Summary
Following a lack of progress in EU/UK discussion on the implementation of the Northern Ireland Protocol, the UK government has tabled a position paper proposing what amounts to a fundamental re-writing of the mutually agreed Protocol. This would bring into question the continued participation of Northern Ireland in the EU customs union and single market as agreed in the Protocol. The EU continues to insist solution must be found within the framework of the agreed Protocol. Prime Minister Johnson’s willingness to suspend the Protocol, so the UK can act unilaterally subject to joint decision making under the Protocol, if acted upon, could result in a serious deterioration in EU/UK trade relations as early as October 2021. This could then be the final nail in the coffin of ACP triangular supply chains. Even if such action is temporarily averted in October, the UK proposals leave unaddressed issues related to the future regulatory regime applicable to ACP products onward traded from GB to Northern Ireland. This in turn will make it more difficult to set in place solutions to the issues disrupting the functioning of wider ACP triangular supply chains (both ACP-to-UK-to EU and ACP-to-EU-to-UK) Read more “UK Government Seeking Fundamental Renegotiation of the Northern Ireland Protocol”
Kenya Looking to Market Diversifications in Face of Growing Complications on EU Markets and Covid-19 Related Increases in Air Freight Costs
Summary
The Kenyan authorities are once again looking to promote a diversification of exports towards non-EU markets, in the face of stricter EU SPS import controls and ongoing impact of Covid-19 related freight disruptions, which have increased the costs of serving EU market. These increased costs are likely to remain for some time, leaving little scope for investments in developing high value alternative non-EU markets for horticultural exports. If such investments are not made any shift to non-traditional markets is likely to reverse once Covid-19 disruptions are overcome. With UK and EU phytosanitary requirements beginning to diverge, new opportunities could open up in a traditional non-EU market, the UK. The ability of Kenyan exporters to exploit these opportunities will be critically determined by the evolution of freight rates to the UK. Read more “Kenya Looking to Market Diversifications in Face of Growing Complications on EU Markets and Covid-19 Related Increases in Air Freight Costs”
Growth Continues in EU27 Imports in Organic Products Where ACP Producers Have an Export Interest
Summary
ACP organic exporters have sustained strong growth in volumes to the EU market in 2020 despite a slight reduction in overall EU organic imports. In some organic product areas (rice and sugar) opportunities appear to exist which ACP producers have yet to exploit. Given the growing EU policy focus on the environmental sustainability of patterns of agri-food imports to the EU, exploring expansion into organic production in these areas could prove worthwhile. However, three headwinds are faced in continuing the expansion of ACP organic exports to the EU: the scheduled reforms to the EU’s organic product regime; the new trade administration complications for ACP organic exports to the UK, resulting from the UK’s departure from EU electronic systems for the management of imports of organic products; and the likely divergence of EU and UK organic certification requirements. Close attention will need to be paid to this issue by ACP organic exporters if existing growth in the volume of ACP organic exports to the Europe are to be sustained. Read more “Growth Continues in EU27 Imports in Organic Products Where ACP Producers Have an Export Interest”
Lack of Clarity on the Whether Brexit Disruptions of EU/UK Trade in Plants in Impacting ACP Exports
Summary
The early introduction of ‘complex and lengthy pre-notifications, certificates and inspections’ for living plants and cutting crossing from the EU to the UK is impacting on the EU/UK trade in such products. Currently it is unclear what knock-on effects this is having on ACP exports to the EU, given the large proportion of imports which originate in AC countries and the central role the Netherlands plays in the import and re-export trade. Given the impasse in EU/UK trade relations around the Northern Ireland Protocol, the early conclusion of a substantive EU/UK ^phytosanitary agreement is unlikely. The scope for shifting over to ACP direct exports to the UK meanwhile is complicated by the commercial consequences of the UK’s Covid-19 linked ‘red-list’ travel restrictions which are raising air freight costs from East Africa to the UK. Read more “Lack of Clarity on the Whether Brexit Disruptions of EU/UK Trade in Plants in Impacting ACP Exports”
Brexit set to extend marginalisation of traditional ACP suppliers on the UK sugar market
Summary
The proposed sugar quota under the UK-Australia FTA is initially equivalent to 17% of total UK import from outside the EU in 2019, rising to 47% after 8 years. Its impact on total ACP sugar exports to the UK will be determined by the future volume of EU27 sugar exports to the UK; the future evolution of UK sugar demand; and the future of the temporary UK ATQ of 260,000 tonnes which was introduced for one year from 1 January 2021. If the ATQ is retained, EU sales remain at ½ 2020 volumes and UK sugar consumption shrinks in line with projections, the situation of most ACP exporters on the UK market will be precarious. However, the vulnerability of individual ACP exporters to the evolving UK sugar sector trade policy varies greatly, with in depth, country specific analysis being required to determine which ACP sugar exporters are most vulnerable to the UK’s evolving sugar sector trade policy. Read more “Brexit set to extend marginalisation of traditional ACP suppliers on the UK sugar market”
