Brexit & UK trade, UK WTO & 3rd countries

UK says will be ready to roll over SADC trade deal post-Brexit – but will it?

The UK will be ready to activate an economic partnership agreement with southern African countries from the first day after Brexit, Prime Minister Theresa May said yesterday. But nothing is done yet, writes Chris Horseman.

A joint statement between the UK and the countries of the Southern African Development Community, released by May in Cape Town, said a new British-SADC trade deal would “replicate the benefits” of the EU’s EPA with the region, and that it could take effect “as soon as the EU deal no longer applies to the UK”.

But closer examination suggests no deal is yet in place and that substantial work remains to translate what is now a statement of intent into an actual trade accord, let alone one that could potentially take effect as early as 30 March if the UK leaves the EU with no transition agreement in place.

“We recognise that the affirmations set forth in this political understanding are not intended to be legally binding and remain ‘without prejudice’ to the technical discussions currently underway,” the statement says.

‘Most advanced statement of progress’ to date

The announcement that a deal between the UK and SADC (which includes South Africa, Botswana, Lesotho, Namibia, Eswatini/Swaziland and Mozambique) would be ready as soon as Britain leaves the EU formed a centrepiece of May’s visit to South Africa. The British side presented it as a significant step in the development of the UK’s post-Brexit portfolio of trade agreements.

“Today’s announcement is the most advanced statement of progress to date with around 40 existing EU trade agreements that the UK is transitioning, and an important step in positioning the UK as a global champion of free trade and development,” said UK trade chief George Hollingbery, who accompanied May to Africa.

The text of the joint statement shows only a commitment among the parties to “continue to work together towards the conclusion of a future UK, SACU [Southern African Customs Union] and Mozambique EPA that ensures continuity in the trade relationship once the EU-SADC EPA no longer applies to the UK”.

The wording provides for continuing uncertainty about the terms and timing of the UK’s exit from the bloc.

The SADC group says it “takes note” of the UK’s intention to be treated, for the purposes of EU international agreements, as an EU member for the duration of the implementation period between the bloc and Britain. It stops short, however, of explicitly saying it is prepared to treat the UK that way.

In any case, as the statement also acknowledges, the March 2019-December 2020 implementation period would only take effect in the context of a wider EU-UK accord on the terms of withdrawal.

A ‘no deal’ Brexit would take such an option off the table. It is for this eventuality that the two sides have committed to “ensure that an agreement can be in place” as soon as is necessary after Brexit.

In essence, the parties have reiterated that a UK-SADC EPA should “replicate the effects” of the EU-SADC EPA, notably by the UK extending to the southern African countries the same trade preferences they currently enjoy.

SADC countries voice concerns over ‘cumulation’

But, as is the case with virtually all EU trade agreements that the UK aims to replicate post-Brexit, the situation is more complicated than a simple copy-and-paste.

Indeed, the joint UK-SADC statement draws attention to the fact that the UK and the EU27 must still agree on rules of origin, and particularly provisions relating to cumulation.

“SACU and Mozambique emphasise the importance of continued cumulation between all the parties in promoting continuity and to avoid disruption in trade, and urge both the UK and the EU to recognise the importance of cumulation in the discussions on a post-Brexit EU-UK arrangement,” the statement reads.

This is particularly importance for manufactured goods such as cars. Ford, for example, has an assembly plant in South Africa that is integral to the supply chain for vehicles finished and sold in Europe. An agreement on cumulative rules of origin among the UK, the EU and SADC is vital to prevent these movements from attracting import duty.

Most imports from the SADC region have preferential access to the EU under the terms of the EPA, and London has stressed that these preferences will continue. Botswana, Lesotho, Namibia, Eswatini /Swaziland and Mozambique benefit from duty-free, quota-free access to the EU market for all non-military products.

No agreement on South African TRQs

However, around 4% of South Africa’s exports to the EU (mostly agricultural products) are subject either to tariff rate quotas or are not eligible for tariff concessions.

The question of how South Africa’s TRQs would be divided up between the UK and the EU27 remains unanswered. There are 12 TRQs on goods ranging from wine and fruit juice to sugar and butter.

These were not included in the list of WTO-bound TRQs for which the EU and UK proposed a simple split, in a controversial proposal submitted to the World Trade Organization in May. South Africa is understood to be pressing for an increase in its future TRQs, which would require difficult three-way negotiations among South Africa, the EU and the UK.

Hollingbery’s comment that the SADC discussions are “the most advanced” of the 40 or so EU trade deals that the UK is seeking to transition – despite the issues that remain unresolved – offers an insight into just how much work officials in London still must do to roll over the terms of EU trade agreements in time for the UK’s departure.

The time pressure will become critical if Britain leaves without a deal in place next March, and hence fails to secure for itself the anticipated 21-month breathing space to finalise such deals that would be provided by the proposed implementation period until December 2020.

Even the pledge to make progress outlined in the UK-SADC joint statement has failed to convince trade experts such as Helen Dennis, policy & advocacy manager at Fairtrade UK.

“I still find it hard to see how these deals could be rolled over in a no-deal scenario,” she told Borderlex.

Moreover, SADC is one of only two of the EU’s eight regional EPAs to which all countries in the region have assented to accede – the Caribbean ‘Cariforum’ group being the other.

Rolling over existing trade accords and packages of concessions will be all the more difficult where significant numbers of countries in the region are not signatory to the core agreement.

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