securing economic interests - ramphal institute1. ensure that the quantum of development assistance...

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After

Edwin Laurent, Lorand Bartels, Paul Goodison,

Paula Hippolyte and Sindra Sharma

Securing economic intereStS

After Brexit…Securing ACP economic intereStS

Edwin Laurent, Lorand Bartels, Paul Goodison, Paula Hippolyte and Sindra Sharma

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Edwin Laurent, SLC, CMG, OBE: Director of the Ramphal Institute.Lorand Bartels, PhD, Reader in International Law in the Faculty of Law and a Fellow of Trinity Hall at the University of CambridgePaul Goodison, PhD, GDC Partners, BelgiumPaula Hippolyte, Consultant, ITID ConsultingSindra Sharma, PhD, Lead Researcher Ramphal Institute

First published by Rila Publications Ltd in 2017Design, Typesetting and Printing by: Rila Publications Ltd, Rila House, 73 Newman Street, London W1T 3EJwww.rila.co.uk

ISBN 10: 1-899839-15-1ISBN 13: 978-1-899839-15-5

British Library Cataloguing in Publication DataA catalogue record for this book is available from the British Library

Copyright:Text © 2017 by The Ramphal InstituteDesign and layout © Rila Publications Ltd, London, 2017

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of both the copyright owner and the above publisher.

The Ramphal Institute 22 Kingsway, London, WC2B 6LE, United Kingdomtel: 44 (0) 207 848 1892. www.ramphalinstitute.orgE-mail: [email protected] Charity no. 1117152. Registered Company no. 5822913

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ACP: African Caribbean and Pacific Group

AfDB: African Development Bank

AU: African Union

Brexit: The UK’s withdrawal from the EU

CAriCOM: Caribbean Community and Common Market

CDB: Caribbean Development Bank

CetA: Comprehensive Economic and Trade Agreement (EU-Canada)

DAC: Development Assistance Committee of the OECD

DfiD: Department for International Development (UK)

DfQf: Duty free and quota free

eAC: East African Community

eBA: Everything but Arms

eCOWAS: Economic Community of West African States

eDf: European Development Fund

eeA: European Economic Area

eeC: European Economic Community

ePA: Economic Partnership Agreement

erDf: European Regional Development Funds ESA Eastern and Southern Africa. (EPA Group)

eU: European Union

eU 28: All members European Union including the UK

eU 27: Members of the European Union without the UK

euroMed: Euro-Mediterranean partnership

ftA: Free Trade Area

GDP: Gross Domestic Product

GNi: Gross National Income

GSP: Generalised System of Preferences

HMG: Her Majesty’s Government (UK)

iMf: International Monetary Fund

itC: International Trade Centre

LDC: Least Developed Country

MfN: Most Favoured nation

NGO: Non-Governmental Organisation

OCts: Overseas Countries and Territories (EU)

ODA: Official Development Assistance

OeCD: Organisation for Economic Co-operation and Development

PifS: Pacific Island Forum Secretariat

SADC: The Southern African Development Community

SDGs: Sustainable Development Goals

teU: Treaty of European Union

tPP: Trans-Pacific Partnership

trQ: Tariff rate quotas

ttiP: The Transatlantic Trade and Investment Partnership

WtO: World Trade Organisation

Acronyms

Foreword

This paper follows extensive research and consultation into how the UK’s withdrawal from the European Union (Brexit) will affect trade and economic relations with the Africa Caribbean and Pacific (ACP) Group of countries.

When UK voters decided to leave the European Union on the 23rd June 2016, they would understandably have been guided by what they thought best for their country; but withdrawal will have major and far reaching consequences; way beyond the UK. ACP countries are among those expected to be most affected. Therefore, it would be essential for them to have as clear an understanding as possible of the precise implications of Brexit so that they could seek to avoid or minimise any negative consequences and identify and capitalise on opportunities that arise or which they might create.

This publication has been prepared for the ACP Secretariat by a team from the Ramphal Institute, a not-for-profit organisation which bears the name of Sir Shridath Ramphal as it continues his pioneering work to advance sustainable development, global justice, social equity and good governance. It seeks to expand and share knowledge and understanding in these fields that will contribute to better informed international debate among policy makers and the public.

The threats that Brexit can pose to ACP economic interests are real and should not be underestimated or ignored. A united Group that pursues a well-informed, comprehensive and effective strategy, will enhance the prospect of achieving its shared objectives and prospering in the post-Brexit era.

It is hoped that the issues highlighted in this book will provide a valuable initial contribution to the ACP as it develops its strategy.

Edwin LaurentDirector

The Ramphal Institute London

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content

List of Figures ............................................................................................................................................ 10

List of Tables .............................................................................................................................................. 10

Executive Summary ................................................................................................................................. 11

Introduction ................................................................................................................................................ 16

Background and Context ....................................................................................................................... 18

Leaving Europe ................................................................................................................................. 19

The Brexit process ................................................................................................................................... 20

Expectations for the UK economy ............................................................................................ 24

Implications for ACP countries after Brexit .................................................................................. 27

Development cooperation ............................................................................................................ 27

UK development policy .................................................................................................................. 29

Other consequences of Brexit for ODA .................................................................................. 33

Proposals for the ACP .................................................................................................................... 33

Trade .............................................................................................................................................................. 35

The EU Framework for Trade relations between the UK and the ACP ........................................................................................................................ 35

Importance to the UK of exports to ACP countries .......................................................... 37

Importance to the ACP of exports to the UK ....................................................................... 39

ECOWAS ....................................................................................................................................... 41

EAC ................................................................................................................................................ 41

Central Africa EPA Signatories .......................................................................................... 42

SADC EPA Signatories .......................................................................................................... 42

Eastern and Southern Africa (ESA) EPA Signatories ............................................... 43

Pacific EPA Signatories ......................................................................................................... 43

Caribbean EPA signatories .................................................................................................. 44

Understanding ACP Trade ............................................................................................................ 45

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Possible different UK-EU trade relationships post Brexit ....................................................... 47

Implications for ACP countries .................................................................................................. 47

UK-EU customs union ............................................................................................................ 47

UK-EU FTA .................................................................................................................................. 49

The WTO option ........................................................................................................................ 50

Compensation from the EU for the loss of the UK from the EPA? ....................................................................................................... 53

What might happen to ACP trade ...................................................................................................... 55

Renewing Preferential Arrangements ..................................................................................... 57

EBA ................................................................................................................................................ 57

GSP ................................................................................................................................................ 58

UK-ACP FTAs ............................................................................................................................. 60

Necessity for avoiding any disruption or hiatus in trade flows .................................................................................................................. 62

Requirements to safeguard ACP trade and economic interests ................................................................................................................. 63

Recommendations and a plan of action ................................................................................. 65

Conclusion ................................................................................................................................................... 68

Annex 1 ........................................................................................................................................................ 70

EAC ......................................................................................................................................................... 72

Central Africa EPA Signatories .................................................................................................. 73

SADC EPA Signatories ................................................................................................................... 74

ESA EPA Signatories ...................................................................................................................... 75

Pacific EPA Signatories .................................................................................................................. 76

Caribbean EPA signatories .......................................................................................................... 77

Annex 2 ........................................................................................................................................................ 78

Visualising Data ................................................................................................................................ 78

Annex 3 ........................................................................................................................................................ 81

Overview of Economic Partnership Agreements ............................................................... 81

Annex 4 ........................................................................................................................................................ 84

Address by Baroness Kinnock ................................................................................................... 84

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List oF FiguresFigure 1: 2015 GDP (Nominal) in the EU .........................................................................9Figure 2: Original and Revised Economic Growth Forecasts .........................................14Figure 3: Depreciation of Pound Sterling.......................................................................14Figure 4: Principal destination of UK exports of goods and services 2010-15 .............22Figure 5: UK Export to Partners (2014) ..........................................................................22Figure 6: ACP Export to the UK ......................................................................................23Figure 7: Brexit Models ..................................................................................................32Figure 8: UK exports to partner countries from 2010 to 2015 .....................................49Figure 9: ACP Aggregate Breakdown .............................................................................49Figure 10: Five Year Bar Chart – UK Imports ...................................................................50Figure 11:Business Investment and GDP Growth ...........................................................50

List oF tAbLesTable 1: Top 20 recipients of UK Bilateral ODA in 2014 ...............................................17Table 2: Top 20 Recipients of UK Core Funding to Multilateral Organisations in 2014 .............................................................18

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executive summAry

The UK’s withdrawal from the EU, Brexit as it is commonly referred to, will see the EU losing its second largest economy or 17% of its GDP and the UK ceasing to apply all EU treaties to which it is party. There will be major consequences for ACP countries because a substantial portion of the development assistance provided by the UK is via the EU and trade with the UK is conducted within the regulatory and institutional framework of the EU.

What happens after Brexit will be determined by a range of variables including some that cannot be predicted with any certainty. The ACP countries need to be ready with strategies for safeguarding their interests and minimising damage to their economies and capitalizing on any opportunities that might arise or which they can create. For this, they will require collective action that extends beyond the traditional ACP-EU framework for consultation and engagement.

The UK Government is set to invoke Article 50 of the Treaty of European Union in the early part of 2017. This will commence a two-year period of negotiation on the terms of withdrawal. Until the UK has actually left the EU it is not permitted to engage in formal trade negotiations with third countries (including with the ACP).

Most predictions are that Brexit will negatively impact on the UK economy, and currency markets have already anticipated this by devaluing the pound sterling. The combination of those two factors will reduce the attractiveness of the UK as a market for ACP goods and services, and a provider of remittances, tourism expenditure and development aid.

development cooperation

Brexit will result in the loss to the EDF of its third largest contributor that is putting in nearly €4.5 billion to the 11th EDF. The UK is also a major contributor to the EU Development Budget. ACP countries will need to ensure that they continue to receive at least the same quantum of aid and that it is disbursed in line with their development priorities.

