Summary
The EU import ban on Kenyan exports of sugar snap and mange tout pea varieties has been lifted after 5 years. EFSA pesticide compliance analysis reveals the inclusion of new residue categories can lead to lower compliance levels in the following reporting period, as farm practices take time to adjust. The ‘time lag’ in revising pesticide application practices is most noticeable on imports form non-EU/non-EEA countries. This suggests a strengthening of regulatory requirements for pesticide traders and importers and the establishment of structured dialogues between government, importers, rural traders and farmers could play a role in ensuring EU markets remain open to all Kenyan horticultural exports. Read more “Tighter Regulation and Improving Knowledge Among Input Suppliers Could be Key to Maintaining Kenyan Access to EU Horticulture Markets”
UK Dependence on the EU for ‘Dark’ Meat Exports Potential Source of Concern
Summary
The UK poultry sector is dependent on exports of ‘dark meat’ to maximise its revenues. Currently 70% of these exports go to EU27 markets. This trade will become increasingly difficult under a ‘no-deal’ Brexit scenario if the EU applies both standard MFN tariffs and its rigorous 3rd country import controls on UK poultry meat. The application of such rigorous controls is made more likely by the probable shortage of veterinarians in the UK post Brexit to carry out the inspections and certification required for imports into the EU to take place. Attaining compliance with standard EU poultry meat import requirements or finding internal markets UK markets for poultry ‘dark meat’ if likely to take some time. This could leave UK exporters seeking alternative overseas markets for their ‘dark meat’ exports from 30th March 2019, in a context where ACP markets already take 42.2% of overall UK extra-EU poultry meat exports. Both African and Caribbean governments who wish to support local poultry sector development will need to consider carefully how they are to manage this likely development. Read more “UK Dependence on the EU for ‘Dark’ Meat Exports Potential Source of Concern”
Will The Trusted Trader Scheme Offer Relief to ACP Agro-Food Exporters Under a No-Deal Brexit
Summary
Against a background of the technological human and physical infrastructure constraints faced by the UK government in implementing border controls under a ‘no deal’ outcome to the EU/UK Withdrawal negotiations it is recognized UK border controls will be ‘less than optimal’. It is recognized a range of significant issues will need to be addressed if the period of sub-optimal application of border controls is to be minimised. Against this background the UK revenue and customs service ‘plans to increase its use of ‘trusted trader’ schemes (1). This raises the questions: What is this UK Trusted Trader Scheme? How does it operate? Can ACP agro-food exporters benefit from making use of the UK’s Trusted Trader Scheme? This article seeks to explore these issues. Read more “Will The Trusted Trader Scheme Offer Relief to ACP Agro-Food Exporters Under a No-Deal Brexit”
Shortages of Cold Storage Space Linked to Brexit Stockpiling Could Disrupt Some ACP Chilled and Frozen Exports
Summary
Fears of supply chains disruption arising from a ‘no-deal’ Brexit has seen food manufacturers and retailers stockpiling supplies to such an extent there is now an acute shortage of cold store space in the UK. This could generate serious problems for ACP exporters of chilled and frozen products which have not already contractually locked in access to cold storage capacity. ACP exporters of chilled or frozen products urgently need to review whether they have contractually secure access to cold storage capacity on route to serving their final customers. If not they will need to intensify their search for what limited cold store capacity remains available across the UK. Read more “Shortages of Cold Storage Space Linked to Brexit Stockpiling Could Disrupt Some ACP Chilled and Frozen Exports”
UK National Audit Office Warns of Lack of Border Preparedness for Brexit
Summary
The NAO report on UK border preparedness for a ‘no-deal’ Brexit makes disturbing reading, confirming many of the concerns raised earlier by private sector bodies and professional associations. For example, it is highly unlikely 11 of the 12 work streams required to ensure effective management of border operations will be in place on time, while recruitment programmes for veterinary staff required to continue to ensure the smooth trade in animal products have not yet got underway, despite their planned launch in April 2018. The prospect of serious failures in UK border control systems under a ‘no-deal’ scenario is seen as high while even a twenty one month transition period would leave the UK government facing serious challenges. ACP agro-food exporters, particularly those serving UK markets via EU27 member states, need to start examining how they can reduce their vulnerability to Brexit related failures in UK border control systems and what they can do to ‘Brexit proof’ their supply chains. They will also need to look at how contracts can be structured to share the burden of possible trade disruptions (leading to high levels of wastage of food products) and whether insurance cover can be secured against such risks. Read more “UK National Audit Office Warns of Lack of Border Preparedness for Brexit”
