Summary
Despite earlier fears over the potential impact of the UK’s MFN tariff review the proposed future schedule has largely left unaffected MFN tariffs on agri-food products of export interest to Ghana. The principal issues now faced will arise if the UK leaves the EU customs union on 1st January 2021. These issues relate firstly to the how the Government of Ghana can retain duty free-quota free access to the UK market after this date. Secondly, the prospect a no-deal UK exit from the EU customs union seeing the UK radically revise its’ proposed MFN tariff schedule so as to avert high food price inflation during a severe Covid-19 induced economic recession.
In 2019 Agri-food products accounted for fully 45% of Ghana’s total exports to the UK in 2019. These agri-food exports can be divided into two distinct groups: products where the UK MFN tariff review was never going to have an impact, since the EU common external tariff (CET) was already set at zero; products where commercially significant margins of tariff preference exist and where a ‘zero production-zero tariff’ UK MFN regime, would carry serious implications of Ghanaian exporters.
In 2019 products falling into the first category (see table 1) accounted for some 32% of Ghanaian agri-food exports and 14% of total exports to the UK. This includes products such as mangoes, coconuts, cashew nuts and papaya.
Table 1: Products Where EU CET Already Zero
| Commodity | Description | EU CET | UK Global Tariff | Change |
| 1801 (€21.2 m | Cocoa beans | 0% | 0% | No change |
| 080450 (€21.14 m) | Fresh or dried guavas, mangoes and mangosteens | 0% | 0% | No change |
| 080119 (€2.3 m) | Fresh coconuts, whether or not shelled or peeled | 0% | 0% | No change |
| 080132 (€2.2 m) | Fresh or dried cashew nuts, shelled | 0% | 0% | No change |
| 080720 (€0.2 m) | Fresh papaya | 0% | 0% | No change |
| 08109020 (€0.3 m | Fresh tamarinds, cashew apples, lychees, jackfruit, | 0% | 0% | No change |
| Sub-Total | €47.3 m |
Source: UK Global Tariff: Search Engine,
https://www.check-future-uk-trade-tariffs.service.gov.uk/tariff?q=070410&n=25&p=1
Products where serious preference erosion concerns arose accounted for fully 62% of Ghana’s agri-food product export trade to the UK, on a value of trade which accounted to fully 27.8% of total Ghanaian exports to the UK in 2019. The products of greatest concern included canned tuna, cocoa paste, cocoa butter, bananas, and other high value fruit and vegetable exports (see Table 2).
For these products it was feared that any UK movement away from the current MFN (and associated Standard GSP) import tariffs could lead to a serious erosion of the margins of tariff preferences and the competitive position of Ghanaian exporters.
Table 2: Products Where A Danger of Commercially Significant Preference Erosion Arose
| Commodity | Description | EU CET | UK Global Tariff | Change |
| 16041421-48
16041490 (€50.5 m) |
Prepared and presser Tuna, skipjack and bonito | 24%
25% |
20%
25% |
Simplified |
| 080390 (€19.7 m)
080310 (€0.2 m) |
Bananas, fresh (excl. plantains)
Plantains |
€114.00/tonne
16% |
£95.00/tonne
16% |
Currency convert |
| 071430 (€7.5 m) | Yams fresh, chilled, frozen, or dried, | €9.5/100 kg | £7.9/100 kg | Currency convert |
| 1803 (€4.1 m) | Cocoa paste | 9.6% | 8% | Simplified |
| 1804 (€1.6 m) | Cocoa butter | 7.7 | 6.0 | Simplified |
| Other fruit | ||||
| 08043000 (€5.3m) | Fresh or dried pineapples | 5.8% | 4% | Simplified |
| 08100975 (€0.5m) | Fresh fruit, edible other | 8.8% | 8% | Simplified |
| Vegetables | ||||
| 0709999 (1.7 m) | Fresh or chilled vegetables n.e.s. | 12.8% | 12% | Simplified |
| 070310 (0.1 m) | Onions and shallot | 9.6% | 8% | Simplified |
| 07099390 (€0.2 m) | Fresh or chilled pumpkins, squash and gourds (excl. courgettes) | 12.8% | 12% | Simplified |
| 07096990 (€0.06 m) | Pimenta | 6.4% | 6% | Simplified |
| Sub- Total | €91.46 m |
Source: UK Global Tariff: Search Engine,
https://www.check-future-uk-trade-tariffs.service.gov.uk/tariff?q=070410&n=25&p=1
As can be seen from the table 2, all major areas of export interest to Ghana either saw only a marginal reduction in the MFN tariff as part of a simplification process or a simple conversion of the existing fixed import tariff from € to £. This provided the greatest relief to Ghanaian exporters of canned tuna and bananas.
