Post Brexit. It’s Business as Usual
While European and British trawlers compete for catches in once-shared fisheries, South African and Namibian fishing companies are pleased that it will be business as usual for them in the event of a no-deal Brexit.
It has taken about two years, but South Africa and five other SADC countries have finally secured agreement with the United Kingdom that they can continue trading on the same terms.
Britain is the fourth largest market for exports from South Africa, behind China, Germany and the USA. It is the seventh largest supplier of imported goods. Together the bilaterial trade between the countries amounts to about R142 billion.
Until now trade with the UK has been facilitated under the SADC-EU Economic Partnership Agreement (EPA). This provides for the tariff arrangements applicable to trade between the six SADC countries and any of the 28 EU member states.
The other SADC countries are Botswana, Lesotho, Namibia, Eswatini (Swaziland) and Mozambique (known together as SACUM).
Loss of exports threat
According to a Statement from the Minister of Trade and Industry, having no agreement in place would materially impact the six SACUM countries. Many products will lose their duty-free status and all trade will then fall under standard WTO (World Trade Organization) rules and normal import tariffs would apply.
For South Africa this means the country will lose preferential access to the UK market on 114 products, affecting exports of around R7 billion. This affects among others, vehicles, auto components, wine, textiles and clothing, sugar, fish and machinery.
In some cases, this may lead to a loss of exports completely.
In addition, UK exports to SACUM countries would be subject to higher tariffs, which may also increase the costs of these products in SA, and if they are input costs into SA-made products, it will hurt local industries.
For SACUM neighbours the cost would be beef exports for Botswana; sugar exports for Eswatini; and fish, fruit and beef exports for Namibia.
This is important to South Africa because economic slowdown amongst our neighbours can trigger a slowdown in a number of industries. In 2018, exports from South Africa to SACUM neighbours amounted to R179 billion.
The new agreement, which will be known as the SACUM-UK Economic Partnership Agreement, will effectively roll-over and replicate the terms of trade present in the existing SADC-EU EPA.
It will allow for seamless, uninterrupted trade to continue between ourselves and the UK.
The tariff arrangements under the SADC-EU EPA have also been carried over to cover South Africa’s trade with the UK. The new Agreement also includes details on:
- the quota levels for certain products of duty-free trade
- health and safety standards for agricultural products
- the rules to determine whether a product qualifies as locally-made and is therefore eligible for preferential trade rates
- whether goods which have been processed partially in an EU-state can still qualify under the rules of origin
Tariff free imports of South African goods include South African-assembled cars, citrus products, grapes, plums and wine.
New tariff-rate quotas
Where we have tariff-rate quotas in place with the EU, a new, additional quota has been agreed for trade between the UK and SACUM. This includes about 70 000 tons of refined and unrefined sugar, 18000 tons of canned pear, apricot and peach and about 70 million litres of wines.
The South African government has in return agreed that the UK has preferential access to South Africa for component-products made in the EU and used in final British products.
The new EPA will come into effect in the event that the UK leaves the EU on 31 October 2019, and will govern bilateral trade between the six SACUM countries on the one side, the UK on the other.
Health and safety standards
The six SADC EPA countries have negotiated hundreds of sanitary and phytosanitary certificates governing separate products exported to the EU, and now the UK and southern African trade negotiators have agreed to transfer those into their new trade agreement.
However, these certificates will not last forever, so the negotiators have also agreed that if the UK wants to change any of them in the future, it must give the southern African side adequate notice to make adjustments.
The new EPA will use the health and safety standards applicable to the EU, and the UK will continue to accept EU model health certificates and plant protection certificates for a period of 12 months from Brexit.
The UK will accept imports of specified animal products from establishments approved by the EU, for a period of 6 months after the UK leaves the EU. The period on both of these can be extended by a further 6 months.
Safeguard measures for poultry imports
In addition, the safeguard measures in place for poultry imports from the EU will continue to apply to British poultry until March 2022. This is even if and when Britain leaves the EU, unless it is set aside through the normal processes of review or appeal.
Up for further negotiation in due course will be issues such as the right of countries to use export taxes to promote local industries; and crediting South African-made inputs in products made in other SACUM countries, when exporting these to Britain in future.
The processes to bring the new EPA into effect are currently underway. Once approved by Cabinet, the agreement will be submitted for ratification. A similar process will take place in each of the other six countries.
Given the timeframe it is likely that not all the ratifications will be in place. To cover this possibility, a Memorandum of Understanding has been agreed. This will allow trade to continue on the agreed terms in the EPA from 1 November this year, effectively until the new Agreements come into effect.
Source: Department of Trade and Industry