Dr Patrick I Gomes - Photo: 2017

Securing ACP Economic Interests After BREXIT

By Dr. Patrick I. Gomes, ACP Secretary-General

Following are extensive excerpts from a presentation by the ACP Secretary-General during launch of the book AFTER BREXIT – SECURING ACP ECONOMIC INTERESTS by The Ramphal Institute on February 17, 2017 at King’s College London.

BRUSSELS (ACP-IDN) – Eight months have passed since the British voted in a referendum to leave the European Union. A lot has since been written and debated on the impact and implications of the vote. This is yet another occasion to join the discourse on BREXIT and to acknowledge and appreciate the work done by the Ramphal Institute by this seminal study.

The book provides pertinent insights and additional intellectual ammunition for ACP countries and their allies to continue their preparation to secure the trade and economic interests of the ACP Group of States. This is fundamental for the reality of trade to be a powerful instrument in the eradication of poverty. This is a battle and on-going struggle at the heart of the ACP’s raison détre.

There is no doubt that the referendum result sent shock waves through many capitals and reverberated in global markets. In ACP markets, investors were disturbed because many economies were already suffering from low commodity prices in the face of a sluggish global demand. There were fears that trade and investment would be woefully affected most by BREXIT. 

The apprehension for most countries in the ACP Group of States was linked to the partnership between the Group and the European Union, which the UK has been a key and influential Member. The concern also arose from mainly the fact that a good number of ACP States joined the partnership with the European Union, because of their historical colonial relations with the United Kingdom. Indeed as a Group, the ACP relations with the United Kingdom are governed by the Cotonou Agreement which is the main framework for cooperation in political matters, development finance and trade.

The present trade arrangements between the United Kingdom and the ACP States were negotiated through the European Union. With BREXIT, the agreements may cease to apply or would have to be renegotiated when the UK finally leaves the EU.

ACP’s anxiety was compounded by the realisation that trade agreements take a long time to negotiate, certainly more than two years, the timing being mentioned for concluding the exit negotiations. In addition, it is feared that the uncertainty of the intervening period could disrupt exports of ACP’s goods and services to the UK.

Five separate regimes in ACP-EU trade

It is worth noting that currently, the ACP States together fall into five separate regimes in their trade with the European Union and by extension with the United Kingdom.

First, under the Economic Partnership Agreement, only 28 countries are so far implementing a full or interim EPA. These include 14 CARIFORUM countries (with the exception of Haiti); 6 EPA SADC countries (Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa); 4 COMESA countries (Mauritius, Madagascar, Seychelles, and Zimbabwe); 2 West Africa countries (Cote D’Ivoire and Ghana); 1 Central Africa country (Cameroon); and 1 East Africa Community country (Kenya).

Second, the Generalised System of Preferences (GSP) Everything-But-Arms scheme applies to all ACP Least Developed Countries that are not part of EPAs. These countries benefit from duty free and quota free market access for all products with the exception of arms. With the exception of Lesotho and Mozambique which are implementing a full EPA and Madagascar which is implementing an interim EPA, all the rest of ACP LDC States are in this category.

Third, the Normal GSP has been provided to countries that have not entered into an EPA. At the moment Nigeria and the Republic of Congo (Brazzaville) in Africa and Cook Islands, Marshall Islands, Micronesia, Nauru, Niue and Tonga from the Pacific are in this class.

Fourth, there is GSP Plus which is offered to countries that apply and have shown compliance with 27 international legal agreements in labour, environment and human rights. Only one country, Cape Verde – that graduated from an LDC status a few years ago – is currently enjoying trade benefits under this regime.

Fifth and finally, the Most Favoured Nation (MFN) treatment is being meted out to countries considered to be upper middle income following the revision of the EU GSP in 2014. Gabon and Palau are the only countries in this category as well as Cuba, although the latter is not in the Partnership Agreement with the European Union.

The existence of so many trade regimes is a clear departure from the one trade regime that existed for all ACP States when the Cotonou Agreement was signed. The current scenario is unsustainable and is likely to undermine the regional integration strides achieved by the ACP regions.