Recent Trends in ACP Sugar Exports to the EU27 Show Continued Decline, with Brexit Exacerbating This Pre-Existing Trend
Summary
While EU sugar production is well down on the five-year average, the position of traditional ACP sugar exporters on the EU27 market is worsening. The reduction of traditional ACP sugar supplies has been larger than the reduction in total EU27 imports, with the share of EU27 import declining. This is linked to the emergence of new non-traditional suppliers who take advantage of recently granted duty-free access arrangements. Given the high dependence of traditional ACP sugar exporters on the UK market, the UK’s withdrawal from the EU sugar market equation will compound this trend. New EU/UK rules of origin are also likely to see EU manufacturers of high sugar content products turning their ack on imported sugar in favour of domestic EU27 beet production where both EU27 and UK markets are being served. At the ACP level this may in part be partially offset by reduced UK sugar exports to the EU market. Overall, the long-term prospects for all but the most competitively priced traditional ACP sugar suppliers look grim, unless the focus is on specialty sugar markets. This could lead to smaller but more sustainable levels of sugar exports, by those ACP sugar producers who adopt such strategic market repositioning strategies. Read more “Recent Trends in ACP Sugar Exports to the EU27 Show Continued Decline, with Brexit Exacerbating This Pre-Existing Trend”
HGV Driver Crisis Raises Contractual Issues for ACP Fresh Produce Exporters
Summary
While a post-Brexit-road haulage crisis was foreseen, this initially focussed on cross border road haulage operations. However, a combination of Covid-19 linked economic downturn and movement restrictions, a ‘hostile’ post-Brexit UK immigration policy and UK tax reforms linked to the employment of independent HGV drivers, has served to create an acute shortage of drivers for both HGV vehicles and lighter vans. This is posing serious challenges to the continued smooth functioning of food supply chains. This raises important issues related to the distribution of the losses and additional costs arising from the current road haulage crisis. These issues need to be addressed within ACP supply contracts, with the inclusion of provisions which insulate ACP suppliers from the worst of the emerging losses and additional costs. On the basis of past commercial experience of burden sharing this may require policy interventions if ACP suppliers are not to bear the brunt of the new costs and losses. However, the policy framework for such interventions is weak. Read more “HGV Driver Crisis Raises Contractual Issues for ACP Fresh Produce Exporters”
Effects of Rules of Origin Complications for ACP Exports Shipped to UK Via EU Being Increasingly Felt
Summary
For products shipped across an EU/UK border since January 2021, the end of the 6-month grace period for the submission of documentation required to validate self-certified originating status claims (on which duty-free access is based) has started. Failure to validate initial claims will potentially see UK MFN tariffs imposed. This poses problems for ACP products shipped to the UK via the EU, where invalid originating status claims were initially made. For these products extending the grace period for document submission will not help. What is required is the introduction of simplified procedures for the verification of initial ‘originating status’ of ACP products re-exported (e.g., through HMRC recognising country specific phytosanitary certificates as valid documentary proof of origin for duty free access claims). Such reforms need to be urgently introduced if the commercial viability of a wide range of ACP triangular supply chains are not to be fundamentally undermined. Read more “Effects of Rules of Origin Complications for ACP Exports Shipped to UK Via EU Being Increasingly Felt”
Wider Trade Dimensions of EU Due Diligence Regulations: Where Does the Interest of the ACP Lie?
Summary
President Macron is throwing his weight behind efforts to establish regulatory ‘mirror clauses’ in EU trade agreements to combat ‘environmental and social dumping’. However, despite strong European Parliament support, there is no consensus among EU member states governments on the scope and practicality of such a ‘mirror clause’ approach. ACP exporters and governments need to define where their interests lie within these EU regulatory discussions, so as to be able to protect and promote ACP producer interests within these policy debates. Read more “Wider Trade Dimensions of EU Due Diligence Regulations: Where Does the Interest of the ACP Lie?”
Circumvention of the LID Highlights the Need for an Ambitious and Effective EU Human Rights and Environmental Due Diligence Regulation
Summary
The EC’s much heralded human rights and environmental due diligence regulation looks set to be limited to establishing a common minimum standard, which businesses will be required to adhere to, with an enabling environment being created aimed at incentivising companies to address the negative impacts of their activities. In the face of corporate lobbying Tony’s Chocolonely has broken ranks demanding the EC establish an ambitious minimum standard. This would appear essential, given current corporate efforts to side-step the overall cocoa procurement cost implications of the Living Income Differential initiative, by reducing other components of cocoa bean payments made in Ghana and Cote d’Ivoire. A clear Organisation of African, Caribbean and Pacific (OACP) States and African Union position in support of an ambitious and rigorously enforced corporate minimum standard for living wage, human rights and environmental protection commitments would appear to be required. Read more “Circumvention of the LID Highlights the Need for an Ambitious and Effective EU Human Rights and Environmental Due Diligence Regulation”