Farmer's Weekly (South Africa)
GLOBAL INSIGHT : Southern Africa waits with bated breath for Brexit agreement
The UK’s departure from the EU, popularly known as Brexit, has dominated the news since the outcome of the landmark referendum in that country was announced in June 2016.
Of particular concern for South Africa, the Southern African Customs Union (SACU), and the rest of the African continent, is how Brexit will affect the overall value of the recently concluded economic partnership agreements (EPAs).
The past two years have revealed the scale and complexity of the challenge the UK faces, with two issues becoming increasingly clear: firstly, the negotiations to leave the EU were always going to be complicated and tough, and there were deep divisions within the UK itself with regard to the real and imagined outcomes that would constitute an acceptable trade negotiation.
Secondly, it also became clear that the UK may not have the technical and human resource capacity to negotiate trade agreements with the rest of the world, particularly within a short period of time, to ensure uninterrupted trade with the rest of its global partners.
Brexit has often been reduced to a debate about these two issues, despite its being much more nuanced. For example, Brexit itself consists of two deals: the first is the ‘Withdrawal Agreement’ and the second is the ‘Future Relationship with the EU’ deal. The former, of which a draft has now been concluded, outlines the conditions that will frame the departure of the UK from the EU. This is the deal that has been negotiated over the past two years, and if the UK’s parliament approves it, the UK can be expected to formally leave the EU on 29 March 2019.
The second deal is yet to be negotiated, and will depend on how the UK’s domestic politics play out, and whether the withdrawal agreement is approved. This would determine whether the UK can meet the 29 March 2019 deadline. If it rejects the withdrawal agreement, we can expect a ‘no deal’ scenario in which the UK will exit the EU with no trade agreement.
In the unlikely event that the UK’s parliament accepts the withdrawal agreement, the country will enter into negotiations for the second deal, which would define the future trade relationship with the EU. The deadline for the negotiation and conclusion of this deal is 21 December 2020. During the transition period, the UK will still technically be a member of the EU.
The nature of the future relationship between the UK and EU remains an open-ended question, and the constraints this will impose on the UK’s ability to have trade agreements with other countries is also a key unknown.
effects for southern africa
What are the implications for South Africa, SACU and Mozambique, countries that have collectively negotiated an EPA with the EU? There are a number of agriculturerelated issues that are of relevance to SACU and Mozambique, including tariff rate quotas, automatic agricultural safeguards, and rules of origin, among others.
A number of agricultural products are subject to tariff rate quotas. These are twotier tariffs based on a threshold quantity, and are imposed on wine, ethanol, sugar and a variety of fruit, all of which apply mainly to South Africa. The rest of the SACU region and Mozambique enjoy duty-free and quota-free market access to the EU.
The critical questions here are whether to use volume or value of goods as a measure of the threshold, which growth factors to apply over time, and what appropriate reference period would apply. Ideally, the last three years (for example, 2015 to 2017) should apply.
Under a ‘no deal’ scenario, the global value chains of agricultural products exported from South Africa to the EU in a raw form, where they are processed and then exported to the UK, are likely to be disrupted significantly. However, this would be a worst-case scenario.
brexit may affect southern africa’s tariff rate quotas and rules of origin