I say this because I have been following the great efforts to implement the Tripartite Free Trade Agreement amongst three ACP regions of COMESA, EAC and SADC. I have also noted the commendable efforts of concluding the Africa Continental Free Trade Area. We see these developments as positive in that they could serve as building blocks or stepping stones for negotiating and concluding an ACP-wide Free Trade Area, an aspiration previously echoed by ACP Heads of State and Government.

The substantive content of this baseline study provides a review of:

– the process and context of the UK’s departures for the EU, including an exploration of options for future UK-EU27 relations;

– what it means for the ACP future trade relations with the UK;

– what it means of future development cooperation with the UK and the EU27;

– and seeks to outline a possible way forward for the ACP in each the important areas where ACP members will be affected.

In particular, the study highlights, region by region, country by country the vulnerability of ACP members to trade disruption, if alternative trade arrangements are not set in place for those trade arrangements – primarily the EBA and the EPAs – which will legally lapse once the UK is no longer part of the EU.

Understanding this base line is vital. It makes it clear that concrete action will be required, if what David Davis the UK’s Secretary of State for Exiting the EU has described as the dangers of ‘a disruptive cliff edge’ are to be avoided.

While Secretary of State David Davis was referring to dangers facing UK exporters and their counterparts in the EU27, the importance of averting the dangers of ‘a disruptive cliff edge’ is of central importance to many ACP countries in their future trade relations with the UK.

The current volume of ACP-UK trade is not insignificant. Exports from the ACP States to the UK amounted to approximately Euros 14 billion in 2015 with the Africa contributing 91 percent, Caribbean 7 percent and the Pacific 3 percent. Some of the key export products include bananas, sugar, fresh vegetables, beef, gold and precious metals, the production of which is labour intensive.

Therefore, any disruption of trade would affect millions of jobs as well as livelihoods of many ACP citizens. We should take all necessary steps and do all in our means to ensure that this does not occur.

While the full implications of BREXIT will not be known for some time, the ACP believes that it is important to engage with both the EU and the UK to convey our expectations, and possibly fears, now that BREXIT is on the path to the trigger of Article 50 and a 2-year period to complete a negotiated exit. It is for this reason that both the ACP Secretariat and the Ramphal Institute agreed to commission a study, the outcome of which is the book we are about to launch.

Let us briefly highlight some significant aspects of the study.

It is particularly useful in identifying which ACP countries have the highest levels of dependence on the UK market in their trade with the EU and hence are most vulnerable to trade disruption, if we fail to get to grips with the policy challenges which lie ahead.

The situation is quite stark for some ACP members. Some Caribbean countries depend on the UK market for three-fourths of their exports to the EU (Belize and St Lucia), while in individual sectors others are exclusively dependent on the UK market (Guyana’s sugar exports).

Indeed, across Africa and the Pacific, from South Africa, Kenya and Ghana to Fiji and Papua New Guinea, any disruption of current access to the UK market could cost tens of millions of ACP nationals their livelihoods.

The Report also shows clearly how it is Commonwealth ACP countries which potentially have the most to lose from any disruption of the existing basis for access to the UK market.

Yet non-Commonwealth ACP members will also be affected, we therefore have common interests as ACP countries in making sure alternative trade arrangements are set in place for ALL ACP members from day 1 of the UK’s formal departure from the EU.

While the study provides an extremely valuable baseline for identifying and protecting ACP’s interests, we are in a situation which is both uncertain and dynamic. It is vital that we don’t allow ourselves to be carried along and overtaken by events.

This will require close monitoring of developments and the elaboration of nuanced and flexible political responses, designed to ensure our fundamental interests as ACP members are protected.

In terms of monitoring developments, I would like to welcome the launch of the epamonitoring.net website, which a Ramphal institute senior advisor (Paul Goodison) has launched this month, which is providing regular updates and analysis of Brexit related developments, as well as the broader policy challenges arising from the implementation of EU EPAs.