UK Withdrawal Agreement Concluded At Negotiators’ Level
Summary
Withdrawal Agreement and Political Declaration on the framework for future EU/UK relations have been agreed at ‘negotiators’ level’. While the UK Cabinet backed the deal 2 of 24 senior Cabinet ministers resigned including the Brexit Secretary. The Withdrawal Agreement includes an automatic rolling over of the terms and conditions of access currently enjoyed by ACP exporters to the UK market until 1st January 2021. This could be prolonged given the Irish backstop now consists of an EU/UK customs union which would remain in place until a long term EU/UK trade deal is finalised. The Political Declaration provides only a summary outline of the future EU/UK relationship but includes a commitment to ‘build on the single customs territory provided for in the Withdrawal Agreement’. The UK Parliament still needs to ratify the Withdrawal Agreement, with the parliamentary arithmetic not currently looking good for Prime Minister May. EU leaders meanwhile have made it clear there is no room for substantive renegotiations of the existing Withdrawal Agreement. While approval of the Withdrawal Agreement would defer any problems for ACP agro-food exporters, political uncertainty in the UK means ACP governments and agro-food sector stakeholders should continue to prepare for the consequences of a non-deal Brexit. Read more “UK Withdrawal Agreement Concluded At Negotiators’ Level”
EAC Sugar Sector Continues to Seek Protection and Effective Management of Sugar Imports
Summary
With sugar sector reforms again stalled Kenya has once again secured an extension of its COMESA sugar sector safeguards, despite rising sugar imports from non-COMESA sources. Tanzania is also facing problems in effectively managing sugar imports in the interests of domestic production growth. This provides the context for the ongoing expansion of EU sugar exports to sub-Saharan Africa which has been underway since 2014. These expanding EU sugar exports are not only linked to the abolition of EU sugar production quotas and the consequent removal of WTO constraints on exports but also EU systems of agricultural support both decoupled direct aid payments and voluntary coupled supports (VCS). VCS may shortly be reclassified in the WTO as a production and trade distorting form of support. These trade trends could pose challenges to African regional trade integration efforts in the agro-food sector. Challenges which will not only need to be addressed in the implementation of African regional trade integration schemes, but also in the implementation of EU EPAs and the design of future EU-Africa trade, development and economic cooperation arrangements in the context of the post-Cotonou ACP-EU negotiations.
- Stalled Reforms in Kenya Sees COMESA Safeguard Extended
Kenya has once again successfully sought from COMESA a further two year extension of its sugar safeguard measures, which will now run until February 2021 (1). Kenya has sought to repeatedly renew these safeguard measures since their introduction in 2004 (1).
The most recent request was made in a context where Kenya had imported sugar from outside of the COMESA region, after the Kenyan government ‘scrapped duty on sugar following a sharp decline in production that saw the price rise to Sh400 per two-kilogram packet’ (2). Against this background COMESA members have insisted on the establishment of a joint committee that will oversee the implementation of the safeguard measures and report back on the progress made in preparation for removing the safeguards (3).
Local Kenyan economists have insisted there is little point in extending the safeguard measures if the Kenyan government continues to avoid addressing the underlying issue of the sugar sectors lack of competitiveness. Efforts by the Kenyan government to privatise its State-owned mills, introduce an early maturing cane variety, and pay farmers based on sucrose content have all stalled (1). This leaves production costs at around $600/tonne, in a context where ‘procuring sugarcane alone accounts for 52 per cent of costs’ (4) (ISO 15 day average global sugar price 24 October 2018 equivalent to $295.02/tonne).