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After brexit...

trade

Upon leaving the EU, the UK will be free, both to apply whatever import duty rates it wishes as long as they do not exceed those that currently exist, and to replace the EU wide trade regime that it operates with one of its own and directly negotiate trade agreements. Exports to the UK are substantial for all ACP regions and for many countries. This totals US$12.3 billion. Much of this trade is governed by preferential arrangements, EPAs, GSP and EBA, which help keep exports viable and competitive where high import tariffs are levied, from which ACP countries are often exempted. For the UK, its exports to the ACP are very important, US$8.3 billion in 2015, even though many individual ACP country markets are not large. In 2015 almost 40% of the UK exports to ACP countries took place under EU preferential trade agreements, which will most likely fall away with Brexit, placing UK exports at a disadvantage in terms of the tariffs applied compared to their EU27 competitors.

There are different possible trading relationships that the UK can have with the EU after Brexit, the only one that would be likely to permit the automatic continuation of the current trading arrangements with the ACP would be a Customs Union. This, however, is unlikely to materialise. Other more likely arrangements could see an FTA or some less comprehensive trading arrangement with the EU. If no agreement is reached the UK would not enjoy full access to the single market and customs union, and trade with its former EU partners on the basis of WTO rules (hard-Brexit).

Aims for AcP post- brexit

1. Ensure that the quantum of development assistance received is at least as much as would have been disbursed in the absence of Brexit and that it is in line with ACP countries’ priorities.

2. That the ACP countries’ trading positions in the UK are safeguarded and any hiatus to trade is avoided which, otherwise, would be very damaging to their economies. Consequently, duty and quota-free (DFQF) and other favourable access terms to the UK market, currently provided under the EBA, EPA and GSP must continue and the preferential margins that help

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Securing AcP economic intereStS

ensure the viability of ACP exports to the UK be preserved. Specifically, the ACP should seek a political commitment from HMG that it will, upon Brexit, continue without interruption to:

a. offer EBA and favourable GSP concessions to eligible ACP countries

b. provide DFQF for countries currently exporting to the UK under EPAs. (This will be a transitional arrangement to permit time for negotiating and concluding WTO compatible FTAs, which might be based on the existing EPAs with the EU).

c. apply tariffs at existing rates, on third country imports of products of export interest to the ACP.

elements of a strategy

As a group, the ACP is in a much better bargaining position than any of its members or regions, given the total value of UK exports to the countries that are also major suppliers of many important mineral products and commodities and host to substantial UK investment. In addition, such a large group of countries has considerable potential international political authority and influence. It needs to show that its role and significance is more than just an economic cooperation vehicle with the EU but a valuable and credible international political partner and ally on issues of mutual interest. For the ACP countries this will require the following:

1. Adopt a common position and strategy for advancing ACP interests post-Brexit.

2. ACP authorities, including their High Commissioners and Ambassadors in London, actively engage with and lobby HMG, not only in formal governmental meetings but also in other interactions with parliamentarians and officials.

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After brexit...

3. Actively engage with the media and supportive organisations to help ensure favourable public attitudes to safeguarding ACP interests, post-Brexit.

conclusion

Brexit poses serious threats to ACP economic interests, which should not be underestimated or ignored. The ACP will have to rapidly mobilise all available resources and engage with allies to vigorously and coherently pursue its shared interests. As a group ACP countries are of considerable economic importance to the UK. It therefore would be in the UK’s own interests to safeguard and cultivate its substantial trade and investment with those countries.

The ability to effectively prepare and organise for and deal with Brexit will be a major test of the solidarity, coherence and maturity of the ACP Group and its ability to successfully address modern day challenges.

After brexit: securing AcP economic interests

The United Kingdom (UK) is set to withdraw from the European Union (EU), Brexit as it is commonly referred to, and as soon as this happens all EU treaties will cease to apply to the UK. The loss of the second largest economy in the single market which accounts for 17% of EU GDP will have major consequences for ACP countries because much of their economic engagement with the UK is within the framework of the latter’s membership of the EU:

1. The ACP countries’ trade with the UK is governed by EU treaties and EU law.

2. The ACP countries will lose the substantial UK contribution to the European Development Fund (EDF) and the EU Development Budget.

Understanding the precise impact of withdrawal and how it will proceed and, on that basis devising and implementing a strategy to safeguard and advance ACP interests will be essential.

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Brexit poses challenges for the ACP of unprecedented magnitude and severity. However, effectively addressing them will require collective action that will need to extend beyond the traditional ACP-EU framework for consultation and engagement.

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The 23rd June 2016 referendum set the United Kingdom on a path to leave the European Union. Whilst the choices made by voters would have been according to what they wished for the future of their country, the UK’s withdrawal (Brexit), will have major consequences for the rest of the world, in particular the ACP group of countries whose trade and economic relations with the UK and Europe have been intricately linked for over 40 years. Not all of the consequences though are predictable since they will be influenced by various factors including the terms of Brexit and the policy choices of the UK and the EU as well as the responses of the markets.

What is not in doubt is that the UK’s withdrawal from the EU single market and the resultant regulatory and organizational changes will have foreseeable and undeniable consequences. These will stem from changes in the provision of development finance and to the ACP countries’ continued ability to access the UK market on a viable basis. Changes are expected in terms of the UK’s and EU’s demand for imports, market prices, provision of development assistance, remittances and spending by their tourists. Then there will be commercial consequences resulting from changes in the business climate and changing levels of prosperity in the UK and the EU which could have secondary impacts on the domestic market.

As shown in the pie chart (Figure 1), the UK is the second largest economy in the EU accounting for 17% of total GDP. It is also the fifth largest economy in the world. The regulatory and the direct and indirect economic consequences of Brexit will undoubtedly be far reaching for all parties: the UK itself, the rest of the EU, the global economy and the ACP.

The challenge facing ACP countries is to safeguard their interests and ensure that any damage that they suffer is kept to a minimum and that they position themselves to make the most of post-Brexit opportunities that arise or which they can create. To do this, ACP countries will need a full understanding of the implications and consequences of Brexit, the processes that will be involved and the various options and policies that might be pursued by the UK and the EU. This understanding will provide the ACP with the foundation for devising and pursuing optimal policies and strategies for advancing their interests.

introduction

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Figure 1: 2015 GDP (Nominal) in the EU

This publication will seek to provide an understanding of the direct and indirect consequences of Brexit and place it in its policy context. It will focus on the implications for development cooperation, trade and regulation. It will consider the various alternatives scenarios for the future relations between the UK and the EU and explore the importance to both the UK and to the ACP of their economic and commercial relationships, notably, in development cooperation and trade. This will be followed by recommendations regarding strategic options that the ACP might adopt and pursue.

Whilst the consequences of Brexit will be determined by a range of variables, including some that cannot be predicted with any certainty, ACP countries will need to devise strategies for safeguarding their interests and minimising any damage to their economies, as they position themselves to make the most of any opportunities that might arise or which they can create.

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Upon joining the European Common Market in 1973, the UK ended the Commonwealth preferential trading arrangements. Its membership of the Common Market and later the Single Market in 1993, has since then precluded the UK from setting or negotiating its own tariffs or trade regime. The EU collectively handles these matters.

From the outset, with the signing of the first Lomé Convention in 1975, ACP countries enjoyed duty and quota-free (DFQF) access for most of their products exported to the EEC and later the EU. The system, enabling qualified duty and quota-free (DFQF) access for the ACP, was renewed in subsequent Lomé Conventions, and then, with the help of a 2001 WTO waiver, for seven years under the Cotonou agreement. This system, which remained largely unchanged, was non-reciprocal in that ACP countries did not have to provide in exchange, free access to their markets for imports from the EU. Preferential ACP trade under the Cotonou Agreement ended in 2008, when it was replaced by reciprocal Economic Partnership Agreements (EPAs), the Generalised System of Preferences (GSP)1 and the Everything But Arms (EBA) initiative2. Other exports from the ACP that are not covered by any of these trading arrangements are on an MFN3 basis; in other words, import duties are charged according to whatever is stipulated in the EU’s WTO approved schedule.

The other important collective engagement is in the area of development cooperation. The EU is a leading international donor of aid and a development partner that is active in all aspects of development and humanitarian assistance. It has a substantial budget line for development and also operates a European Development Fund (EDF) of €30.5 billion for the period 2014-2020, the

bAckground And context

1. The GSP is a system permitting developed countries to charge reduced or zero duties on selected imports entering their markets from developing countries that fall within eligible and specified categories.

2. The arrangement, introduced by the EU in 2001, for the removal of import duties and quotas on most products imported from LDCs.

3. The Most Favoured Nation Principle (MFN) is the basis on which WTO Members trade with each other in the absence of preferences for instance under the GSP or an EPA.

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11th EDF. This is funded by voluntary contributions from Member States and is exclusively for the ACP and the OCTs4.

Unlike trade, however, development cooperation is not an area of exclusive EU competence. Brexit will nonetheless have immediate implications for ACP countries since, although the UK disburses the bulk of its development budget, 60%, on a bilateral basis, it is also a major contributor to the EU budget (estimated at €8.3 billion in 2015) and contributes 15% to the 11th EDF. These payments would cease once the UK withdraws. Consequently, unless the remaining 27 Member states make up the shortfall, Brexit will substantially reduce the total volume of finance available to the EU for financing development.

LeAving euroPeUnlike much of continental Europe, the UK, with its particular history and view of its position in the world, has never wholeheartedly embraced integration. Ever since joining the EEC in the early 1970’s there has always been some antipathy to the concept in certain political and public quarters. In more recent years, this crystalised into a political movement seeking a referendum that would directly ask the electorate whether the country should remain in the EU. After many years of campaigning it was held on the 23rd June 2016 and a majority voted to leave. Although the decision was only advisory, given the political context, including the commitment of the Government to leave the EU, ACP countries should operate on the premise that Brexit will happen and therefore plan and act accordingly.

