Summary
With UK and EU exporters of short shelf life products fearing severe trade disruptions in the first weeks of 2021, the question arises: what strategies should ACP exporters serving the UK market via the EU seek to set in place? This will require careful planning. Possible options include moving over to direct exports to the UK, shifting to onward shipping via UK east coast or inland ports to side-step Kent traffic congestion, or diversifying markets away from the UK. If routes to markets cannot be adjusted a critical issue will be the distribution of the additional costs within the supply chain (of which currency depreciation is one dimension). This will also require careful attention, particularly in regard to contractual arrangements for the delivery of goods to the UK at the beginning of 2021. If ACP exporters exclusively bear the additional logistical costs and losses arising from delays, this could undermine the commercial viability of such exports. A no-deal UK departure could also lead to both EU and UK export surges of certain agri-food products to 3rd country markets. This is particularly the case not only for poultry meat and long-life dairy products, but also products like onions, where alongside West African markets the UK market is a major market for Dutch traders. Were such export surges to threaten local producers, ACP governments would need to look at adopting remedial trade policy measures. Where no local ACP production is affected, ACP importers could capitalise on low priced ‘surpluses’ arising as a result of EU/UK trade disruptions. Read more “If Negotiations Fail No Deal Trade Effects Likely to be Felt in Final Weeks of 2020”
UK Decision to Roll-Over Recognition of EU Issued Organic Certification for Whole of 2021 Welcome News for ACP Organic Exporters, But IT Constraints Will Be Faced
Summary
The UK will continue to recognise EU issued organic certification until the end of 2021. This will avoid any loss of commercial value on ACP exports to the UK market arising from the lapsing of the validity of organic certification issued by EU27 based agencies. The issue of the lapsing of EU recognition of UK issued organic certification from 1st January 2021 however remains unresolved, with an ACP coordinated political initiative in this regard now urgently needed. The UK will however, need to move over to a system of manual organic import controls, given the lapsing of UK access to the EU TRACES system from 1st January 2021, with this potentially causing delays and increasing the administrative cost of clearing organic products through UK border controls. Read more “UK Decision to Roll-Over Recognition of EU Issued Organic Certification for Whole of 2021 Welcome News for ACP Organic Exporters, But IT Constraints Will Be Faced”
Strict Management of Sugar ATQ Necessary on Public Health Grounds Given Failure of Voluntary Measures to Reduce UK Consumption of Hidden Sugars
Summary
Voluntary sugar reduction efforts have proved largely ineffective in reducing the use of sugar in food and drink products in the UK, with the DISL in contrast demonstrating how the ‘price’ of sugar can influence the product re-formulation efforts of companies. This suggests the UK’s future sugar trade policy should be managed in a way which carefully balances the supply and demand situation on the UK sugar market, so as to maintain sugar prices and prevent surplus supplies depressing sugar prices. Otherwise, the UK’s sugar trade policy could unnecessarily depress UK sugar prices, to the detriment of wider public health policy objectives. Read more “Strict Management of Sugar ATQ Necessary on Public Health Grounds Given Failure of Voluntary Measures to Reduce UK Consumption of Hidden Sugars”
With No Deal Brexit Preparation Underway in UK and Serious Challenges Faced ACP Exporters Will Need to Look to “Brexit Proofing” Their Supply Chains
Summary
The announcement by the UK government of new inland Border Control Posts is seen as ‘extremely last minute’, with serious road freight disruptions along the main EU/UK Ro-Ro routes through Kent now seen as almost inevitable. The UK is seen as ‘dangerously ill-prepared’ for leaving the EU customs union and single market on 1st January 2020. As a consequence, significantly large increases in costs of moving goods through EU/UK border controls are likely. However, there are expanding freight options for delivery to UK East Coast and ‘inland’ ports which will side-step traffic congestion in Kent. ACP exporters using triangular supply chains need to adequately prepare for these changes and actively seek to “Brexit-Proof” their supply chains. ACP exporters directly serving the UK market will also need to take similar “Brexit-Proofing” initiatives, with successful companies potentially being able to capitalise on the rising food prices projected for the UK market in 2021. Read more “With No Deal Brexit Preparation Underway in UK and Serious Challenges Faced ACP Exporters Will Need to Look to “Brexit Proofing” Their Supply Chains”
New Initiatives Around UK ‘Land Bridge’ Issue Opens Up Opportunities to Address ACP Triangular Supply Chain Challenges
Summary
Amid growing concerns over Ireland’s vulnerability to disruption of freight movements across the UK ‘land bridge’, the Irish government has indicated it is open to mobilising public support for direct ferry operation between the mainland EU and the Republic of Ireland. However, this will require faster and better planned freight ferry services in line with the needs of Irish businesses. From an ACP perspective two dimension of these discussions stand out: first the emergence of a greater range of options for cargo shipments direct to the Republic of Ireland, avoiding the UK ‘land bridge’; second the establishment by the EU of ‘green lane’ border clearance arrangement for Irish freight shipments using the UK ‘land bridge’ upon landing at mainland EU border control posts. If a similar ‘green lane’ approach were adopted by the UK to the handling of ACP cargoes delivered to the UK market via initial landings in the mainland EU, this could greatly facilitate the continued smooth functioning of ACP supply chains delivering short shelf life products to the UK market via the mainland EU. Such a solution would appear to be urgently needed, if future orders for delivery to the UK market in 2021 are not to be lost by ACP fresh produce exporters. Read more “New Initiatives Around UK ‘Land Bridge’ Issue Opens Up Opportunities to Address ACP Triangular Supply Chain Challenges”
Freight Pressures Remain on Kenyan Horticultural Exporters with Covid Clouds Still Loom Over the Sector
Summary