Unfortunately ‘all five State-owned milling firms are operating using obsolete milling machineries that drastically hamper efficiency and production capacities’ (4), making them a less than attractive proposition for private investors. Competition from privately owned mills meanwhile is gobbling up what little locally produced sugar cane is available. According to analysts ‘perennial delays in payments to farmers for cane delivered, coupled with low producer prices of cane between Sh 3,500 and Sh 4,500 per tonne enormously eroded farmers’ confidence in the crop, as many turned to alternative products’ (4).
The Kenyan sugar sector is further plagued by ‘weak legislation governing the sub-sector’. This has been exploited by sugar importing cartels, with it being reported that by the end of the financial year ‘more than 800,000 tonnes was imported (4).
Following the COMESA decision Kenya’s Trade Principal Secretary Dr. Chris Kiptoo acknowledged ‘it is very unlikely that the sector would have implemented the conditions set by Comesa at the end of the two years because of the structural problems facing the sugar millers’ (3).
- Import Management Problems in Tanzania
Meanwhile in neighbouring Tanzania pressure is mounting on the government to take stronger action to curb illegal sugar imports, with local producers claiming they are ‘struggling to sell their own stockpiles’ in the face of illegal imports. The Chair of the Tanzanian Sugar Producers Association (TSPA) Ashwin Rana said in the face of accumulated stockpiles of imported sugar local producers ‘will find it difficult to sell the 348,989 tonne sugar harvest scheduled for the 2018/19 season. It was maintained that some traders were exploiting the lower duty for ‘industrial sugar’ to import sugar which was then sold as direct consumption sugar to consumers. Tanzania has a major shortfall in sugar production with a domestic direct consumption demand of 630,000 tonnes and an industrial sugar demand of 145,000 tonnes (4).
This situation in the EAC sugar sector provides the background to expanding levels of EU sugar exports.
- Expanding EU Sugar Exports to Africa and Beyond
The EC reported that by the 18th September 2018 total extra-EU sugar exports had reached 3,220,000 tonnes, a level above earlier projections with almost two weeks left to run until the end of the 2017/18 season. This increase took EU exports to levels 149% above the 5 year average (6).
This expansion in EU export volumes has occurred despite the almost 50% decline in global sugar prices between October 2016 and August 2018. The EC notes ‘the excess supply has put severe pressure on world prices, which have fallen steadily over the last two years from a peak of EUR 540/t in October 2016 to EUR 274/t in August 2018, the lowest level since 2007’(6). A number of analyst however have noted the unique contribution the EU is making to this situation of excess supply on world markets, given the combined effects of its expansion in export volumes and reduction in import demand on what is a residual market.
Table: EU Sugar Exports to Main Sub-Saharan Africa Destination markets first 9 months 2017/18 Season
| Total EU Sugar Exports 9 months 2017/18 season: 2.710,000 tonnes | ||||
| Country | Tonnes | Country | Tonnes | |
| West Africa | Southern & Eastern Africa | |||
| Mauritania | 109,225.0 | South Africa | 40,450.9 | |
| Ghana | 66,913.7 | Tanzania | 34,342.4 | |
| Senegal | 50,716,.6 | Sudan | 36,498.7 | |
| Cameroon | 48,814.3 | – Sub-Total | 111,292 | |
| Guinea | 37,217.5 | Total Main SSA Destinations | 465,168 | |
| Togo | 40,988.9 | Total Extra-EU | 2,710,000 | |
| – Sub-Total | 353,876 | % share Main SSA Destinations | 17.16% | |
It is against this background that some 9 African countries were among the top 24 destinations for EU sugar exports in marketing year 2017/18 season, with smaller volume also being exported to other ACP destinations. Nine months into the season these destination were taking around 500,000 tonnes of EU white sugar exports, with exports for the whole of the season likely to be substantially in excess of this level. In the first 9 months of the 2017/18 season the EU exported 3 times more sugar to sub-Saharan African markets than in the whole of the 2016/17 season.