In terms of ensuring a nuanced, flexible and effective political response, it is vital that there be close cooperation between High Commissioners in London and ACP Ambassadors in Brussels, since there will be both purely UK dimensions and important EU27 dimensions to the challenges which lie ahead.

We will have to work both sides of the pond, so to speak, if in the difficult and uncertain times ahead, we are to make progress in protecting important ACP interests, rooted in the unique partnership which African, Caribbean and Pacific countries have developed with the UK and wider EU since 1975.

The knowledge which Brussels-based Embassies and institutions have on trade issues and development cooperation matters which will be transformed by the Brexit process, needs to be made available to High Commissioners in London as they engage with the UK authorities, while the insights which High Commissioners can provide on the evolving political discourse in the UK will be vital in formulating nuanced and timely interventions.

It is already apparent from recent statements that the UK authorities do not want to further complicate the difficult Brexit process by being drawn into public discussion on their negotiating strategy.

This reality needs to be respected. Yet it also needs to be made clear a ‘Global Britain’, will need to build on its existing network of trade and development cooperation rights and obligations.

In this context, quite independent of what takes place in the UK-EU27 discourse, there will be a need to discuss with the UK authorities how to ensure continuity in developing countries current market access arrangements to UK markets and more specifically how to preserve the existing preferential access enjoyed by ACP exporters to the UK market from day 1 of the UK’s formal departure from the EU.

Given the multiplicity of challenges facing the UK authorities in setting up future bilateral trade arrangements, there is a danger that ACP interests could be lost sight of. This needs to be avoided.

This will probably require the adoption of a two-stage approach:

Firstly, the unilateral extension of existing market access conditions by the UK to all ACP members, on a transitional basis while new alternative long term trade arrangements are set in place;

Secondly, negotiating the new long-term framework, with, as South Africa’s Trade and Industry Minister Rob Davies has implied the easiest way being through re-fitting the existing EPAs, into various forms of ‘EPA-Plus’ arrangements

While this re-fitting of the EPAs can be seen as the simplest way of establishing a longer-term framework, let us be clear, this will have its own complications, notably, as the Institute’s report has pointed out, getting to grips with the processes of preference erosion, which independent UK trade and agricultural policies are likely to give rise to.

Under the ACP-EU Partnership, the ACP holds the view that as long as it remains a member, the United Kingdom is bound by all ACP-EU agreements namely the Cotonou Agreement and the Economic Partnership Agreements (EPAs). It is also bound by the trade provisions enshrined in the EU Generalised System of Preferences (GSP) – namely the GSP Everything-But-Arms, the GSP Normal and the GSP Plus, referred to earlier.

Failure to honour the commitments under these agreements would leave a vacuum as there are currently no bilateral agreements between the UK and the ACP as a Group.

Some key questions

It is some key questions that framed the conduct of the study on how to secure ACP economic interests after BREXIT as they relate to:

– Would the United Kingdom continue to implement the trade agreements mentioned earlier and honour its commitments after it leaves the EU, at least until the expiry of Cotonou in 2020?

– With United Kingdom’s significant contribution to the EDF, how would the proposed exit impact on the commitments of the European Union development finance cooperation to ACP States?

– What about the European Union, which is legally bound to honour its commitments to the ACP under Cotonou Agreement – would the European Union share among its EU Member States the financial obligation that the UK’s had committed to carry under the Cotonou Agreement or we would see a reduction of EDF resources by a corresponding amount?

– After BREXIT, what would be the United Kingdom’s preferred options as far as partnerships are concerned – would they be bilateral, through the Commonwealth, the African Union or the existing regional organisations or a combination of these arrangements? In other words, how best should the ACP prepare to engage with the UK post-BREXIT?

These questions arise in light of ACP States’ desire to safeguard the market access, trade and investment, as well as development financing benefits that are currently accruing from the United Kingdom’s membership in the European Union. Any dilution of those benefits would significantly tilt the balance of rights and obligations under the Cotonou Partnership Agreement and could seriously hamper future relations between the ACP and the European Union, in terms of security of benefits

It is to be recalled that most of the ACP States enjoy close historic, economic, cultural and political ties between with the United Kingdom. Therefore, it is not surprising for the ACP Group to express its expectation of seeking to develop closer bilateral ties with the United Kingdom after BREXIT.