4. The non-independent overseas countries and territories of the EU.

Brexit will cause upheaval for the ACP countries because a substantial portion of the development assistance provided by the UK is via the EU and their trade with the UK is conducted within the regulatory and institutional framework of the EU.

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The following sets out a legal analysis of the Brexit process according to the provisions of Articles 50 (1) and (2) of the Treaty on European Union (TEU).

Formally, the Brexit process will begin when the UK, having decided to withdraw, notifies the EU of its intention. This will be in accordance with Articles 50(1) and (2) of the Treaty on European Union.5 Once such a notification has been made, the EU is obliged to negotiate and conclude an agreement with the UK ‘setting out the arrangements for [the UK’s] withdrawal’. these arrangements will cover matters such as pensions and residency rights for UK and EU-27 nationals by the other party respectively.

If an agreement is reached, the EU treaties cease to apply to the UK as of the date of entry into force of that agreement, or unless the agreement specifies another date. But if no such agreement is reached, then the EU treaties cease to apply to the UK as of two years from the date of the Article 50 notification. This imposes a de facto deadline for reaching agreement.

There is the theoretical possibility of extending the two-year period, but this requires unanimity among all other EU Member States, which may be difficult to obtain, and in any case from their negotiating perspective it is unlikely that they would agree to extend the deadline.

the brexit Process

5. There is presently some uncertainty as to the constitutional aspects of this process, which may delay the Government’s stated intention of notifying the EU by the end of March 2017, but that is of little concern for present purposes. It is unlikely that a notification would not be given at least within some months after March 2017 due to pressure from the government to this effect, and an absence of serious resistance to the overall result within parliament. Less important, early notification is also desired by the EU-27 and its Member States. There is also some uncertainty as to whether a notification, once given, can be withdrawn; the following is based on the assumption that it either cannot or will not be withdrawn.

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The withdrawal agreement does not itself cover economic issues such as trade, but Article 50(2) states that it ‘shall take account of the framework for [the UK’s] future relationship with the Union.’ This clearly includes the economic relationship between the UK and the EU. However, there is debate on whether this means that the terms of that relationship can be negotiated during the two-year period, or only afterwards.

Also, as far as the UK’s third-country trade relations are concerned, there is an unsettled question concerning the ability of the UK to commence negotiations with third-countries during the two-year period. The difficulty is that the UK remains a full EU Member State during this period and as such, would ordinarily be precluded from negotiating an agreement in the areas of EU competence, such as the common commercial policy, as to do so ‘could jeopardise the attainment of the Union’s objectives’ (Art 4(3)(3) TEU, as interpreted.

The question is whether such negotiations pose the same threat to the attainment of the EU’s objectives if the resulting agreement only takes effect after the UK has already left the EU. For most third countries, this question is of lesser importance, because they appear to be waiting for a UK-EU free trade agreement to be negotiated before commencing their own negotiations with the EU. This may be due to pressure from the EU, or to a desire to know about the expected competition from EU products in the UK market, or to understand the market for UK downstream products using their components in the EU. For ACP countries, these reasons may be outweighed by the advantage of preserving – or even improving – their market access in the UK market as soon as possible.

Clearly, it would be more convenient for both the UK and the EU to be able to negotiate an economic agreement in parallel with the withdrawal agreement. A strong legal argument can also be made in favour of early negotiations, on the basis that the reference to the ‘framework’ implies that the existence of such a framework – which could take the form of an agreed framework – cannot be precluded during the two-year period. On the other hand, there is no obligation on the part of the EU to negotiate any such agreement if it chooses not to do so. In that event, trade relations between the UK and the EU would be on WTO terms.

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After brexit...

The UK Government is set to invoke Article 50 of the Treaty of European Union in the early part of 2017, this will commence a two-year period of negotiation on the terms of withdrawal. Until the UK has actually left the EU it is not permitted to engage in formal trade negotiations with third countries (including the ACP).

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Brexit will have massive consequences for the UK’s economic growth and its demand for imports and provision of development aid and remittances.

Goldman Sachs6 estimates that during the 18 months following the vote, Brexit will see a cumulative drop of 2.75% in UK GDP due to increased uncertainty and deteriorating terms of trade. Reconfiguration of the economy and a reallocation of resources will be necessary as the UK emerges from a 40-year relationship shaped by access to the single market. In the process leading up to and immediately after the triggering of Article 50 the UK economy could find itself in “stormy seas”. The economic and policy uncertainty during this period of reconfiguration could drag down investment7 and drive the economy into recession8.

Figures 2 and 3 show the revision of the IMF forecasts for UK economic growth and the sharp devaluation of sterling as the market anticipates and prepares for that eventuality.

6. Goldman Sachs (2016, June). Podcast Episode 41: Brexit – After the Vote. http://www.goldmansachs.com/our-thinking/podcasts/episodes/06-28-2016-huw-pill.html

7. With an estimated fall in FDI inflows of 22% according to: Bruno, R., Campos, N., Estrin, S., & Tian, M. (2016). Technical Appendix to ‘The Impact of Brexit on Foreign Investment in the UK’ Gravitating Towards Europe: An Econometric Analysis of the FDI Effects of EU Membership. Centre for Economic Performance.

8. Zenghelis, D. (2016, August). Building 21st Century Sustainable Infrastructure (Part 1): Time to Invest. Policy Brief. Grantham Research Institute on Climate Change and the Environment and Centre for Climate Change Economics and Policy.

exPectAtions For the uk economy

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After brexit...

Figure 2: Original and Revised Economic Growth Forecasts9

Figure 3: Depreciation of Pound Sterling10

9. Source: International Monetary Fund, 201610. Source: International Monetary Fund Exchange Rate Archives

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One of the immediate aftermaths of Brexit was seen in the weakened currency. If inflation increases (projected at 3%), the value of the pound could drop further or stabilise at a lower level. For countries that depend heavily on UK aid, such as Sierra Leone and Ethiopia, this could mean the levels of assistance that they are able to receive might fall.

The depreciation of the pound also negatively impacts remittances. In 2015 US$24.8 billion in remittances was sent from the UK to other countries, of this US$16.4 went to developing countries with Nigeria being one of the biggest recipients (US$3.72 billion).

Most predictions are that Brexit will negatively impact on the UK economy and the currency markets have already anticipated this by devaluing the pound sterling. The combination of these factors will reduce the attractiveness of the UK as a market for ACP goods and services and a provider of remittances, tourism expenditure and development aid.

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Brexit will have immediate implications for ACP countries’ development cooperation even if, as has already been mentioned, this is not an area of exclusive EU competence.

The ACP benefit from the EU’s Development Budget and the European Development Fund (EDF). The latter is exclusively for them and the OCTs11. The 11th EDF (2014-2020) is set at €30.8 billion. The UK is the third largest contributor to the EDF behind Germany and France, providing nearly €4.5 billion or 15% of the total. The UK also makes a major contribution, estimated at €8.3 billion in 2015, to the EU’s overall budget, which provides the finance for the EU’s Development Budget line.

The current context of development cooperation is one of transition and instability that poses its own challenges. These include changes in the classification of aid beneficiaries, the realignment of international development cooperation to the new Sustainable Development Goals framework, ongoing international economic and financial crises and austerity, and the political demand for greater value for money from Overseas Development Aid (ODA).

Brexit will result in the loss of the UK’s contribution to the EU development budget and, more pertinently to ACP countries, the EDF. Change is inevitable and since the referendum, the UK has already suspended certain previously agreed payments under the European Regional Development Funds (ERDF).

imPLicAtions For AcP countries AFter brexitdeveLoPment cooPerAtion

11. The EU’s Overseas Countries and Territories

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Will the changes though necessarily signal a loss to the ACP? That will depend very much on the EU’s and the UK’s policy choices.

Regarding EU funding for the ACP post Brexit, the 11th EDF, which runs to 2020, is already set so ACP countries should continue to receive the total committed amount even if the UK leaves before then. Of course, the ACP Group will need to be vigilant to ensure that disbursement is actually effected.

Given the two years for Article 50 negotiations, the earliest possible date for Brexit will be in 201912 which will be just months before the end of the life of the 11th EDF. The ACP’s major concern will be whether the remaining member States will agree in future EDFs to make up for the substantial UK contributions that will be lost. There is ongoing discussion as to whether in future the EDF should be brought into the EU budget, which would then call for mandatory rather than voluntary contributions. This would have its own implications depending on any changes in the volumes of resources that would be available to the ACP and any simultaneous adjustments to policy and management.

12. Since the UK Government has indicated that it will trigger Article 50 by March of 2017, the country will not exit until negotiations end in 2019.

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After brexit...

The other factor that will affect outcomes for the ACP would be UK development policy. Will there be any change in overall policy in the run-up to or post-Brexit? The UK will no longer contribute to the EU’s Development Fund and the EDF, but will it maintain overall aid levels, redirecting and disbursing the funds via other multilateral agencies or doing so bilaterally?

Firstly, it is likely that the UK will maintain its 0.7% of GNI aid target. It is a leading player in global development cooperation and was the first G7 country to meet the international 0.7% of GNI target. In 2014 it disbursed the second largest amount of development assistance among OECD DAC countries.

DfiD: The UK manages its development cooperation principally via the Department for International Development (DFID). The continued commitment to development was reaffirmed by the new UK Secretary of State for International Development, Hon. Priti Pattel who stated that UK development aid will be invested in the UK’s national interest, “while keeping the promises we’ve made to the world’s poorest people. Successfully leaving the European Union will require a more outward looking Britain than ever before, deepening our international partnerships to secure our place in the world by supporting economic prosperity, stability and security overseas.”

