Photo: EPAs are trade and development partnerships being negotiated between the EU and the 79 African, Caribbean and Pacific (ACP) countries and regions. Credit: Neil Palmer/CIAT - Photo: 2017

Going Bananas Over Brexit

By Samantha Sen

LONDON (ACP-IDN) – The Brexit question as seen by the small and poor group of African, Caribbean and Pacific (ACP) countries is far simpler – and potentially far more lethal – than those the more usual Brexit debate engages with. It belongs less to debate on knock-on effects rolling into the future than to questions of physical survival here and now. When a fifth of Fiji exports head for the UK, when a Caribbean island lives off bananas sold to Britain, new spokes in buying and selling can hit the people, and even all of the people, of a small nation.

The more so when Britain is not just a large market in itself but a gateway to the European Union for many of the exports from small countries, none more than sugar and bananas. The EU-ACP trade agreement, known as the Cotonou agreement after the city in the West African country Benin where it was signed in June 2000, is now set to face fundamental revisions in the face of Britain’s separation from the EU. Some ACP trade is heavily weighted towards one or the other, the other being currently the rest of the European Union.

The wall that potentially may arise through the gateway between Britain and the EU following Brexit is raising some concerns already. All sorts of overlaps and exclusions have come to crowd the space for negotiating the separation. One body of these concerns is being taken up by the Commonwealth, a group of 52 countries including Britain and other countries a part once of the British Empire – a majority of Commonwealth countries are also ACP countries. That spells consequences for countries with historical trade ties with Britain, which now forms the axis of the change.

“What we know is that the ACP countries have traditionally had a lot of their trade and services come through the UK,” Commonwealth Secretary-General Baroness Scotland tells IDN. Britain is the stepping stone for substantial ACP exports into the European market, she says. “And therefore there has been quite a lot of anxiety as to what this will mean if the UK is no longer in the European market.”

Baroness Scotland does not believe there is great reason for anxiety, though. “We’ve had some very encouraging sounds coming from the UK who have tried to make it clear that they do not wish any of their partners to be disadvantaged. So I reasonably anticipate that every effort will be made to maintain the current position in terms of access to British markets.”

Contrary to fears, there may be promise ahead that the change could bring better trade deals, she says. “If Britain remains in the EU it is limited in how many bilateral agreements they can make. But there is great hope that if and when the UK leaves the EU, they will be able to have a greater degree of flexibility in the way in which they do business, and there may be scope even for improved circumstances for all members of the Commonwealth.”

A reassuring sign has come by way of a statement from British Prime Minister Theresa May in a White Paper presented to the parliament in Britain: “We are seeking to achieve continuity in our trade and investment relationships with third countries, including those covered by existing EU free trade agreements or EU preferential agreements.” That is only a broad statement of intent, though, and there could be limits just how much reassurance a small country can read into such promise given its specific circumstances.

The British accent will inevitably be on new free trade agreements with large Commonwealth countries such as India offering a far bigger potential market for British goods. “As the UK may prioritise the roll-over other Free Trade Agreements (FTAs) (e.g. Korea, Canada) and the negotiation of new FTAs (India, China, etc.), Economic Partnership Agreements (EPAs) countries will compete to get the attention of the U.K.,” Maximiliano Mendez-Parra, senior research fellow at the Overseas Development Institute (ODI) in London tells IDN. Economic Partnership Agreements govern trade with many ACP countries.

“Most of the effects will depend on whether the UK roll-over existing preferential tariffs for these countries,” Mendez-Parra says. “Currently, their trade with the EU is covered by the Everything But Arms (EBA) unilateral preferences and by the Economic Partnership Agreements (EPAs). Whilst the extension of the EBA regime would be a sole UK decision, the roll-over of the EPAs will require some negotiation with the involved ACP countries.”

British direct trade with ACP countries has reduced over years but remains substantial for many, the ODI points out. Britain accounted in 2014 for 21 percent, 20 percent, 10 percent and 9 percent of the exports of Mauritius, Fiji, St Lucia and Kenya respectively. Many of the products imported into Britain attract very low tariff as negotiated with the EU under the Cotonou agreement. “The non-participation in the single market and the EU customs union will imply higher trade costs for developing countries operating in value chains,” Mendez-Parra tells IDN. British exports to all 79 ACP countries form only 2 percent of its export basket.

Despite May’s broad reassurance, the very nature of the British economy could draw its priorities away from a new push for trade with the ACP. “The UK economy specialises in the production of high tech products, industrial intermediate products and very high skilled services (i.e. financial),” says Mendez-Parra. “ACP countries, based on their size and structure of their economies, are not main destinations for these type of products. In virtue of their size and that they present more compatible production structures, the UK seems to be prioritising the relationship with other developed countries and with emerging economies. India and Brazil, for example, absorb as many exports as all ACP combined.”

Furthermore, Mendez-Parra cautions, “As the UK leaves the EU, it is possible that some of the products currently sourced in the EU may start to be sourced elsewhere. The possibility that the reorientation of the demand may benefit ACP countries is quite limited.”

ACP countries will inevitably by looking at new deals – as much if not more – with an EU minus Britain as with a Britain outside of the EU, if only because the EU will be a far larger market with which a trade deal would bring greater scope for profit. “We will have to work both sides of the pond,” ACP secretary-general Dr Patrick Gomes said at The Ramphal Institute at King’s College, London, on February 17. That appeared an obvious statement of sensible intention, but it did carry a hint of a warning to Britain, considering how much bigger the EU pond will be.

The UK-EU split is opening up a split within the ACP already. For countries such as Kenya and Ghana “the EU (even without the UK) constitutes an important export destination,” says Mendez-Parra. For the Caribbean the EU without the UK is of little interest,” says Mendez-Parra. “The least developed among the ACP countries are in no hurry either to enter into EPAs “as they have preferential access under the EBA.” The EU is looking to finalise Economic Partnership Agreements that the UK will soon be out of. But not all ACP countries will be tempted by these agreements.

The ACP is in any case from a tightly integrated entity. Its members have more commonalities among themselves than connections. It is regional groupings within this group of countries that are expected to lead negotiations for new terms with the divorcing partners. [IDN-InDepthNews – 11 March 2017]

Photo: EPAs are trade and development partnerships being negotiated between the EU and the 79 African, Caribbean and Pacific (ACP) countries and regions. Credit: Neil Palmer/CIAT

Note: This report is part of a joint project of the Secretariat of the ACP Group of States and IDN, flagship agency of the International Press Syndicate

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