While West African countries were the main destinations for these EU sugar exports, growing volumes also went to the sugar surplus region of Southern and Eastern Africa (5). The leading origins for these EU sugar exports were Belgium and France which accounted for around 59% of total EU sugar exports in the 2017/18 season, with Poland someway behind with around 16%, followed much further behind by Germany, the Netherlands, Denmark and the United Kingdom. Marginal sugar export volumes also took place from 16 other EU member states (around 3% of the total) (5).
This needs to be seen against the background of the most recent trends in EU sugar exports to these top 9 Sub-Saharan African countries. Between 2013 and 2017 an almost 9-fold increase in EU sugar exports occurred (+319,817 tonnes).
EU sugar exports to top 9 Sub-Saharan African countries 2013-2017 (tonnes)
| 2013 | 2014 | 2015 | 2016 | 2017 | |
| Mauritania | 62 | – | 1 | 45 | 118,330 |
| Ghana | 2,178 | 3,187 | 4,586 | 9,192 | 42,441 |
| Senegal | 18,825 | 9,568 | 11,690 | 10,717 | 22,054 |
| Guinea | 1,907 | 2,668 | 1,570 | 1,679 | 7,649 |
| Togo | 2,947 | 1,940 | 12,385 | 5,282 | 19,070 |
| Cameroon | 14,735 | 26,368 | 22,292 | 38,356 | 54,524 |
| South Africa | 249 | 203 | 4,480 | 30,822 | 15,768 |
| Tanzania | 48 | – | 4,231 | 3,020 | 24,184 |
| Sudan | 74 | 4,050 | 2,383 | 30,314 | 56,822 |
| – Sub-Total | 41,025 | 47,985 | 63,618 | 129,428 | 360,842 |
Source: EC Market Access Data Base
This forms part of a broader picture of expansion of EU sugar exports across African regions.
Trends in Extra EU Sugar exports to Sub-Saharan Africa by region and total extra-EU Sugar exports (tonnes)
| 2013 | 2014 | 2015 | 2016 | 2017 | +% 2013-17 | |||
| Total West Africa | 63,853 | 55,754 | 54,949 | 52,842 | 280,913 | +339.9% | ||
| Total Central Africa | 30,303 | 35,515 | 32,090 | 63,598 | 64,613 | +113.2% | ||
| Total Eastern Africa | 870 | 4,862 | 7,782 | 35,547 | 89,144 | +10,146% | ||
| Total Southern Africa | 261 | 257 | 4,483 | 30,823 | 26,605 | 10,093.5% | ||
| Total Sub-Saharan Africa | 95,287 | 96,388 | 99,304 | 182,810 | 461,275 | +384% | ||
| Total Extra-EU | 1,411,291 | 1,523,870 | 1,322,704 | 1,369,367 | 2,178,337 | +54.4% | ||
| % share Sub-Saharan Africa | 6.7% | 6.3% | 7.5% | 13.3% | 21.2% | |||
| West Africa: Mauritania, Ghana, Senegal, Sierra Leone, Togo, Benin, Mali, Niger, Guinea, Burkina Faso, Nigeria, Liberia, Gambia, Cape Verde, Ivory Coast, Guinea Bissau Central Africa: Cameroon, Angola, Equatorial Guinea, ,Gabon, Chad, DRC, Congo, CAR Eastern Africa: Sudan, Tanzania, Kenya, Somalia, Uganda, Comoros, Madagascar, Ethiopia, Burundi, Rwanda, Mauritius, Eritrea Southern Africa: South Africa, Namibia, Mozambique |
||||||||
Source: EC Market Access Data Base
| Comment and Analysis The long standing problems faced in the Kenyan sugar sector highlight the profound problems faced in not only promoting competitive sugar production in sectors which have traditionally been protected but also the problems faced in fostering regional free trade in sensitive agricultural products such as sugar. The issues faced in Kenya are not only technical linked to mill management, cane varieties and payments systems but increasingly political given the geographical distribution of sugar production, the politicisation of ethnicity within the electoral process and subsequent de-centralisation of government decision making to provincial authorities.From a trade policy perspective however what is of most concern is the inability of the Kenyan government to effectively manage its nominal trade policy and harness it to the process of necessary production restructuring. The problem of managing trade in sensitive products such as sugar is also apparent in Tanzania. Without an effective capacity to manage trade flows, structured and managed moves towards regional trade integration are likely to be held back and disrupted. This provides the context in East Africa to the dramatic increase in EU sugar exports which is underway.The almost 9-fold expansion in EU sugar exports to sub-Saharan African countries which occurred between 2013 and 2017 needs to be seen in a context where sub-Saharan Africa is a