This is also borne out of the acknowledgement of the United Kingdom’s major political clout, inter alia, as a Permanent Member of United Nations Security Council and a key member of NATO, the G7 and the G20.

But even more important is the fact that the UK has been one of the leading voices for the weak at the global level. The ACP Group has amongst its membership what could described as the most economically weak and vulnerable states in the world.

The exit from the European Union was originally foreseen to take two years from the time of formally applying to leave, signified by triggering Article 50 of the Lisbon Treaty. For this reason, the ACP Ministers of Trade meeting in Brussels in December last year noted that before the exit clause is triggered by the UK and pending the negotiations that will follow between the UK and the EU, most of the analysis conducted can only be hypothetical or speculative but necessary.

As a result, the ACP Group has taken a deliberate decision to be alert to the issue and has decided to be proactive by consistently monitoring developments on BREXIT, while identifying implications for ACP States.

Indeed, the ACP Group has called upon the United Kingdom to, as a minimum, preserve the existing market access conditions so as to ensure that there is no trade disruption. In making this call, the Group is clearly aware of the negative impact that the Most-Favoured-Nation duties, were they to be imposed in place of current arrangements, would have on trade between ACP and UK.

Furthermore, the ACP Group is readying itself to define a negotiating framework with the UK as an alternative to the Cotonou Agreement, if this turns out to be the way to go. But the ACP Group also recognizes that BREXIT portends an opportunity that could be used to address challenges and improve on provisions in the current ACP-EU Partnership and the existing trade regimes.

Fears assuaged

I should also say that some of the fears previously expounded have been assuaged by recent policy pronouncements by Her Majesty’s Government.

First, the ACP Ministers of Trade at their meeting in Brussels on December 7, 2016 held an exchange of views on BREXIT with Ambassador Angus LAPSLEY of the UK Mission to the EU. The Ambassador set a reassuring tone by stating that “the starting assumption is to try to maintain as much continuity as possible”.

That promise of continuity was confirmed in the Statement of the British Prime Minister, which followed on January 17, 2017 when she presented her Government’s White Paper with a 12 point plan for exiting the European Union.

In the area of trade, the statement – that “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” -sets the right tone for future engagement. Although the devil is in the detail, the Prime Minister’s statement is reassuring and gives a good indication of what is in store for in the ACP Group.

On development financing, the UK contributes about 17 percent of the European Development Fund (EDF), it has met its 0.7 percent GNI target for ODI and also supports bilateral programmes, such as Trade out Poverty for Sub- Saharan Africa. Securing ACP economic interest means ensuring that UK contributions in the development financing are not reduced but increased or at least maintained.

I should say that what is contained in the subsequent first UK’s Economic Development Strategy issued by the Department for International Development focussing on prosperity, poverty and meeting global challenges is welcomed. The ACP Group looks forward to engaging with the UK on how best to ensure that the trade and economic interests are truly secured.

To conclude, I wish to note that this year, the European Union is celebrating 60th anniversary of the Treaty of Rome, against the backdrop of the many challenges it is facing – ranging from growing populism, aggressive nationalism, rising intolerance and xenophobia, suspicion and distrust of traditional political parties, institutions and élites, widening inequalities and increased economic and political divergence across member states. It is well likely that some of these challenges precipitated the vote by the British to leave the EU.

For us in the ACP Group, it is of major interest to see a strong Europe, leading and playing an influential role at the global level, particularly now that one of the previous global leading nations has decided to focus efforts and attention to domestic issues. A strong Europe that remains a major export market and source of investment for many countries in our Group. A strong Europe is what we want to engage with post 2020 when the Cotonou Agreement comes to an end. But this does not mean we will neglect our relations with the United Kingdom. It is too important a country to ignore and our discourse this afternoon must contribute to emphasizing that point. [IDN-InDepthNews – 23 January 2017]

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

Photo: Dr Patrick I Gomes

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