SA not in a rush for new trade deals with the UK
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.
AUSTRALIA AND NEW ZEALAND ARE ITCHING TO NEGOTIATE UK FREE-TRADE AGREEMENTS Peter Draper Tutwa Consulting MD