net sugar surplus continent. This also needs to be seen against the background of the intensification of efforts to create both regional free trade areas and a pan-continental free trade area. The danger exists that the growing volume of EU sugar exports (and high sugar content food products) could complicate this process of regional trade integration in the African sugar sector. This could get particularly complicated when the global corporate strategies of EU sugar companies, which have invested in sub-Saharan African sugar production since 2004, are taken into account. These strategies seek to position the companies concerned so as to have a diversified source of sugar production to meet rising demand in Asian markets, with value added processing commonly taking place in Europe not at the point of production. By the end of the 2017/18 season the EU will be once again exporting substantially more sugar to Sub-Saharan Africa as a whole (including destinations outside the top 24 markets) than it imports from Sub-Saharan Africa. While by 18 September in the 2017/2018 season some 521,000 tonnes of sugar had been imported from ACP/EBA countries (excluding South Africa), some 49% of these imports came from non-African ACP countries, namely Belize (27%), Fiji (13%) and Guyana (9%). This rapid expansion of EU sugar export has occurred despite the collapse of global sugar prices and the greater inherent efficiency of production of sugar from sugar cane compared to production of sugar from sugar beet. In this context it should be recalled EU production levels and trade outcomes cannot be divorced from the deployment of EU agricultural support payments, notably the underlying system of decoupled direct aid payments which makes a major contribution to farm incomes and since the abolition of EU sugar production quotas the maintenance of voluntary coupled support payments for sugar producers in member states where the production of sugar beet is less competitive (see companion epamonitoring.net article ‘The June 2018 CAP Reforms: Part 2 – Importance of CAP Instruments to EU Agriculture and Issues Arising for the ACP’, 13 September 2018). This has led to a situation where production has increased in more efficient sugar production zones of the EU but with no corresponding decline in sugar beet production in the less competitive production zones of the EU. It was this that resulted in record EU sugar production in the 2016/17 season (see companion epamonitoring.net article ‘Sugar Substitution Gaining Pace in EU Amid Falling EU Import Demand’, 5 November 2018). African governments individually and collectively will need to explore just how they are to manage the trade distortions which arise as a result of EU agricultural support policies in the sugar sector as they seek to promote closer intra-African market integration as part of the AfCFTA process. A major problem faced in this regard is that these distortions are so deeply entrenched within the EU agricultural production system that they are not commonly mistaken for the simple operation of market forces. This is likely to mean that any African efforts to address the sugar sector trade distortions will meet with strong resistance from the European Commission and EU member states, all of which are looking to use the economic partnership agreements and the post-Cotonou EU agreements with African, Caribbean and Pacific countries to more effectively promote EU trade and investment interests (for details of recent EU initiatives in this regard, specifically the ‘new Africa-EU alliance for sustainable investment and jobs’ initiative, see companion epamonitoring.net article ‘EU Sees Mauritania’s EPA signature as Stepping Stone to an EU-Africa FTA?’, 25 October 2018). This is going to throw up complex challenges for African governments not only in their relations with the EU but also in their relations with each other as they seek to operationalise their commitments to the creation of an African Continental Free Trade Area (AfCFTA), not only in the sugar sector but across a multiplicity of sensitive sectors. |
Sources
(1) People Daily, ‘Sugar safeguards dilemma’, 17 July 2018