It of course will be important for the ACP to engage with the UK government (HMG) to help it appreciate that its aid can also serve a more fundamental and valuable purpose than securing the UK’s “place in the world”. Instead, it can support economic growth, and sustainable development that will transform lives and reduce poverty making the world more prosperous and secure.

uk deveLoPment PoLicy

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The UK particularly through DFID has a direct presence in all ACP regions and in several other countries. It also contributes to and supports specific African Union-led operations in some ACP countries such as Somalia, under the African Peace Facility. The bulk of its aid though, 60%, is bilateral while the remainder is channeled through multilateral agencies like the IDA and EU. Most of the UK’s multilateral ODA was spent by DFID, which accounts for 86.2% of total UK multilateral ODA. The remaining 13.8% of UK aid was provided by other agencies like the Department of Energy and Climate Change and the Foreign and Commonwealth Office.

Policy areas: Those policies that have hitherto been the hallmark of UK development cooperation will doubtlessly continue to be promoted to the extent that they have direct bearing on the UK’s vision of itself as a global player and where the UK believes that it has greater expertise and can have the best impact. These include poverty reduction, security, humanitarian aid, climate change and disaster risk reduction, good governance, education, wealth creation, extractive industries, migration and the SDGs.

Priority countries: One should expect continued differentiation in UK development cooperation both in policy and practice. Its emphasis has been on ‘countries most in need’ or LDCs, or vulnerable countries, though just as with the EU, it’s policies will also be very influenced by its own priorities and interests.

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After brexit...

Table 1 sets out the 20 largest recipients of bilateral aid which account for 80.8% of the total.

Table 1: Top 20 recipients of UK Bilateral ODA in 201413

Rank Country £ million Rank Country £

million1 Ethiopia 322 11 Kenya 1352 India 279 12 Syria 1303 Pakistan 266 13 Somalia 1244 Sierra Leone 238 14 Nepal 1125 Nigeria 237 15 Zimbabwe 1046 Bangladesh 208 16 Zambia 917 Afghanistan 198 17 Mozambique 848 South Sudan 167 18 West Bank & Gaza

Strip83

9 Congo, Dem. Republic

167 19 Uganda 82

10 Tanzania 149 20 Yemen 82ACP countries are highlighted in red.

intermediaries and Partners: The UK can be expected to continue to work closely with trusted multilateral and regional partners, though it has a definite preference for the bilateral approach. The principal agencies through which it disburses funds are, the World Bank, UN agencies, African Union, AFDB, CDB and RECs. Aid is also channeled through NGOs in several African countries; sometimes as an extension of UK’s development cooperation arm and promoters of UK shared values.

Table 2 shows the main multilateral organisations through which the UK disburses development assistance.

13. Source: DFID Statistics on International Development, 2015

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Table 2: Top 20 Recipients of UK Core Funding to Multilateral Organisations in 201414

Rank Multilateral organisation

£ million

share of total

Rank Multilateral organisation

£ million

1 International Development Agency

1,641 33.5% 11 International Finance Facility for Immunisation

66

2 European Commission – Development Share of Budget

816 16.7% 12 United National Development Programme

55

3 European Commission – EDF

328 6.7% 13 Global Environment Facility Trust Fund

53

4 Global Fund to Fight AIDS, Tuberculosis and Malaria

285 5.8% 14 International Fund for Agricultural Development

51

5 Strategic Climate Fund

274 5.6% 15 Asian Development Fund

50

6 Global Alliance for Vaccines and Immunisation

269 5.5% 16 World Food Programme

50

7 African Development Fund

207 4.2% 17 United National Children’s Fund

48

8 Clean Technology Fund

112 2.3% 18 UNITAID 40

9 Private Infrastructure Development Group

74 1.5% 19 CGIAR Fund 38

10 Central Emergency Response Fund

69 1.4% 20 United Nations Relief and Works Agency for Palestine Refugees in the Near East

37

14. Ibid

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After brexit...

If the UK economy shrinks and the value of sterling remains low or falls further, 0.7% of GNI will represent less money and therefore reduce the UK’s budget for development. Also, a low exchange rate, will lessen the purchasing power of even the same number of pounds sterling provided as aid.

The loss of the UK’s perspective and influence will undoubtedly affect the direction of future EU development policy. This might not necessarily be in ways that the ACP would have wished since the UK has often been an advocate and strong supporter of various causes adopted by the ACP such as the attainment of 0.7% GNI as ODA and climate change mitigation and adaptation support.

other consequences oF brexit For odA

The ACP countries collectively need to ensure that, despite Brexit and the ongoing changes, they continue to receive at least the same quantum of aid and that it is disbursed in line with their development priorities. Specifically they should:

• Engage with the UK to ensure that European Development and EDF contributions that would have gone to the ACP will now be diverted principally to the ACP, its countries and regions, as opposed to donor agencies.

• Seek confirmation from the EU that there will be no change in its development cooperation commitments post-Brexit.

• Seek support from the UK and collaboration with it to advance shared development cooperation goals in multilateral fora, where international development policy is being debated and determined, such as the UN and its agencies, OECD (DAC committee) , World Bank, G7 and G20 among others.

ProPosALs For the AcP

33


Brexit will result in the loss to the EDF of its third largest contributor that is putting in nearly €4.5 billion to the 11th EDF and is a major contributor to the EU Development Budget. ACP countries will need to ensure that, they continue to receive at least the same quantum of aid and that it is disbursed in line with their development priorities.

34

Immediately on Brexit, the UK will be free, firstly, to apply whatever import duty rates it wishes, as long as they do not exceed those that currently exist, and secondly to replace the EU wide trade regime that it operates with one of its own. It will also have an independent voice and vote in the WTO and be free to directly negotiate trade agreements. Its operations would of course have to conform with WTO rules and norms including MFN principles.

In order to understand what this might mean for the ACP and what would be its optimal strategy, it is essential to appreciate the regulatory basis on which ACP countries currently trade with the UK and its importance to them as well as the possible alternative post-Brexit arrangements and the considerations that will underlie the negotiations.

trAde

Much of ACP exports to the UK is enabled by three preferential arrangements, the Economic Partnership Agreements (EPAs), the standard Generalised System of Preferences (GSP) and the GSP based Everything But Arms (EBA) initiative. These have helped keep many ACP exports viable and competitive because high tariffs are maintained on imports which ACP exporters do not have to pay. These products include sugar, beef, bananas, tobacco, certain vegetables and other raw and processed agricultural products and fish and fisheries products. Many of the tariffs and non-tariff measures which provide ACP exporters with preferences are intimately linked to the EU’s common agricultural policy. This makes the future trajectory of the UK’s agricultural policy and agricultural trade policy a matter of considerable importance to the ACP.

the eu FrAmework For trAde reLAtions between the uk And the AcP

35


everything but Arms (ebA)

• 40 ACP countries can export to the EU under the EBA, which is a non-reciprocal trade arrangement that grants full duty and quota-free access to the EU market, for all products except arms and ammunitions. (It should be noted that half of these LDCs are also participants in EPA processes which have established or will establish reciprocal preferential trade arrangements with the EU).

economic Partnership Agreements (ePAs)

• The 49 ACP countries (including 20 LDCs) that have concluded (or are in negotiations to conclude) WTO compatible economic partnership agreements, with trade preferences and duty and quota-free access for their exports to the EU, (except for South Africa where TRQs15 apply across a range of products), and for the EU tariff elimination commitments from the ACP partners. The status of EPAs with ACP partners is presented in Annex 3

generalised system of Preferences (gsP)

• The remaining ACP countries currently export or will shortly export under GSP tariffs, including most non-LDC Pacific island ACP members (which have marginal exports to the EU); Congo Brazzaville, Gabon and potentially Nigeria if it does not sign and ratify the West African EPA. This extends what the European Commission describes as “generous tariff reductions” to beneficiary developing countries, involving the partial or entire removal of tariffs on two thirds of all product categories. The third of product categories not covered by the EU GSP scheme, however, includes some important ACP export products such as sugar.

15. Tariff Rate Quotas.

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After brexit...

The UK has considerable investment in many of these countries and exports to them a considerable volume of goods and a range of financial, consultancy, transport, insurance, medical and other services. The total value of the UK’s trade in goods and services with the ACP group is only exceeded by that with the EU, the US, China and Switzerland. The UK’s extensive economic commercial relationship with ACP countries makes a major, though not sufficiently acknowledged contribution to its own economy.

Figure 4 shows the value and destination of UK exports and Figure 5 UK exports to partners.

Figure 4: Principal destination of UK exports 2010-1516

When services are added the ACP still retains its overall ranking.

imPortAnce to the uk oF exPorts to AcP countries

16. Source: International Monetary Fund, 2016

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Figure 5: UK Export to Partners (2014)17

Whilst the volume of UK exports to most individual ACP countries, might not be large, when viewed collectively they are very significant with considerable potential for further expansion. This has implications for negotiations and the negotiation strategy to be adopted by the ACP, since the full group will be a stronger and more credible partner than any individual member state or region. UK exporters will undoubtedly have an interest in preserving and expanding preferential access to what for them have been lucrative markets.

17. Ibid

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After brexit...

The UK is the fifth largest economy in the world and this fact, combined with its historical commercial links with many ACP countries and the various preferential trading arrangements, has resulted in substantial and longstanding exports by ACP countries to the UK.

In 2015 UK imports from ACP countries were worth US$12,295 million. Figure 6 shows the principal exports and the trends of the last three years.

