SA not in a rush for new trade deals with the UK

Business Day - - FRONT PAGE - Joffe is ed­i­tor-at-large.

Bri­tain’s exit from the EU would leave it “free to strike trade deals with old friends and new part­ners around the world”, said UK Prime Min­is­ter Theresa May last week as she an­nounced her in­ten­tion to seek par­lia­ment’s ap­proval for a June 8 gen­eral elec­tion. Will SA take full ad­van­tage of the chance to be one of those old friends or new part­ners? If a speech by Trade and In­dus­try Min­is­ter Rob Davies to the British Cham­ber of Commerce last week is any­thing to go by, SA may not lose any ex­ist­ing trade ben­e­fits due to Brexit, but the coun­try is not ex­actly ex­ert­ing it­self to gain any new ones — a case of try­ing to min­imise the down­side rather than max­imise the up­side.

The plan is to roll over the pro­vi­sions of the Euro­pean Part­ner­ship Agree­ment (EPA), which SA and its South­ern African Cus­toms Union neigh­bours signed with the EU in 2016, into a bi­lat­eral agree­ment with the UK that will run in par­al­lel. Davies says an un­der­stand­ing has been reached be­tween the gov­ern­ments of SA and the UK, and the cus­toms union.

With the UK set to part ways with the EU in two years, he wants to get a new agree­ment along these lines inked as soon as pos­si­ble. His view seems to be that the UK, which has to ne­go­ti­ate at least 50 new bi­lat­eral agree­ments with other coun­tries as well as agree­ing to new ar­range­ments with Europe, will be kept very busy in the next two years.

Davies wants to en­sure, for now, that there is no dis­rup­tion to the ex­ist­ing trade re­la­tions SA has with the Bri­tain through the EPA. A new trade deal with the UK could come later — but his pri­or­i­ties, he made clear in an interview on the side­lines, are else­where. He is fo­cus­ing on new African trade agree­ments and re­gional in­te­gra­tion.

Ar­guably, he is sim­ply be­ing re­al­is­tic about Brexit. SA’s ex­porters, im­porters and trade fi­nanciers will no doubt find this re­as­sur­ing.

Ne­go­ti­at­ing a brand new trade deal would take years. Even just putting a par­al­lel agree­ment in place is not un­com­pli­cated for SA, given that key ex­ports such as wine and fruit are sub­ject to quo­tas, which re­flect the de­mands of Europe’s 27 coun­tries, and the quo­tas can­not just be di­vided by 28 to get the UK’s share. A share of 40% of SA’s wine to Europe goes to the UK.

“Des­ig­na­tion of ori­gin” rules on prod­ucts such as sherry could also come up for dis­cus­sion. Per­haps tweak­ing the quo­tas and rules over the next two years is the best that can be hoped for, but it seems unimag­i­na­tive at best. That is par­tic­u­larly so given how im­por­tant a trad­ing and in­vest­ment part­ner the UK is for SA – and how keen May’s government seems to be to court its “old friends” in the Com­mon­wealth, SA in­cluded.

The tar­iffs and quo­tas in the EPA were largely driven by coun­tries such as Spain, which like SA pro­duce fruit and wine they ex­port to the UK. SA should surely be look­ing to ex­pand its agri­cul­tural and agri-pro­cess­ing ex­ports to the UK, in par­tic­u­lar, but should be look­ing at ev­ery page of the EPA to see where it could boost its trade with Bri­tain.

“The op­por­tu­nity for SA is in the de­tail — go­ing through the cur­rent agree­ment and ask­ing, where do we think we are able to find a bet­ter deal with the UK than the one we have been able to cut with the EU,” says Her­bert Smith Free­hills part­ner Gavin Wil­liams. Other Com­mon­wealth coun­tries are aim­ing to go much fur­ther.

The con­cern would surely be that if SA were tardy about seek­ing out op­por­tu­ni­ties, oth­ers may leap in and grab those mar­kets.

Aus­tralia and New Zealand are itch­ing to ne­go­ti­ate free-trade agree­ments with the UK, says Tutwa Con­sult­ing MD Peter Draper.

About 85% of SA’s ex­ports to the UK are not sub­ject to tar­iffs and the coun­try should be con­sid­er­ing what can be done with the other 15%, as well as prob­ing the ex­ist­ing line items.

On the goods side, the op­por­tu­nity to ex­pand ex­ports is mainly in agri­cul­ture, but Draper sees a much broader set of op­por­tu­ni­ties to ex­pand the ser­vices trade with the UK. Much of SA’s in­vest­ments in the UK and the UK’s in SA are in the ser­vices sec­tor.

There has to be po­ten­tial to in­crease ser­vices ex­ports in ar­eas such as fi­nance, telecom­mu­ni­ca­tions and even in the ed­u­ca­tion sphere.

If tar­iff bar­ri­ers were in the way, Brexit could pro­vide a chance to look at those again.

It is surely the time to start find­ing out where the op­por­tu­ni­ties lie and lis­ten­ing to all pro­pos­als on how SA might lever­age Brexit to its ad­van­tage. The coun­try cer­tainly could do with much greater ex­port of ser­vices and goods, es­pe­cially in job-cre­at­ing sec­tors such as agri­cul­ture or tourism.

Yet there is lit­tle sign Davies and his depart­ment are rush­ing to com­mis­sion stud­ies and in­ves­ti­ga­tions into those op­por­tu­ni­ties, to ready SA for a more as­sertive ap­proach. By the time Brexit has oc­curred in 2019, it may be too late.



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