http://www.mediamaxnetwork.co.ke/451555/sugar-safeguards-dilemma/
(2) Business Daily , ‘Kenya seeks fresh Comesa sugar import safeguard’, 13 July 2018
https://www.tralac.org/news/article/13264-kenya-seeks-fresh-comesa-sugar-import-safeguard.html
(3) buisnesdailyafrica.com, ‘Relief for Kenya as Comesa team endorses sugar import safeguard’, 16 July 2018
https://www.businessdailyafrica.com/markets/commodities/Comesa-team-endorses-sugar-import-safeguard-Kenya/3815530-4665714-w7mueo/index.html
(4) IPPmedia, ‘Govt urged to get tougher over illegal sugar imports’ 13 July 2018
https://www.ippmedia.com/en/news/govt-urged-get-tougher-over-illegal-sugar-imports
(5) EC, ‘Sugar Market situation’, AGRI G 4 Committee for the Common Organisation of Agricultural Markets, 27 September 2018
https://ec.europa.eu/agriculture/sites/agriculture/files/market-observatory/sugar/doc/market-situation_en.pdf
(6) EC, ‘Short-term outlook for EU agricultural markets in 2018 and 2019’, Autumn 2018
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/short-term-outlook-autumn-2018_en.pdf
Growing African Demand Fuelling Poultry Meat Imports with EU Likely to Continue to Play Major Role
Summary
Growth in African poultry production is projected to lag behind growth in consumption making Africa the region with the highest rate of growth in poultry meat imports. African governments need to adopt policies which will encourage poultry companies in exporting countries to invest in local poultry meat production. This would build on an emerging trend. This may require managed trade regimes in the poultry meat sector, similar to those used by the EU. This may also require flexibility in how existing EPA commitments on the use of non-tariff trade policy tools are interpreted and applied so as to create market space for expanded domestic production. However the trade disruptive effects of a ‘no deal’ could make it more difficult for the EC to implement such a flexible approach. Read more “Growing African Demand Fuelling Poultry Meat Imports with EU Likely to Continue to Play Major Role”
ACP Banana Sector Concerns Raised in EP Opinion on Apportioning Bilaterally Negotiated EU TRQs within the Brexit Process
Summary
The issue of the future of EU TRQs negotiated as part of FTAs has been formally raised in the European Parliament opinion on the EU’s proposal for apportioning WTO agreed TRQs. This is an important issue for ACP banana exporters, particularly Cameroon, Ivory Coast and Surinam, whose banana exports are focused on EU27 markets. Any failure to apportion existing EU bilaterally negotiated TRQs would de facto increase competition on EU27 markets in the post-Brexit period by around 20%. With this potentially have severe price effects on ACP suppliers. With the potential for a ‘no-deal’ Brexit increasing there is an urgent need for the European Commission to clarify its approach on this issue, so ACP banana exporters can develop marketing strategies to deal with the increase in competition on EU27 markets they may face from 30th March 2019. Read more “ACP Banana Sector Concerns Raised in EP Opinion on Apportioning Bilaterally Negotiated EU TRQs within the Brexit Process”
Sugar Substitution Gaining Pace in EU Amid Falling EU Import Demand
Summary
While the impact of EU sugar production quota abolition is the most immediate concern to ACP exporters given the dramatic decline in EU prices paid for ACP sugar and the 60% decline in ACP sugar export volumes to the EU, the long term trend towards replacing sugar and reducing sugar usage in food and drinks is also a major source of concern. This will lead to an overall reduction in EU sugar consumption in a context where the future scaling back of EU production from record levels in 2017/18 is unlikely to see a return to historical levels of EU imports from ACP countries. This is likely to be compounded by the withdrawal of the UK from the EU. This means ACP sugar exporters will need to look to markets in Asia and particularly for African producers, in Africa. They will also need to look to the more systematic exploitation of non-sugar revenue streams linked to sugar cane production. Read more “Sugar Substitution Gaining Pace in EU Amid Falling EU Import Demand”