Summary
The tariff bill faced by Ghanaian exporters as a result of the UK allowing pre-existing duty-free access to lapse without an ‘bridging mechanism’ in place is mounting. It is unclear how long it will be before more companies shift their sources of supply away from Ghana. Given agreement had been reached on all substantive issues of concern, the failure of the UK to include Ghana in the ‘bridging mechanism’ appears to be linked to a misunderstanding of the constitutional constraints arising from the democratic election process in Ghana. This limits the capacity of Ministers to sign international trade agreements, in the absence of due parliamentary endorsement. The adoption of a course of action by the UK government which economically penalised Ghana for respecting Parliamentary processes and constitutional requirements, would appear to be a matter deserving of urgent political attention at the highest level in the UK government.
The UK government’s decision not to implement a trade arrangement ‘bridging mechanism’ for Ghanaian exports to the UK market saw the reimposition of UK import tariffs on Ghanaian products from 1 January 2021 (1). This occurred despite the UK government having adopted such a ‘bridging mechanism’ for other countries which faced procedural constraints in finalising ratification processes or in provisionally apply their agreements (including for Cameroon, Kenya, St Kitts, Trinidad & Tobago, Samoa and the Solomon Islands and Colombia). This ‘bridging mechanism’ allows a continuation of pre-existing duty-free access to the UK market despite the incomplete nature of the trade agreement signing and ratification process (2).
Press reports from 23rd January reveal that since the first imposition of tariffs on 3 January 2021 a total of ‘at least £100,000 of tariffs have been slapped on Fairtrade bananas’ imported to the UK from Ghana (3).
Unless this issue is resolved annualised tariffs on Ghanaian Fairtrade bananas in excess of £1 million will be generated, gobbling up funds equivalent of over2/3rd of the annual Fairtrade premiums paid to Ghanaian banana producers. This has seen the Fairtrade Foundation urging the UK government to ‘put in place provisional mechanisms’ so Ghanaian banana exports can once again enter the UK market duty free (4) (see epamonitoing.net article, ‘Punishing Start to Ghana’s Post Brexit Trade Relations with the UK’, 5 January 2021). The current lapsing of duty -free access for Ghanaian exports poses a serious threat to a trade which has taken years to build up and which to date has successfully managed to sustain supplies to the UK market despite Covid-19 related trade disruptions from other suppliers.
The MD of Companie Fruitier UK, the main importer of Ghanaian bananas, Keith Sadler, has warned that in the face of a potential tariff bill in excess of £1 million per annum ‘no business can operate with that level of extra costs.’ He stressed how the tariff issue needed to be resolved urgently before the company would ‘have to make difficult decisions’ (3)
Against this background, George Kporye of the Ghanaian banana exporter Golden Exotics pointed out ‘if this issue continues for weeks, it will put the jobs of over three thousand workers mostly in rural communities at great risk’ (3). Mr Kporye had earlier highlighted how export volumes to the UK were already being scaled back (1), in the face of losses of $1.60 per box of Fairtrade bananas landed in the UK. He urged Secretary of State Truss to ‘waive tariffs in the interim period or commit to refund them after the agreement has been signed’ (3).
The issue of the inexplicable application of tariffs on imports from Ghana has been taken up in the UK Parliament most recently by the Chair of the House of Commons International Trade Committee, Angus MacNeil, who wrote to Secretary of State Truss calling for a statement as to why when ‘an agreement had been reached on all the main issues’, tariffs were still being imposed. He warned that if UK importers were forced to move away from sourcing from Ghana ‘thousands of jobs in rural areas will be put at risk’ (3).
For his part the shadow Trade Secretary, Gareth Thomas, urged the Secretary of State for Trade to take action to save jobs in low margin businesses like banana exporters. He claimed it ‘beggars’ belief that they left sorting out a deal with a key Commonwealth ally so late’ (1).
UK Department of International Trade (DIT) officials meanwhile blamed the Government of Ghana for a failure to engage fully until it was too late. It was asserted the Government of Ghana choose not to take up an earlier ‘generous offer’ from the UK that would have ‘guaranteed their continued and lasting access to the UK market’ (3). DIT officials maintain the UK government is continuing to work with the Government of Ghana to restore duty-free access but maintain the responsibility for restoring duty free access lies with both parties (3).