While a partial recovery in commercial flights is underway this is focussed on intra-European flights, with inter-continental flights excluding the EU, still less than 60% of their January levels. With East-West routes better able to bear rising freight costs, African exporters will face continued air freight challenges, particularly as air freight demand rises in the face of the rolling out of a global vaccination programme. Given the economic significance of the air freight export sector to the Kenyan economy, there is a need for the designation of East African focussed air freight services as a ‘strategic autonomy’ sector, with normal rules related to state supported lending being waived. There is also a need to systematically review Kenyan production and export patterns, to see which export products remain commercially viable at higher freight rates and which export products can be shifted to sea freight. This review will need to take into account the increased costs which will be faced in trading into the UK market via initial ports of landing in mainland EU countries. These new costs along triangular supply chains are now inevitable given the state of play in EU/UK trade negotiations, with the only uncertainty being the scale of these increased costs. This will be impacted by the basis on which the UK finally leaves the EU customs union and single market. Read more “Freight Pressures Remain on Kenyan Horticultural Exporters with Covid Clouds Still Loom Over the Sector”
Report Spells Out Impact of Brexit Scenarios for Food and Beverage Supply Chains
Summary
While even under an EU/UK FTA mutual trade in agri-food products will be adversely affected, under a no-deal outcome these effects would be far more severe. Thus, under an FTA it is estimated UK food exports to the EU would fall 22.5%, while under a no-deal outcome the decline would be 63.2%. The corresponding figures for EU food exports to the UK are 22.6% and 61.7% respectively under an FTA or no-deal scenario. This would have substantial market and wider trade consequences. The knock on effects of the outcome of the EU/UK negotiations will be felt in 5 main areas:
o The effects on ACP triangular supply chains serving the UK via the EU.
o The effects on ACP triangular supply chains serving the EU via the UK.
o A possible further revision of the UK’s MFN tariff schedule under a no-deal outcome.
o New opportunities for increased direct exports to the UK market.
o The diversion of displaced EU/UK exports to targeted ACP market.
ACP agri-food sector enterprises and governments will need to make preparations for dealing with the trade and market consequences which will arise under both an EU/UK FTA and more seriously, the growing prospect of anon-deal outcome to the ongoing negotiations. Read more “Report Spells Out Impact of Brexit Scenarios for Food and Beverage Supply Chains”
Implementation of New EC Organic Products Regulation Postponed but Unresolved Brexit Issue Threatens Commercial Gains of ACP Organic Production
Summary
The deferment of the implementation of EU’s new organic regulation offers a precedent for addressing the commercial losses ACP organic exporters face if there is no EU/UK organic equivalence agreement in place by 1st January 2021. The lapsing of EU/UK mutual recognition of organic certification on 3rd country products should be deferred until the end of the Covid-19 pandemic plus 9 months, given the travel restrictions and social distancing requirements which complicate the securing of UK or EU27 specific organic certification at the present time. This would avert needless commercial losses for ACP organic exporters and encourage the continued growth in ACP organic exports, which are wholly consistent with both EU and UK sustainability objectives. Read more “Implementation of New EC Organic Products Regulation Postponed but Unresolved Brexit Issue Threatens Commercial Gains of ACP Organic Production”
EU Led Sustainable Cocoa Initiative Formally Launched
Summary
The EU sustainable cocoa initiative while welcome, needs to get to grips with the central issue of ensuring sustainable livelihoods which lift cocoa farming communities out of the endemic poverty which characterises the sector. If sustainability initiatives are launched which address environmental and child labour concerns in ways which place livelihood issues as an afterthought, then these are likely to be unsustainable, since it will not get the necessary farming community ‘buy-in’ required to finally put an end to both the use of child labour and unsustainable farming practices in the cocoa sector. Any such initiative needs to be rooted in financially incentivising through the market the production of child labour free and environmentally sustainable cocoa. This essentially has to address the issue of the distribution of revenues and costs along supply chains, with the existence of legally enforceable mechanisms to systematically remove non-compliant cocoa from European cocoa supply chains being a necessary complement to action in this core area. Read more “EU Led Sustainable Cocoa Initiative Formally Launched”
Government of Kenya Looking for Way Out of UK-EAC Continuity Agreement Negotiations Impasse
Summary
Press reports indicate the Government of Kenya is to conclude a bilateral trade agreement with the UK, with other EAC members joining later. This is seen as being based on the concept of ‘variable geometry’, an approach which had been endorsed by the EAC Heads of State in both February 2018 and February 2019.. However, the concept of ‘variable geometry’ has never been utilised in regard to the application of different tariffs within a customs union, since a customs union by definition is based on the application of a Common External Tariff by all members of the customs union. The only way for a Kenya-UK trade agreement to be concluded without undermining the integrity of the EAC customs union Common External Tariff would be if the implementation of reciprocal commitments were deferred until all EAC members agreed to come on board with a common programme of tariff reduction. This would be consistent with the current application of the EU-EAC EPA, where the implementation of reciprocal tariff reduction commitments has not yet been activated, given the reluctance of certain EAC members to come on board. An additional option available to avert a loss of Kenya’s duty-free access to the UK market would be the reactivation of the Transitional Protection Mechanism initially proposed in October 2019, but which was overtaken by events before the need for its’ implementation arose. On this basis, it needs to be recognised any loss of duty-free access for Kenyan exports would be a political choice of the UK government and not an unexpected by-product of the Brexit process. Read more “Government of Kenya Looking for Way Out of UK-EAC Continuity Agreement Negotiations Impasse”