Revisiting the Brexit debate
A
s the extended deadline of
31 October for the UK to leave the EU
approaches, I would like to revisit
any changes to the circumstances around the
Southern African Customs Union’s (SACU)
prospective trade relationship with the UK.
Given new UK Prime Minister Boris
Johnson’s hardline position on taking
the UK out of the EU by the deadline,
and given that the EU is not prepared
to re-negotiate the ‘divorce’ agreement,
many observers believe the more likely
outcome will be a no-deal Brexit. However,
widespread media reports suggest that
some members of the UK parliament
are exploring ways to prevent him from
unilaterally implementing this decision. The
good news is that SACU is preparing some
contingency measures to manage a no-deal
outcome. Over the past two years, SACU
has been negotiating a trade agreement
with the UK, which is similar to the EU’s
economic partnership agreement (EPA).
For example, the existing set of sanitary
and phytosanitary compliance provisions
and certification systems under the SACU-
Mozambique-EU EPA will be adapted to the
SACU-Mozambique-UK EPA; and the tariff
rate quotas (TRQs) from the former will
be amended to scale, to fit the latter. A key
challenge, however, is negotiations around
cumulation. For example, the usage of raw
materials from the EU in a production and
value-addition process in South Africa, so
that it still fits into the rules of origin and
still qualifies for preferential market access
under the SACU-Mozambique-UK EPA.
We could reasonably expect the terms
of the SACU-Mozambique-UK EPA to
provide the UK with SACU import TRQs for
cereal-based food preparations, as well as
dairy products. We can also expect SACU
to have export TRQs in the UK market for
canned tropical fruit, frozen fruit juice,
apple juice, wine and sugar, among others.
Another addition will be a special
agricultural safeguard to provide the
domestic sector with tariff protection if
an unanticipated surge in UK agricultural
commodity exports occurs. These safeguards
will have specific trigger quantities, which
would lead to duties kicking in when
the threshold volumes are exceeded.POSSIBLE SCENARIOS
There are two potential scenarios after
31 October. If the UK manages to strike
a deal with the EU, nothing should
change in the immediate term; the UK
will remain a part of the EU at least until
December 2020, while an EU-UK customs’
union-type agreement is negotiated.
It is not clear if the extension of the Brexit
deadline from end of March to end of
October has also extended the December
2020 deadline for the finalisation and
actual exit of the UK from the EU.
If the UK leaves the EU without a deal,
but strikes a deal with SACU-Mozambique,
we can expect the memorandum of
understanding (MoU) that was agreed earlier
this year to kick in, and allow for the residual
parts of the existing SACU- Mozambique-EU
EPA to remain functional, while the
parties finalise and ratify the SACU-
Mozambique-UK EPA. A period of six
months is envisaged for the transition.
The worst-case scenario is the UK
failing to have a deal in place with both
the EU and SACU. This will mean that
SACU’s trade relationship with the UK
moves to ‘most favoured nation’ tariffs
immediately after 31 October. About 95%
of the UK’s tariff book is duty-free, and
duties will be triggered on 469 tariff lines
that are deemed as sensitive products.
This means that, regardless of these
two scenarios, most of SACU’s export
trade with the UK will remain duty-
free. The risk for SACU, however, is
that without a trade agreement, there
is little competitive advantage for other
producers in the UK market, particularly
Southern Hemisphere fruit exporters.
The benefits of the UK leaving the EU
remain: SACU’s citrus exports to the UK
will cease to be subject to citrus black spot
(CBS) emergency measures, and therefore,
it means SACU can increase its UK market
share, and the new wine quota under the
SACU-Mozambique-UK EPA will have
an additive effect on the existing one
that SACU already has with the EU.
So the departure from the EU gives
expanded market access for SACU’s TRQs in
general. Thus, overall, the benefits of Brexit
remain positiveforSACU’sagriculture.OPINION & ANALYSIS
GLOBAL INSIGHT
BY DR TINASHE KAPUYA
Dr Tinashe Kapuya is an
agricultural economist. Email him
at [email protected].
23 AUGUST 2019 farmer’sweekly 11