In the canned tuna sector, where the new May 2020 proposed UK MFN tariff regime envisages maintaining in place 80% of the current high MFN import duty applied to canned tuna, this outcome is critically important. Access to tuna resources and preferential access to major markets are critical to investment flows in the canned tuna sector. Had the UK remove the MFN tariffs on canned tuna than a critical factor in the recent expansion of the Ghanaian canned tuna industry would have been removed overnight, probably leading immediately to a loss of jobs and a reduction of export earnings. This needs to be seen in a context where the UK takes some 40% of Ghanaian canned tuna exports to the EU
Already since the Brexit referendum, exports of Ghanaian canned tuna to the UK market have fallen markedly (-54%). In contrast, over the same period Ghanaian canned tuna exports to the EU27 increased 12.6%. However, given in 2016 the UK accounted for almost 60% of Ghanaian canned tuna exports to the EU28, this saw Ghanaian canned tuna exports to the EU28 market fall 27%.
Any changes in the UK MFN tariff would have been likely to see a further sharp reduction in Ghanaian canned tuna exports to the UK. It is against this background that the maintenance, largely intact, of the existing MFN tariff applied by the UK will be viewed with relief by those working in the tuna canning industry in Ghana.
Table 3: Trends in Ghanaian Canned Tuna (160414) Exports to the EU27 and UK 2013-2019 (tonnes)
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | % change 2013-19 | |
| EU28 | 23,537 | 23,042 | 33,677 | 38,505 | 29,716 | 29,563 | 28,105 | +19% |
| UK | 2,451 | 11,198 | 18,173 | 22,989 | 16,214 | 12,106 | 10,632 | +334% |
| EU27 | 21,086 | 11,844 | 15,504 | 15,516 | 13,502 | 17,457 | 17,473 | +17% |
| UK % EU28 | 10.4% | 48.6% | 54.0% | 59.7% | 54.6% | 40.9% | 37.8% |
Source: EC, Market Access Data Base, https://madb.europa.eu/madb/statistical_form.htm
Similarly, In the banana sector it was feared any move over to a ‘zero production-zero tariff’ policy favoured by the Eurosceptic global liberalisation wing of the Conservative Party would have profoundly impacted on the basis for the majority of UK imports of bananas. This needs to be seen in a context where the introduction of a ‘zero production-zero tariff’ policy would not only have removed the import tariff on MFN and GSP suppliers but also from exporters currently trading under EU FTAs, which currently dominate the UK banana market. Had a zero UK MFN tariff been scheduled for introduction for bananas, these dominant exporters would no longer have exported under the ‘rolled over’ UK Continuity Agreement but would simply have exported under MFN terms. This would largely have driven Ghanaian banana exports off the UK market.
Beyond the preference erosion dimension of the UK MFN tariff review, there is a second dimension potentially of significance to Ghanaian exporters. This dimension would take on significance if the UK left the EU customs union with an alternative EUI/UK trade agreement being in place. Under such circumstances the UK would be compelled to apply its MFN tariff schedule to imports from the EU27 as of 1st January 2021.
This could potentially create opportunities for increased Ghanaian exports of cocoa paste and cocoa butter to the UK market. Currently, the Netherlands is a major supplier of cocoa paste and cocoa butter to the UK market. The application by the UK of the ‘rolled over’ MFN tariffs (8% for cocoa paste and 6% on cocoa butter) could provide a boost to direct Ghanaian exports to the UK.
In recent years while Ghanaian exports of cocoa paste and cocoa butter to the EU28 market have been growing strongly (+37% for cocoa paste and 81% for cocoa butter between 2015 and 2019), exports directly to the UK have been declining. This trend on the UK market could be reversed if the UK applies standard MFN tariffs to UK imports of cocoa paste and cocoa butter from EU27 suppliers. This could then support the further expansion of local value-added processing of cocoa beans in Ghana. While any hiatus in EU/UK trade relations may last only a few years, the investment gains for Ghana could be sustained for decades.
Table 4: Ghanaian Cocoa paste and cocoa butter exports to the EU28 and UK 2015-19 – tonnes
| 2015 | 2016 | 2017 | 2018 | 2019 | % change | |
| Cocoa Paste (1803) – EU28 | 67,384 | 60,231 | 81,908 | 98,247 | 92,325 | +37.0% |
| Cocoa Paste (1803) – UK | 2,016 | 5,514 | 4,131 | 1,845 | 1,321 | -34.5% |
| Cocoa Butter (1804) – EU28 | 33,078 | 31,693 | 49,976 | 55,984 | 59,810 | +80.8% |
| Cocoa Butter (1804) – UK | 5,101 | 7,208 | 4,422 | 2,916 | 310 | -93.9% |
Source: EC, Market Access Data Base, https://madb.europa.eu/madb/statistical_form.htm
Similar opportunities could arise in other agri-food sectors, depending on the impact of the Covid-19 pandemic on UK consumer demand and the availability of agricultural labour in the UK. These potential opportunities however will need to be subject to a product by products analysis.