| Comment and Analysis Behind the current situation there lies the deeper issue of the limited capacity of UK officials to understand the complexities involved in ‘rolling over’ trade agreements from the perspective of partner countries. In the case of Ghana, the government had genuine concerns over the need to reconcile its existing regional trade policy commitments made (in the context of ECOWAS trade integration initiatives) with its ‘rolled over’ trade arrangement with the UK. As early as June 2020 this issue had been formally raised by the Ghanaian Minister of Trade with Secretary of State Truss. However, with the issue being dealt with at a relatively junior level in the UK’s Department for International Trade (DIT), Ghanaian proposals to get to grips with the regional dimension were rejected in July 2020. It was only following the direct engagement of Secretary of State Truss that the UK agreed to an approach which took Ghanaian regional concerns into account. Following the secretary of State’s intervention, detailed discussions were held which enabled the hammering out of a compromise which ensured the UK would be accorded parallel treatment to that extended to EU27 exporters when it came to tariff reduction schedules. This substantively addressed UK tariff phase down concerns, while taking on board Ghanaian regional concerns (including a commitment that any subsequent UK-ECOWAS agreement would supersede the provisions of any bilateral Ghana-UK arrangement). However, by the time these agreements had been hammed out, the election process was underway in Ghana and certain constitutional constraints entered into force with regard to the signing of new trade agreements. Without Ministerial appointments in place which have been endorsed by Parliament, the responsible Minister is not empowered to sign any new trade agreements. With the outcome of the elections yielding a hung parliament, this process of Parliamentary endorsement is taking more time than would normally be the case. These constitutional constraints were recognised on the Ghanaian side, with the seeing the Ghanaian Government seeking a ‘work around’ which would preserve Ghanaian duty-free access to the UK from 1 January 2021. This involve the issuing of a Joint Ministerial statement on 31 December 2020, which recognised ‘a consensus on the main elements of a new trade agreement’ had been reached, and which asserted this provided ‘the basis to replicate, the effects of the existing trade relationship between the UK and Ghana’ (5). On the Ghanaian side it was assumed this would be sufficient for the UK to establish a ‘bridging mechanism’ that would allow duty free access to be maintained, while the agreement and associated ratification processes were being completed. Such a course of action would have been fully in line with the ‘bridging mechanism’ established by the UK government in favour of neighbouring Cameroon and a range of other developing countries which faced procedural constraints in finalising trade agreement processes before the end of 2020 (including Colombia a major banana exporter which supplied 319,338 tonnes of bananas to the UK market in 2019 valued at €201 million (6)). It therefore came as shock when from 1 January 2021 the UK allowed Ghana’s duty-free access to lapse, without any comparable trade arrangement being set in place. This was particularly damaging in the banana sector where it meant standard MFN tariffs of £95 per tonne were applied to the first of the weekly shipments of Fairtrade bananas to the UK. However, UK tariffs have not only impacted on Ghanaian banana exports. Canned tuna exports to the UK (under the John West label) have also been ‘paused’, given the initial shipment in the absence of duty-free access would have faced import tariffs of £1 million. Other prepared fruit sectors UK importers have shifted their sources of supply away from Ghana to suppliers which continue to enjoy duty free access to the UK market. It would appear to be only a matter of time before the international tuna canning company which ships John West tuna to the UK market, makes a similar decision to shift its sourcing for the UK market away from Ghana. If this occurs, it is an open question as to whether the affected Ghanaian tuna canning plant would continue operations. Against this background, there appears to be an urgent need for the British government to restore Ghana’s duty-free access to the UK market immediately. No substantive points of disagreement remain, with the only impasse being the Ghanaian constitutional constraint on signing while the due democratic process of constituting the new parliament and confirming new Ministers in office is completed. UK negotiators appear to have neglected the constitutional constraints facing the government of Ghana in formally signing an international trade agreement at the end of 2020, given the unfortunate conjuncture of the lapsing of the existing trade arrangement and the conduct of democratic elections in Ghana. There also appears to be a lack of awareness on the UK side of the serious long-term sourcing and investment implications which can follow on from the lapsing of duty-free access arrangements for even a relatively short period of time. It seems a strange message for the UK government to be sending to its trade partners that countries can be penalised economically where government’s respect democratic processes and constitutional requirements in the conduct of their international trade relations. Indeed, the current situation suggests a need for clear political leadership in the UK to urgently rectify the unfortunate removal of Ghanaian duty-free access to the UK market arising from Ghana’s exclusion from the ‘bridging mechanism’ applied to other countries faced with similar procedural constraints in completing the signing and ratification process for new UK-only trade agreements by the end of 2020. |
Sources:
(1) Bloomberg.com, ‘Ghana’s Costly Wait for Its Post Brexit Trade Deal With UK’, 4 January 2021
https://www.bloomberg.com/news/newsletters/2021-01-04/supply-chains-latest-ghana-s-costly-wait-for-a-u-k-trade-deal
(2) For details see, gov.uk, ‘UK trade agreements with non-EU countries’, 14 January 2021
https://www.gov.uk/guidance/uk-trade-agreements-with-non-eu-countries
(3) The independent, ‘£100,000 of tariffs slapped on Fairtrade bananas from Africa threatening farmers with ruin’, 23 January 2021
https://www.independent.co.uk/news/uk/politics/brexit-tariffs-bananas-africa-farmers-b1791225.html
(4) Fairtrade Foundation, ‘Lack of agreed trade deal with Ghana means banana farmers will face tariffs’, 4 January 2021
https://www.fairtrade.org.uk/media-centre/news/lack-of-agreed-trade-deal-with-ghana-means-banana-farmers-will-face-tariffs/
(5) gov.uk, ‘Ghana UK Joint Ministerial Statement on a Continuity Trade Agreement’, 31st December 2020, Department for International Trade and The Rt Hon Elizabeth Truss MP
https://www.gov.uk/government/news/ghana-uk-joint-ministerial-statement-on-a-continuity-trade-agreement
(6) EC, Market Access Data Base,
https://trade.ec.europa.eu/access-to-markets/en/statistics?includeUK=true