Figure 6: ACP Export to the UK18

It will help in analysing the relative importance among ACP countries of their exports to the UK market as a share of their trade with the EU, to classify them by country as well as by sector, according to their dependence on the UK market.

imPortAnce to the AcP oF exPorts to the uk

18. Source: International Trade Centre, 2016

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The following classification of dependence at country and/or product level can usefully be applied:

• exceptionally high dependence countries (above 55% dependency on the UK market in their exports to the EU);

• high dependence countries (between a 30% and 55% dependency on the UK market in their exports to the EU);

• an above average dependence countries (between a 15% and 30% dependency on the UK market in their exports to the EU);

• low dependence countries (below 15% dependency on the UK market in their exports to the EU).

Using this first level classification we find 16 out of 49 EPA signatories have a higher than average dependence on the UK market in terms of their exports to the EU. The most exposed ACP countries being: St Lucia, Belize, Fiji, Seychelles, Guyana, Jamaica, Gambia, Dominica, Mauritius, Kenya, South Africa and the Dominican Republic. The country breakdown according to EPA region is at Annex 1.

It should be noted that, with the exception of the Dominican Republic, all of these ACP countries are members of the Commonwealth.

However, the key issue is less the total share of the UK in ACP exports to the EU, than the importance of the UK market for ACP exports where high tariffs are still applied and/or where non-tariff measures are important to market access. For example, in the agro-food sector, the EU often maintains high levels of tariff protection and hence duty and quota-free access granted is most significant.

Even where an ACP country may have a low dependence on the UK market in its overall exports to the EU, there may be sectors with a high dependence or even exceptionally high dependence on the UK market.

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After brexit...

To properly and fully understand the ACP export data, it would be helpful to disaggregate the figures since there are some factors that should be taken into account which include:

a. the extent of misleading trade statistics in the total national exports to the EU (e.g. resulting from the re-registering of boats);

b. the considerable amount of exported products that attract zero MFN rates and would therefore enter duty free anyway (for example around 50% of total South African exports to the EU would enter duty free or at very low rates of duty regardless of the trade regime applied).

Trade falling into these two categories then needs to be factored out in order to fully assess the overall dependency on the UK market and appreciate the value of the preferences.

The following analysis outlines the degree of overall dependence among EPA members, existing or acceding.

ecowAs

Of the 16 West African countries,19 only one has a disproportionate dependence on the UK Market, namely Gambia, with 30% of exports to the EU going to the UK. The second most dependent country is Ghana with 11.6% of exports to the EU destined for the UK, followed by Nigeria (10.8%), Senegal 7.9%, Ivory Coast 7.2%. For most West African countries the UK receives less than 5% of their exports to the EU.

19. Benin, Burkina Faso, Cape Verde, Ivory Coast, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, Togo, Mauritania

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eAc

Of the five EAC EPA member countries Kenya, Tanzania, Uganda, Burundi, Rwanda, two have a disproportionate dependence on the UK Market; Kenya, with 27.8% of exports to the EU going to the UK and Rwanda with 17%. The other three members all have less than 6% of their total exports to the EU going to the UK.

Kenya is an example of an African country with an exceptionally high dependence on the UK market in particular sectors. Its exports to the UK of fresh and chilled leguminous vegetables (customs classification 0708) 51% as well as other fresh or chilled vegetables (customs classification 0709) - 79% and cabbages, cauliflower etc. (customs classification 0704) – 85% were valued at over €100 million in 2015.

centrAL AFricA ePA signAtories

Cameroon, EPA signatory in Central Africa has a less than average dependence on the UK market, with 8.6% of exports to the EU destined for the UK market

sAdc ePA signAtories

Of the 6 SADC EPA signatories; South Africa, Botswana, Lesotho, Namibia, Swaziland, Mozambique, only one has a disproportionate dependence on the UK market, South Africa, with 26.7% of SA exports to the EU in 2015 going to the UK market. Mozambique comes second with 7.2% of their exports to the EU going to the UK market. However, for specific sectors the dependence is much higher. Thus, we find that while only 5% of total Namibian exports to the EU go to the UK market, 65.1% of its fresh and chilled beef exports to the EU go to the UK market and 29.5% of its exports of table grapes.

Namibia therefore provides a useful illustration of an African country with a low overall dependence on the UK market, but an exceptionally high dependence in specific sectors.

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After brexit...

Namibia’s situation also underlines the value of assessing the relative importance of the UK market vis a vis the alternative markets in the rest of the EU. In 2015 Namibia exported 3,829 tonnes of quality differentiated beef to the UK market, in a context where the estimated size of the EU27 market for quality differentiated beef is around 900,000 tonnes. The affected Namibian beef exports to the UK would thus be equivalent to only 0.4% of the consumption of quality differentiated beef in the EU27.

eAstern And southern AFricA (esA) ePA signAtories

Of the four ESA signatories Mauritius, Madagascar, Seychelles, Zimbabwe, two have a disproportionate dependence on the UK market in their exports to the EU, Seychelles (34.3%) and Mauritius (26.9%).

PAciFic ePA signAtories

The two Pacific ACP signatories Fiji and Papua New Guinea, have a higher than average dependence on the UK market in their exports to the EU, with Fiji (44.9%) having a very high dependence despite the recent success in diversifying away from the UK market.

Papua New Guinea also has an above average dependence (19.2%) on the UK market, with 33.9% of its palm oil exports going to the UK.

Given the processing of PNGs fully certified palm oil takes place in the UK for the whole of the EU28 market for sustainably certified palm oil, the nature of the future UK-EU27 trade relationship will be particularly important for PNG.

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cAribbeAn ePA signAtories

Eight of the 14 EPA signatories have a disproportionate dependence on the UK market for their exports to the EU. With Belize and St Lucia having an exceptionally high dependency, Guyana and Jamaica a very high dependency and Dominica, Dominican Republic, Barbados and Haiti having an above average dependence on the UK market.

In the case of St Lucia 80% of exports to the EU are in agro-food products with a high dependence on trade preferences. In the case of Belize the figure is 73% of total exports to the EU which go to the UK and have a high dependence on tariff preferences provided under trade agreements with the EU. These countries thus have an exceptionally high dependence on the UK market in terms of their overall export trade with the EU

In other Caribbean countries, an exceptionally high dependence on the UK market exists in particular sectors. For example, Guyana and Jamaica have a very high dependence on the UK market for their sugar exports (100% and 84% respectively), while St Lucia’s entire banana exports to the EU go to the UK market. This suggests some serious adjustment challenges could be faced, depending on the nature of the post-Brexit agricultural and agricultural trade policy pursued by the UK.

44

After brexit...

The data shows that for all the ACP regions, exports to the UK are substantial. Much of that trade is enabled by preferential arrangements such as EPA, EBA and GSP, which have helped keep ACP exports viable and competitive because high tariffs are maintained on imports which the ACP products do not have to pay. These products include sugar, beef, bananas, tobacco, certain vegetables and other raw and processed agricultural products and fish and fisheries products.

It is argued20 that as the UK leaves the EU, third party countries can benefit through better trade. The UK must implement trade reform in a manner that does not undermine its commitments under the SDGs. Goal 17.11 states: “Significantly increase the exports of developing countries, in particular with a view to doubling the least developed countries’ share of global exports by 2020”. The ACP countries need to urge the UK government to ensure this is not at the expense of their long-standing trade interests.

Exports to the UK are substantial for all ACP regions and for many ACP countries. This trade totals US$12.3 billion. In many cases, it is governed by preferential trading arrangements, EPAs, the GSP and EBA, which help keep exports viable and competitive where high tariffs are maintained on imports, which the ACP do not have to pay. The future value of ACP trade preferences will be strongly influenced by the future trajectory of the UK’s agricultural trade policy post-Brexit.

understAnding AcP trAde

20. Anderson, M., Juden, M., Rogerson, A. (2016). After Brexit: New Opportunities for Global Good in the National Interest. CGD Policy Paper 089.

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For Brexit not to damage ACP’s exports, preferential margins must be preserved. This will require the retention of the duty and quota free access arrangements, as well as of the high import duties from which ACP countries are exempted. Both are required since, even if ACP exports continue to be granted duty and quota-free access, reducing the MFN rates could fundamentally undermine ACP competitiveness on the UK market, in the particular products of greatest export interest. Attention also needs to be paid to other commercially significant factors, including competitiveness, adaptability, and market positioning strategies of ACP exporters.

ACP country markets are very important to UK exporters, who exported a total of US$8.3 billion to the Group in 2015, 40% of these exports took place under preferential trade agreements established through the EU, which will fall away for UK exporters post Brexit.

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As it leaves the EU, the UK will negotiate its future relationship with the other Member States, the EU27. The nature of that eventual relationship will affect the outcomes for the ACP countries’ and their future trade situation.

The following analyses cover various options for UK-EU trade relations and what these mean for ACP countries, not only in economic terms, but also in terms of the types of issues ACP countries will need to focus on in their representations to the UK (and to some extent the EU).

uk-eu customs union

One option is that the UK remains within the EU/Turkey customs union. Under this arrangement there is unrestricted circulation of goods of whatever origin that would be able to freely transit between the UK and the EU and vice versa. Politically, at this stage this option seems unlikely.

The UK is a net importer of goods from the EU (£8bn deficit), but a net exporter of services (£20bn surplus), so it is in the UK’s interests not to conclude a customs union agreement without an accompanying services agreement. However, the closer the trade arrangements with the EU resemble the existing situation, the more intransigent the remaining EU Member States are likely to be in their demands for the UK to continue permitting free movement of persons, to which the UK is also unlikely to agree.

PossibLe diFFerent uk-eu trAde reLAtionshiPs Post brexit imPLicAtions For AcP countries

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Placing aside that this model most probably won’t be realised, one can predict what would be the consequences for ACP states of the UK remaining part of a customs union with the EU, based on Turkey’s experience as a non-EU Member State in the EU customs union. Article 16 of the EU-Turkey Association Council Decision No 1/95, which established the customs union, states that:

“With a view to harmonising its commercial policy with that of the EC, Turkey shall align itself progressively with the preferential customs regime of the EC within five years as from the date of entry into force of this decision. This alignment will concern both autonomous regimes and preferential agreements with third countries.”