The availability of these opportunities of course will be dependent upon avoiding preference erosion through the adoption by the Government of Ghana of an effective strategy to maintain duty free access to the UK market beyond the 1st January 2021.
| Comment and Analysis Given the newly announced UK-only MFN tariff schedule will maintain existing margins of tariff preferences on an important range of Ghanaian products exported to the UK market, the most urgent priority for the Government of Ghana is preserving the existing duty free-quota free access to the UK market once the existing EU agreement, under which the current trade takes place, will lapse for the territory of the UK.While ideally a long-term agreement for future trade relations should be concluded, the regional complications faced in West Africa and the impact of the global Covid-19 pandemic have made it difficult to finalise a comprehensive long-term Ghana-UK Continuity Agreement before the end of 2020. If the UK government goes ahead with its current plan to leave the EU customs union and single market by 1st January 2021, regardless of whether an alternative UK/EU trade arrangement is in place, then there would appear to be a need for the UK to renew its offer, first made in October 2019, of a Transitional Protection Mechanism which would preserve existing duty free access for Ghanaian exports until such time as a long-term UK-only trade agreement is in place (see epamonitoring.net article, ‘Continued Duty Free Quota Free Access to UK Market Secured but the MFN Issue Looms’, 28 October 2019).
However the Government of Ghana needs to recognise that if the UK government continues to believe the UK/EU negotiations can be completed by the end of the year despite the impact of the Covid-19 pandemic on the conduct of negotiations, then the UK government is likely to continue to take the view a ‘rolled over’ UK-only Continuity Agreement can be concluded with the Government of Ghana by the end of the year. If the UK government is to be persuaded otherwise, then a sustained and targeted lobbying effort to explain the Covid-19 related constraints on the completion of the Continuity Agreement negotiations will be needed. If such a course of action is not taken and the UK leaves the EU customs union as currently scheduled on 1st January 2021 without the Government of Ghana having signed on to a UK-only Continuity Agreement then Ghanaian banana, canned tuna, cocoa paste and cocoa butter exporters will face the imposition of MFN or Standard GSP duties on exports to the UK market, since Ghana is not on the current list of GSP+ beneficiaries which the UK applies while part of the EU. This would undermine the commercial viability of continued Ghanaian exports of some of these products and future investment flows into the effected sectors. Table 5: Proposed UK MFN and Projected GSP° and GSP+ Treatment of the Main Vulnerable Ghanaian Export Products
° Assumes the same ratio of Standard GSP to MFN duties is applied by the UK (with rounding down) as currently applied by the EU. Beyond these trade agreement considerations, an additional complication would arise if the UK were to leave the EU customs union without an alternative trade deal being in place. Analysis has pointed out how under the UK’s MFN tariff schedule announced on 19th May 2020, this would see high MFN tariffs applied to imports from EU member states on 85% of existing agricultural imports from the EU (3). This would impact on fully 40% of agricultural products consumed in the UK (3), with this carrying potentially serious implications for food price inflation during what will be the most severe economic recession the UK has faced in the past 100 years. It has been suggested that the political fall-out from this could be such as to compel the UK to undertake a further review of its MFN tariff schedule. This could see a renewed impetus being given to those in the UK government who argue for the application of “zero production-zero tariff” approach to the UK’s future MFN tariff schedule. This would be a commercial disaster for Ghanaian exporters of bananas and canned tuna and could set back efforts to further expand local value-added processing of cocoa beans in Ghana. It could also pose commercial challenges to other Ghanaian fruit and vegetable exporters, who would lose the current tariff preferences they enjoy over competing exporters in countries which export to the UK under the MFN (e.g. Brazil and Thailand) or Standard GSP (e.g. India) trade regimes. However, for major products such as pineapples, the extra tariff levied would be marginal under Standard GSP treatment. The Government of Ghana therefore faces some tricky trade policy challenges and choices if the UK’s departure from the EU is to ensure continuity in current Ghanaian exports and the availability of opportunities for expanded exports to the UK market. |
Sources:
(1) gov.uk, ‘UK Global Tariff backs UK businesses and consumers’, 19 May 2020
https://www.gov.uk/government/news/uk-global-tariff-backs-uk-businesses-and-consumers
(2) UK Global Tariff: Search Engine
https://www.check-future-uk-trade-tariffs.service.gov.uk/tariff?q=070410&n=25&p=1
(3) Dmitry Grozoubinski, ‘The UK’s New Tariffs under No-Deal: Unsustainable’, blog post
https://www.slideshare.net/DmitryGrozoubinski/the-uks-new-tariffs-under-nodeal-unsustainable