Summary
Despite earlier fears the UK’s proposed future schedule has largely left unaffected MFN tariffs on agri-food products of export interest to Caribbean ACP countries. The principal issues now faced in future agri-food sector exports to the UK arise in the context of a possible ‘no-deal’ departure of the UK from the EU customs union and single market. These include: the need to ensure the continued smooth functioning of triangular supply chains given the regions limited shipping service options; the future evolution of EU sugar prices and the sourcing decisions of Tate & Lyle Sugars; the future basis of access for African banana exporters in the absence of rolled over UK-only ‘Continuity Agreements’ with Ghana, Cameroon and Cote d’Ivoire and the Covid-19 related interruption of negotiations; and the future phytosanitary imports controls to be applied to UK citrus imports. Read more “The Caribbean and the Outcome of the UK MFN Tariff Review”
Category: Sugar
The reduction of EU sugar prices and scheduled abolition of EU sugar production quotas have and will continue to transform the market conditions faced by ACP sugar exporters to the EU. Under the impact of EU sugar sector reforms prices on sugar markets served by ACP sugar exporters are likely to be increasingly volatile. In addition the consolidation and internationalisation of European sugar companies which EU reforms have given rise to are having important effects on patterns of ACP-EU sugar trade. Intensified competition on EU sugar markets is bringing into question the financial sustainability of the full-time raw cane sugar refiners who traditionally refined ACP raw sugar exports. The final stages of EU sugar sector reforms will carry particularly profound consequences for smallholder sugar cane farmers in ACP countries. Close attention will ned to be paid to strengthen the regulatory framework for the functioning of ACP-EU sugar supply chains. This will need to include the development of new revenue sharing formulas which allow independent sugar cane growers to gain a share of revenues from the new products increasingly manufactured from sugar cane.
The challenges faced in ACP-EU sugar sector relations will be further complicated by the impending departure of the UK from the EU.
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Future UK Only MFN Tariff Schedule Announced
Summary
After much speculation, the MFN tariffs on most agricultural and food products of greatest export intertest to ACP countries have been retained largely unchanged by the UK government. This will bring considerable relief to ACP banana, sugar, canned tuna, and value-added cocoa product exporters, where fears of the adoption of a ‘zero production-zero tariff’ approach had arisen. Across a range of other areas, relatively minor tariff reductions are unlikely to carry serious trade implications for ACP agri-food product exporters. The only area of uncertainty arises from the removal of the EU entry price system currently applied to a range of products and its replacement by simpler ad valorem import duties. It is unclear what the commercial impact of this change will be on individual ACP exporters of specific products. Read more “Future UK Only MFN Tariff Schedule Announced”
More Evidence Sugar Levies Work in Stimulating Product Reformulation
Summary
Daily per capita sugar consumption in soft drinks in the UK has declined by 30% between 2015 and 2018, in part in response to the Soft Drinks Industry Levy. This decline could see similar such measures introduced for other high sugar content food products. Some 73% of the decline was driven by industry reformulation efforts and 27% by changing consumer purchasing patterns. An important underlying driving force however is the trend towards healthier eating, which is largely immune to short term price falls (as induced by the economic effects of the Covid-19 pandemic). This will accelerate the trends towards reduced Eu sugar consumption which is already underway. If ACP sugar exporters remain focussed on the EU market, they will need to target increasingly differentiated member states sugar markets, since considerable price premiums exist on in certain national EU sugar markets (region 3 countries). Read more “More Evidence Sugar Levies Work in Stimulating Product Reformulation”
The Link Between EU Agri Food Sector Protectionism and the Value of ACP Trade Preferences Highlighted
Summary
The WTO has once again highlighted the EU’s extensive use of tariffs and non-tariff measures to manage EU agri-food markets. Preferred ACP exporters benefit from these protectionist EU trade policies, with any movement away from these policies potentially see mainly ACP/LDC exporters losing out to the tune of €1.6 billion. The prospects of such losses are very real with regard to the UK market, where there is strong pressure under the current MFN tariff review to abandon MFN tariffs where the UK has no or only limited production interests to protect. Looking forward, within the EU, a long standing insistence on abolishing quantitative restrictions on imports from the EU under economic partnership agreements concluded with ACP countries, is being given new impetus with the creation a Chief Trade Enforcement Office, dedicated to making sure existing trade agreement commitments by 3rd countries are fully implemented. Such a course of action however sits uneasily with the EU’s own extensive use of quantitative restrictions in sensitive agri-food sectors. Read more “The Link Between EU Agri Food Sector Protectionism and the Value of ACP Trade Preferences Highlighted”
UK to Strike Out on Bold New Trade Policy but Will Africa and the Caribbean Take the Hit?
Summary
The UK has formally announced the launch of an on-line public consultation on its future MFN tariff regime. This consultation appears limited to UK stakeholders and largely ignores the UK’s trade and development commitments enshrined in a host of preferential trade arrangements the UK has sought to ‘roll over’. The value of these ‘rolled-over’ trade arrangements would be profoundly undermined by any move towards the kind of zero UK MFN tariff regime which the Secretary of State appears to be championing. Some €1.5 billion in African and Caribbean exports, mainly from Commonwealth countries would be adversely affected, with 8 countries seeing over 70% of their current direct exports to the UK adversely affected and a further 7 countries likely to see between 46% and 69% of their direct exports to the UK adversely affected. With no formal structure for dialogue with the UK government operative, there is a need for special initiatives from African and Caribbean governments to place their concerns around the current UK MFN tariff review on the table for consideration by the UK government. Read more “UK to Strike Out on Bold New Trade Policy but Will Africa and the Caribbean Take the Hit?”