Turkey has fully harmonised its own GSP program with the EU’s GSP program, including the EU’s rules of origin.21 The UK, which already is party to the preferential customs regime and all the agreements, would be likely to enter into an equivalent undertaking. Indeed this is a condition of free circulation of imports within the customs union.22 This means that the UK will aim to continue its rights and obligations under any FTAs, including the EPAs, to which it is currently a party as an EU Member State,23 and that it will have the EU’s support in this endeavor.

There seems little reason for a third country to object to any such continuation, and, practically speaking, all that would be required would be a formal agreement noting the UK’s change of status to the EPA as a non-EU Member State. As for preferential trade with ACP states, the same conclusion can be drawn.

21. Handbook of Turkey’s GSP Scheme, http://english.gtb.gov.tr/data/56deda511a79f54 9fc2a1dd4/HANDBOOK%20of%20Turkey%20s%20GSP%20Scheme.docx

22. Indeed, the exception proves the rule. In fact, Turkey has not managed to conclude FTAs with a number of third countries with which the EU has FTAs, and it has no means of preventing products imported to the EU under those FTAs from being deflected into Turkey in circumvention of Turkey’s still extant customs tariff for such countries.

23. For example, Article 233 (‘Definition of the Parties’) of the Cariforum-EU EPA defines the ‘EC Party’ as ‘the European Community or its Member States or the European Community and its Member States, within their respective areas of competence as derived from the Treaty establishing the European Community.’ As a result, when the UK leaves the EU, it will no longer be included in this definition, and must be taken to be excluded from the EPA.

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After brexit...

24. The Agreement on the European Economic Area, entered into force on 1 January 1994, and brings together into Single Market, the EU Member States, Iceland, Liechtenstein and Norway

25. Entered into force 26 February 2013, replacing earlier similar arrangements.

uk-eu FtA

The EU has concluded numerous FTAs over the years, the most comprehensive, in terms of coverage, being the Deep and Comprehensive Free Trade Agreements (DCFTAs) with Ukraine, Georgia and Moldova. Services were excluded from the EU-Switzerland agreements, and agriculture from the EEA Agreement.24 A key difference between FTAs and a customs union is that FTAs have rules of origin used to determine when products are sufficiently ‘worked’ to be considered originating products that can benefit under the FTA. Rules of origin are unnecessary for customs unions, insofar as they adopt the alternative model of ‘free circulation’.

If the UK and the EU enter into a similarly comprehensive agreement, it can be envisaged that this agreement will adopt the rules of origin set out in the Pan-Euro-Mediterranean Convention on preferential rules of origin (PEM).25 The application of the rules of origin in this Convention to UK and EU products using ACP inputs is deserving of further study.

Other internal aspects of such an FTA, relevant to ACP, exports can be negotiated between the UK and the EU, but ACP countries need to ensure that this is actually done. For example, it would be desirable to ensure that shipments to the UK continue to be counted for purposes of determining the size of shipments subject to SPS inspections. Beyond this, the main feature of an FTA, as opposed to a customs union, is that its parties can operate their own tariff regimes, and conclude their own free trade agreements with third parties. One need not be unduly concerned, from a regulatory or duty standpoint, about products that are landed, e.g., in Rotterdam or Felixstowe, and then exported to the UK or the EU respectively. Goods in transit are not subject to duties in the country of first landing. Since most ACP exports have free entry into the EU there will not be any duty payable. If on the other hand, they are shipped to the UK after first landing in Europe, there would only be duty if the ACP does not continue to enjoy duty free treatment in the UK.

49


Nonetheless, there will be a certain degree of additional time and administrative costs associated with transit between the UK and the EU. This increased cost could well be significant where the ACP products are only marginally competitive.

If the UK and the EU only manage to negotiate a looser type of FTA, such as CETA26 or the EU-Korea agreement, matters become more complex for ACP countries. This is for four main reasons. First, the rules of origin adopted under such an agreement will be sui generis, and are therefore much less predictable. Second, it is more likely that the FTA will not abolish duties on all trade, with implications for any ACP products used in the production of affected UK or EU products (albeit duty drawbacks can be negotiated). Third, the more that the UK regulatory regime can diverge from the EU’s, the more difficult it will be to ensure that ACP trade to the UK and to the EU respectively can be bundled, as at present. This has implications, inter alia, for SPS sampling, as well as administrative costs. Fourth, the UK will not only cease to be a party to the EU-ACP EPAs, but it will be highly unlikely that the EU and the UK would be willing to reinstate the UK as a non-EU Member State EPA party.

the wto oPtion

Given the scope and complexity of the negotiations it is quite conceivable that the UK and the EU fail to agree on a customs union agreement or FTA prior to the expiry of the two-year negotiating period. The result, at least in the immediate term, would be that they must treat each other as any other third country. That means that in the immediate term the EU will impose its MFN tariff on UK products, and the UK will impose, quite likely identical, MFN tariff on EU products.

For ACP countries, this has several implications. First, as mentioned, this could affect trade in processed UK/EU products using ACP inputs, and therefore the demands for those inputs themselves. Second, the reduction in competition in each other’s markets could lead to higher prices, which could be to the advantage of ACP countries. Probably most fundamentally, though, such a scenario would

26. EU-Canada Comprehensive Economic and Trade Agreement (CETA)

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After brexit...

put intense pressure on the UK government to negotiate alternative preferential market access with third countries, the results of which could have significant implications for ACP exports, both in terms of preference erosion and of increased competition in the UK market. ACP countries should remain alert to these risks.

A London and Brussels based advisory firm, Global Counsel that helps companies and investors across a wide range of sectors anticipate the ways in which politics, regulation and public policymaking create both risk and opportunity – and to develop and implement strategies to meet these challenges. It has put out a summary of Brexit models and provides its summarised assessment of each of the possible scenarios (Figure 7).

Figure 7: Brexit Models27

27. Global Counsel. (2015). Brexit: the Impact on the UK and the EU. Retrieved from: https://www.global-counsel.co.uk/sites/default/files/special-reports/downloads/Global%20Counsel_Impact_of_Brexit.pdf

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There are different possible trading relationships that the UK can have with the EU after Brexit, the only one that would be likely to permit the automatic continuation of the current trading arrangements with the ACP would be a Customs Union. It is, however, unlikely that this will be the outcome. The other more likely post-Brexit relations will see the UK devising its own new policy and the ACP will require new trading arrangements with it.

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After brexit...

comPensAtion From the eu For the Loss oF the uk From the ePA?

Since Brexit will reduce the economic size of the EU by 17%, two main concerns arise following the UK ceasing to be a party to the ACP-EU EPAs. First, the ACP EPA countries will lose the valuable preferential access to this major market. Second, as a result of losing the range of benefits including market access to the UK, the balance of concessions negotiated with the EU-28 will change dramatically. In essence, the concessions negotiated by the ACP side will in the changed circumstances turn out to have been made in exchange for benefits that are much reduced in value from what was initially expected from the EU and would be realised post-Brexit.

There could be a case for highlighting the reduced value of current EPA trade preferences for a range of ACP countries resulting from the departure of the UK from the EU, and using this to argue for:

a. financial assistance to programmes of adjustment support to assist individual ACP sectors make market adjustments consequent on the loss of EPA preferential access to the UK market;

b. more flexible and responsible implementation of EPA commitments (including those related to the removal of non-tariff barriers to trade and those constraining the use of non-tariff trade policy tools), in the light of the need for production and trade adjustments in the ACP countries worst affected by the UK’s departure from the EU and the lapsing of existing preferential market access.

Highlighting that the ACP’s EPA’s expectations will be curtailed, might be cited in encouraging the EU27 to make the issue of the UK’s respect for inherited trade obligations towards ACP countries an integral part of the Article 50 discussions or the negotiations on future EU27-UK trade arrangements (which is likely to include some trade concerns related to trade with third parties, given the expected EU interest in dividing the EU28 WTO TRQs with the UK).

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Frustration of the ACP countries’ expectations of the EPA can constitute the basis for denunciation of the agreement, or plausible threat to do so, in accordance with its own terms, or termination on the basis that the circumstances in which the agreement was concluded have changed. Article 62 of the Vienna Convention on the Law of Treaties states relevantly, as follows:

Article 62

A fundamental change of circumstances which has occurred with regard to those existing at the time of the conclusion of a treaty, and which was not foreseen by the parties, [and] (a) the existence of those circumstances constituted an essential basis of the consent of the parties to be bound by the treaty; and (b) the effect of the change is radically to transform the extent of obligations still to be performed under the treaty

It would be for the ACP to decide how best they might use this lever in negotiations with the EU.

Brexit will result in the UK ceasing to be a party to the EPAs depriving ACP EPA countries of the valuable preferential access to this important market. This frustration of the ACP countries’ expectations and the changed circumstances can constitute the basis for denunciation termination of the EPA agreement or plausible threat to do so.

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Upon Brexit, the UK can have its own tariff schedules, but if the rates were to be higher than those that it currently applies, it would need to negotiate them in the WTO. If the changes are significant and its trading partners consider that their exports might be harmed, this would invariably be a lengthy and exceedingly difficult task.

EU tariffs were largely designed to protect EU-wide production and therefore the rates are necessarily overall more protectionist than required for the UK. Hence there have been calls from certain UK business interests and politicians to reduce MFN tariffs. Also the Government has declared its desire to champion free trade post-Brexit.

Eventually of course it is conceivable that the UK could seek to negotiate new schedules in the WTO, but this could only begin after it has exited the EU. The likelihood therefore is that MFN tariffs are unlikely to be increased immediately upon Brexit though the UK can legally and unilaterally reduce rates.