EU Sugar Sector Restructuring Seeing Stabilisation of EU Production Import and Export Trends Which Pose Challenges for Some ACP Sugar Exporters
Summary
EU sugar production is stabilising but on a gradual upward trend to 2030, in the context of declining human consumption of sugar in the EU. This will see reduced EU sugar imports and increased EU sugar exports with the EU being a growing net sugar exporter from 2024. EU corporate adjustment to the post quota market realities continues apace, with factor closures in efficient beet sugar production zones as processing operations are consolidated to maximise cost reductions. Maximisation of utilisation of installed capacity efforts place beet co-refiners in a more competitive position than traditional raw cane sugar refiners, with some ACP exporters still needing to rethink their marketing strategies in light of the evolving EU27 market realities. Some ACP sugar exporters however are constrained in their marketing options by existing patterns of corporate ownership. Responding effectively to evolving EU market realities and the UK’s future sugar sector MFN tariff policy will be critical to the commercial viability of existing patterns of ACP sugar exports to the EU27 and UK market respectively. Read more “EU Sugar Sector Restructuring Seeing Stabilisation of EU Production Import and Export Trends Which Pose Challenges for Some ACP Sugar Exporters”
UK Africa Investment Conference Aims to Boost UK Trade With Africa But What of Current African Exports to the UK?
Summary
While the UK government has launched a UK-Africa investment conference to showcase the financial services the City of London can offer in mobilising investment financing, it is neglecting a range of nuts and bolts trade issues in the agri-food sector which could profoundly impact on around €1 billion in African exports to the UK market. This includes sectors which in the past 20 years have attracted considerable investment in export orientated production and which have generated 100,000 of employment opportunities. These issues, notably in regard to the UK’s future MFN tariff regime and the administrative measures which need to be taken to ensure the continued smooth functioning of triangular supply chains, which serve the UK market via the Netherlands and Belgium need to be urgently addressed. Read more “UK Africa Investment Conference Aims to Boost UK Trade With Africa But What of Current African Exports to the UK?”
Conservative Party Election Victory Mean Full Speed Ahead with Brexit and Raises The Threat of Loss of ACP Tariff Preference as a Result of Post-Brexit UK MFN Tariff Choices
Summary
The Conservative Party’s election victory which has delivered a 80 seat majority means Parliamentary approval of the Withdrawal Agreement can now go ahead and the UK can leave the EU on 31st January 2020. The UK will however remain part of the EU customs union and single market until at least 1st January 2021. The size of the majority means the influence of the ERG hard Brexit group of Conservative MPs will be reduced. This will give Prime Minister Johnson more space to extend UK membership of the EU customs union and single market if the conclusion of a comprehensive free trade area agreement by 1st January 2021 proves unrealistic. In this context the major issue facing ACP exporters in the first half of 2020 will be the impact of the scheduled UK-Only MFN tariff review on the value of rolled over ACP tariff references, with bananas, preserved tuna, fresh beans and certain value added cocoa products looking vulnerable to a loss of value of rolled over preferences (current ACP direct exports to the UK valued at €936 million). This need to be seen in a context where the UK government has already made the decision to set UK-only MFN tariffs for all other fruit, vegetables and cut flowers at zero (current ACP direct exports to the UK valued at €449 million). The trade effects for these products could be even greater given the volume of exports to the UK which takes place along triangular supply chains focussed on the landing of cargoes in the Netherlands and Belgium prior to onward shipment. The commercial impact of this process of preference erosion will however needs to be assessed on a product by product basis in light of the functioning of individual ACP supply chains and current patterns of UK imports and the tariffs actually levied on this current trade. Read more “Conservative Party Election Victory Mean Full Speed Ahead with Brexit and Raises The Threat of Loss of ACP Tariff Preference as a Result of Post-Brexit UK MFN Tariff Choices”
EU Sugar Production Adjusting After Quota Abolition and In Face of Low Prices, with Renewed Growth in Imports and Reduced Exports
Summary
In the face of sustained low prices EU sugar production is declining as part of the now post-quota abolition market adjustment, with lower areas under sugar beet being contracted by beet processing companies. There is a growing variation in prices across EU markets with ACP exporters needing to enhance their marketing operations in the EU to maximum total revenues gained on sales to the EU. ACP export volumes to the EU nearly doubled in 2018/19 compared to the depressed levels of 2017/18, while EU export volume fell back dramatically (-53%), but nevertheless remained above pre-quota abolition export levels (+23%). ACP sugar exporters have a disproportionate dependence on the UK market with Belize Guyana and Fiji being particularly exposed. ACP sugar exporters will thus need to keep a close eye on developments around Brexit in the coming year, given the impact a ‘Hard’ Brexit could have on price levels on both the UK and EU27 markets. Read more “EU Sugar Production Adjusting After Quota Abolition and In Face of Low Prices, with Renewed Growth in Imports and Reduced Exports”
Evidence Suggests Extending Sugar Content Tax to Snacks Would be More Effective in Combatting Obesity
Summary
Public health concerns are leading to a gradual but sustained reduction in EU sugar sector consumption. With the EU sugar sector finding a new post-quota equilibrium this is likely to reduce market opportunities in the EU for ACP sugar exporters. This will require improved marketing of sugar in the EU and the identification and exploitation of markets beyond the EU. This will also need to include at the national level in ACP sugar exporting countries structured dialogues with the international sugar companies involved in local sugar production on a common strategy for market and revenue diversification which protects and promotes the economic well-being of local sugar farmers and sugar sector workers. Read more “Evidence Suggests Extending Sugar Content Tax to Snacks Would be More Effective in Combatting Obesity”