The ACP would wish the preservation of higher tariffs on third country imports on products of concern to them. The UK, post Brexit will pursue its own independent trade and agricultural policy which could lead to the dismantling of those MFN tariffs particularly where the UK has no production interest.

ACP agro-food exports tend to be among the products with the highest MFN import duties, and consequently where the ACP’s margins of tariff preferences are highest. Therefore, if the tariffs were to be eliminated or substantially reduced on products of export interest to ACP countries, preference erosion would be rapid and extensive even if their exports continue to be duty and quota free.

whAt might hAPPen to AcP trAde

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For Brexit not to damage the ACP’s exports by undermining their competitiveness on the UK market, preferential margins must be preserved. This will require the retention of high import duties from which ACP countries are exempted.

Since the UK will be negotiating a range of new trade agreements, immediate liberalisation of tariffs might not happen right after Brexit. Unilaterally discarding some of its principal and most valuable bargaining chips, would considerably weaken the UK’s hand in future trade negotiations. It seems likely therefore that the UK will continue, at least for a time, with most of the EU’s common external tariffs, even if it reduces the rates over time.

It could therefore be that existing preferences would continue to have some value, at least for a few years. This would particularly be the case if the principle of inherited trade obligations were applied only to countries with long standing preferences and not under the more recently concluded EU FTAs.

Given the importance of tariffs on products of interest to ACP countries, they will need to be alert to the prospect of preference erosion and represent their interests to the UK before any reductions are decided upon, whether in MFN schedules or in FTAs with third countries.

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After brexit...

ebA

Since, according to WTO rules, the duty and quota-free access, EBA, which is provided to LDCs as a unilateral measure, the UK would be able on its own to grant the preferences. The UK has long been a champion of this arrangement so re-establishing or avoiding an interruption of this trading preference should not be a problem, since there are no WTO complications.

However, agreement with the EU27 may be needed to allow the UK to set in place a regulation granting LDCs free access to the UK market from day one of Brexit, in advance of their formal departure from the EU.

There is, however, an important additional dimension: namely establishing the case for the UK undertaking such a course of action. It needs to be seen as the UK accepting its ‘inherited’ trade obligations towards developing countries. This is important since the notion of ‘inherited’ trade obligations could then be applied to the broader ACP Group which has an established relationship of preferential access to the UK market which dates back to 1975 (although the extent of this preferential access has only been extended over time and only attained the status of full DFQF access in 2008 – the same time as this principle was applied fully to LDCs).

With 40 of its members being LDCs, the future application of the EBA’s duty and quota-free treatment of imports from LDCs would be very important to the ACP. Given the UK’s longstanding political support for LDCs and its role in getting the measure adopted by the EU, it would seem safe to assume that the arrangement would continue post-Brexit.

renewing PreFerentiAL ArrAngements

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The ACP should urge the UK government to make an unequivocal commitment that from the date of departure of the UK from the European Union, it will immediately extend the ‘inherited’ duty and quota-free access which least developed countries (LDCs) have enjoyed to its markets since 2001.

gsP

The current EU GSP scheme is a three-tiered affair consisting of:

• the standard GSP arrangement, which offers substantial tariff reductions to developing countries. Practically, this means partial or the entire removal of tariffs on two thirds of all product categories;

• the “GSP+” scheme which provides enhanced preferences (meaning full removal of tariffs) on essentially the same product categories as those covered by the regular arrangement described above. Concessions are granted to countries which ratify and implement core international conventions relating to human and labour rights, environment and good governance;

• the already discussed EBA arrangement for least developed countries (LDCs), which grants duty and quota-free access to all products, except for arms and ammunitions;

The EBA regime covers all least developed countries. Of the 16 GSP+ beneficiaries none are ACP countries28.

28. The current GSP+ beneficiaries are: Armenia, Azerbaijan, Bolivia, Colombia, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Honduras, Mongolia, Nicaragua, Peru, Paraguay and Panama, Sri Lanka (currently suspended).

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After brexit...

The standard GSP provides for zero tariffs or tariff reductions (typically 3.5 percentage points on ad valorem duties) on a large number of both non-sensitive and sensitive imports.

An Autonomous UK GSP Scheme

The UK could formulate its own autonomous GSP scheme, with a broader country coverage (i.e. including EPA beneficiaries since the EPAs would no longer apply) and deeper levels of tariff preferences. This could be unilaterally established and would require no negotiation, though needing to comply with WTO requirements. However, such a scheme would take some time to design and set in place.

If, however, it included duty free access (and improved rules of origin) for an extensive range of products, such a new scheme could possibly be subject to challenge in the WTO by a Member that considered that its rights had been infringed.

The GSP, is of interest to non-LDCs for exports that are not covered by an EPA or an FTA. Since the principle of support for developing countries is firmly entrenched in HMG policy, one can safely assume that the UK will continue to operate some such arrangement for developing countries.

Nevertheless, a UK scheme might be different than the currently applied EU designed programmes. Whilst the schemes are informed by certain objective economic criteria, they are also influenced by the policies, interests and the domestic concerns of the developed country providing the preferences.

It can be presumed that for various products the UK’s domestic concerns would be different from those of the EU. It might well switch political focus in favour of some developing countries and categories that do not precisely reflect the EU’s traditional focus. Secondly, the UK’s domestic economic interests are likely to have implications for the design of its GSP scheme. For both reasons, ACP countries have an interest in making representations to the UK government as soon as possible on these points.

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The ACP should urge HMG to ensure that ACP trade under GSP is not interrupted or disadvantaged by Brexit and that ACP interests are preserved. It is recommended that the UK puts in place the ‘inherited’ EU GSP scheme pending possible further review and improvement.

uk-AcP FtAs

It is first of all necessary to recall that upon Brexit, the UK will immediately cease to be a party to the EPAs, which the country had concluded on the basis that it was an EU Member State. This means that trade preferences between the UK and ACP EPA parties will need to be restored in some replacement framework. For the purposes of WTO consistency, that will have to be in the form of a new FTA.29

How can the current preferential trading arrangements, which benefit non-LDC (and indeed many LDC) ACP countries, be preserved?

The main area where the ACP could address this issue of erosion of the value of trade preferences would be through the conclusion of new trade agreements, which included provisions related to the extension of adjustment support where new trade agreements lead to the erosion of pre-existing ACP preferences. This could be included as an integral part of any “EPA+” arrangements negotiated with the UK, which also restores UK exporters to parity of trade treatment with their EU27 competitors.

29. A WTO-illegal unilateral discriminatory arrangement, such as Regulation 1528/2007, might well be envisaged in the short term. Experience with that regulation shows, WTO Members do not necessarily have an appetite for challenging every single measure deemed to be illegal. On the other hand, experience also shows that other WTO Members might be keen to challenge illegal measures when these are of commercial interest to them. In addition, the UK’s legal culture is such that it is less prepared than some other WTO Members to violate its international obligations in such a blatant manner. The result is that the UK might not be minded to offer unilateral discriminatory preferences to EPA parties even as a short term solution.

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After brexit...

oPtion 1: uk AssociAtion with the eu ePAs

One option which has been advanced is that ACP regional groupings should explore with the EU the possibility of adding the UK as a third party to their EPAs. This it is held would require the consent of the EU27 as well as appropriate amendments to the final provisions of the EPA:

While this is one option which could be explored, this is very much a second-best option since

a. it does not allow ACP countries to explore any EPA+ gains from Brexit;

b. it leaves ACP EPA arrangements vulnerable to mishandling and conflicts within the EU/UK Article 50 and parallel/subsequent bilateral UK-EU trade negotiations.

A course of action which would de facto subordinate ACP interests to what happens in the difficult process of UK-EU negotiations might not be the ideal way forward.

oPtion 2: new uk FtA ArrAngement

The UK may opt for the negotiation of new free trade area agreements with individual countries, existing configurations or new configurations of ACP partners. However, it needs to be recognised that this is normally a very protracted process. If the existing EU-ACP EPAs are accepted as a starting point, some of which took over ten years to negotiate, the additional time and effort required for these further negotiations would be considerably reduced.

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Given the numerous other trade negotiations that the UK will be engaged in upon Brexit, it is unlikely that new FTAs with the ACP could be rapidly negotiated and implemented and the UK will not in any event be able to formally commence trade negotiations until after Brexit has taken effect. Therefore, whilst on Brexit day the preferential arrangements would cease to apply, there would not have been the opportunity to negotiate and implement a substitute arrangement. Without the preferential margin, certain ACP products could become too expensive and orders would be cancelled. Trade would come to a halt with disastrous consequences particularly for the more marginal suppliers that might have no alternative markets and whose production might not be able to survive protracted interruption.

A two-stage approach is therefore proposed that will avoid disrupting ACP exports to the UK, pending the conclusion and implementation of the new arrangements. It is recommended that the ACP seeks from the UK Government that DFQF with EPA countries continues on a transitional basis, pending the negotiation and introduction of WTO compatible arrangements.

necessity For Avoiding Any disruPtion or hiAtus in trAde FLows

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After brexit...

Clarity and precision are essential regarding the arrangements necessary if ACP countries are not to be harmed by Brexit and can take advantage of its opportunities.

Firstly, with regard to development assistance the ACP would wish to ensure that the quantum of funding received is at least as much as would have been disbursed in the absence of Brexit and that it is in line with ACP countries’ priorities. For this purpose, it will be necessary that:

1. the EU does not change, because of Brexit, its development cooperation commitments to the ACP, particularly those under the EDF.

2. UK contributions intended for the ACP which were transmitted via the European Development budget and EDF will now be diverted principally to the ACP, its countries and regions, as opposed to going via other donor agencies.

3. The UK supports ACP interests in multilateral fora where policies relevant to development cooperation are debated and determined. These include the UN and its agencies, OECD (DAC committee, as well as other configurations), World Bank, G7 etc.

With respect to trade, ACP countries need to safeguard their long-term trading position and avoid any hiatus to their export trade with the UK, which would be very damaging.

It will be necessary that duty and quota-free and other favourable terms of access to the UK market, currently provided under the EBA, EPA and GSP continue and that preferential margins which help ensure the viability of ACP exports to the UK are preserved.

requirements to sAFeguArd AcP trAde And economic interests

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Specifically, the ACP needs an early political commitment from HMG that it will, upon Brexit, continue without interruption to:

a. offer EBA and the favourable GSP concessions to eligible ACP countries

b. provide, on a transitional unilateral basis, DFQF for countries currently exporting to the UK under EPAs. (This will be a transitional arrangement to permit time for negotiating and concluding WTO compatible FTAs, which might be based on the existing EPAs with the EU).

c. apply tariffs at existing rates, on third country imports of products of export interest to the ACP.

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After brexit...

Though essential for securing its interests, the ACP’s requirements are considerable and the group has not hitherto been a partner to the UK even if the UK has excellent relations with several ACP states, the majority of which belong to the Commonwealth. Working together, though, places the ACP in a stronger bargaining position and permits the interests of the non-Commonwealth countries to be more fully taken into consideration. This is particularly significant given the similarity in the economic profiles of the members of the ACP Group whether or not they belong to the Commonwealth, which contains developed and developing countries, and some major economies.

If the ACP is to have an impact on UK decision making it will have to demonstrate and convince the UK of its worth as a credible and valuable international partner. It must show that its role and significance is more than just an economic cooperation vehicle with the EU. If the UK perceives the ACP in this limited manner, essentially it would be an irrelevance at a time that the UK is leaving the EU.

Given the UK’s international profile and considerable interests on a range of issues including international development, poverty reduction, combating climate change, security and combating terrorism, it doubtlessly would wish to engage with a partner that is credible, active, is listened to and is respected in international fora. To be successful, the ACP would first need effective coordinating capability and to arrive at common positions on those international issues where joint action would be feasible and in their interests.

A group of states as large as the ACP that is coherent and can unite to forcefully pursue agreed international objectives will inevitably be influential and an attractive political partner to other countries and groupings.

recommendAtions And A PLAn oF Action

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If the ACP Group is recognised as a valuable and credible international political partner and ally on various issues and campaigns of mutual interest it would also have greater legitimacy and authority to engage with partners like the UK on those matters that concern trade and development cooperation interests of its members.

A prerequisite therefore of a successful Brexit strategy will be enhancing the effectiveness and coherence of the ACP.

The following are the specific recommendations for the ACP:

1. Arrive at a common position and strategy to be pursued, aimed at securing and advancing ACP interests post-Brexit. This should be used as a background brief by governments for engaging with the UK and instructing their representatives, especially in London.

2. Actively engage with and lobby HMG, not only in formal government to government meetings but also in other interactions with parliamentarians and officials.

3. Most ACP countries have good working relationships with the UK Government therefore their Ambassadors and High Commissioners in London need to be fully involved and provided with briefings and support. This could be facilitated initially by a half day seminar at which the Secretary General would brief and discuss with them the impact of Brexit on the ACP, its strategy and the role that they can play. The Group will be encouraged to continue regular meetings to plan and coordinate lobbying of HMG.

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After brexit...

4. The ACP Secretariat should encourage and support a London based technical advisory group (TAG) serviced by officials of supportive organisations and selected experts. This will provide ongoing technical and strategic advice to the ACP and its campaign.

5. The ACP Group and Secretariat should actively engage with the media and supportive organisations to help ensure favourable public attitudes to safeguarding ACP interests, post-Brexit.

6. Pursue agreement on a Memorandum of Understanding between the ACP Group and the UK covering among other things: the redirection and securing of funds aimed for the ACP that had previously been channeled via the EU; the promotion of the transfer of technology and sharing of experiences; information exchange and policy dialogue.

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Whilst Brexit poses serious threats to ACP economic interests, which should not be underestimated or ignored, the new era does not have to be disastrous if the group mobilises all available resources and engages with allies to vigorously and coherently pursue their shared interests.

Given how high the stakes are for the ACP, it needs absolute conceptual clarity on both the short term and medium term challenges. This is particularly the case with respect to safeguarding preferential margins, which would be the foundation of the ACP’s post-Brexit “demand” in trade.

The negotiations and engagement do not have to be one-sided. ACP countries as a group are of considerable economic importance to the UK. It therefore would be in the interests of the UK to safeguard and cultivate its substantial trade and investment with those countries and ensure that it retains rather than loses parity with the rest of the EU after Brexit.

It is vital that ACP moves as quickly as possible on its Brexit campaign. The demands on the UK authorities are exceedingly great and it will steadily become increasingly difficult to get the attention of relevant Ministers and officials. This situation is likely to worsen after the launch of the Article 50 process. The campaign for securing ACP interests needs to start as soon as a plan and strategy have been agreed. Positions and policies are being discussed both within and outside the UK government and the ACP needs to get to and convince policy makers and those with influence, before positions are finalised.

Unlike many previous joint ACP campaigns, this one will be very much centered in London and will be particularly political in character. The extensive bilateral engagements that ACP countries have with UK ministers and other representatives in their capitals and in London can be invaluable in supporting common positions. In addition ACP High Commissioners and Ambassadors in London must be key participants in the campaign. Pro-active engagement in the coming months will be vital if the ACP is not to slip off the UK’s agenda of concerns.

concLusion

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After brexit...

Simultaneously, engagement with the EU is vital in stressing the lessened value of the EPA for ACP exporters as a result of the loss of the important UK market.

Preparing for and organising to deal with Brexit will be a major test of the solidarity and coherence of the ACP Group and its maturity and ability to successfully address modern day challenges.

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Table 3: West African Exports to the UK and the EU (€,000)

Country 2010 2011 2012 2013 2014 2015

Benin

EU 31,318 68,394 34,714 37,221 45,923 45,982

UK 19 17,568 72 39 199 1,160

UK % EU 2.50%

Burkina Faso

EU 97,499 62,509 64,555 46,896 113,740 54,486

UK 283 20 65 401 1,238 1,796

UK % EU 3.90%

Cape Verde

EU 36,152 45,992 55,156 48,075 97,249 63,563

UK 56 153 160 242 56 127

UK % EU 0.20%

Ivory Coast

EU 3,218,722 3,191,839 3,262,248 3,293,856 3,257,528 3,685,797

UK 206,855 105,467 213,394 153,300 166,130 264,582

UK % EU 7.20%

Gambia

EU 17,990 20,554 15,553 9,080 17,977 17,187

UK 4,589 5,722 4,683 2,538 6,699 5,156

UK % EU 30%

Ghana

EU 1,474,689 3,480,937 3,299,994 3,378,956 2,884,926 2,394,209

UK 274,071 326,946 265,079 330,250 315,862 277,005

UK % EU 11.60%

GuineaEU 472,081 471,910 523,426 439,385 455,335 581,972

UK 2,513 3,476 4,027 1,921 2,395 1,177

UK % EU 0.20%

Guinea Bissau

EU 5,669 4,201 5,922 1,476 3,347 2,041

UK 8 2 67 - - 3

UK % EU 0.10%

Annex 1

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After brexit...

Country 2010 2011 2012 2013 2014 2015

Liberia

EU 444,953 311,061 274,133 530,524 366,354 408,569

UK 5,977 7,881 3,918 3,920 1,041 1,473

UK % EU 0.40%

Mali

EU 26,786 45,257 31,823 41,926 40,644 39,632

UK 577 370 282 328 839 992

UK % EU 2.50%

Mauritania

EU 557,146 784,726 593,984 490,619 547,002 476,025

UK 288 2,994 417 2,735 36,782 6,361

UK % EU 1.30%

Niger

EU 196,043 285,619 463,353 597,741 389,158 497,061

UK 148 39 46 262 282 225

UK % EU 0.05%

Nigeria

EU 14,505,452 24,403,094 33,045,405 28,678,392 28,115,354 18,364,055

UK 939,814 2,605,758 4,670,738 3,646,846 3,053,985 1,975,292

UK % EU 10.80%

Senegal

EU 295,334 411,988 339,546 341,425 400,974 420,481

UK 15,749 29,427 26,340 31,371 36,473 33,425

UK % EU 7.90%

Sierra Leone

EU 158,907 171,188 220,346 171,797 223,135 231,029

UK 10,156 16,744 10,132 10,194 9,548 1,412

UK % EU 0.60%

Togo

EU 220,546 320,804 191,372 150,034 85,482 71,180

UK 871 1,024 614 2,106 1,763 2,810

UK % EU 3.90%

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eAc

Table 4: EAC County Exposure to the UK Market in their exports to the EU (€,000)

Country 2010 2011 2012 2013 2014 2015Kenya EU 1,112,354 1,277,016 1,234,255 1,140,176 1,167,989 1,330,249UK 391,740 422,823 389,647 354,784 317,722 369,983UK % EU 27.80%Tanzania EU 362,258 508,299 468,905 544,622 597,135 695,608UK 26,106 28,487 30,361 28,365 42,950 39,187UK % EU 5.60%Uganda EU 389,396 453,208 412,641 430,019 452,698 485,125UK 13,344 16,067 17,924 20,302 19,147 21,691UK % EU 4.50%Burundi EU 28,971 46,587 42,005 31,711 21,516 38,999UK 57 293 131 515 443 1,322UK % EU 3.40%Rwanda EU 37,315 48,178 49,136 26,766 46,870 64,423UK 5,464 3,030 4,337 2,932 4,300 10,977UK % EU 17.00%

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After brexit...

centrAL AFricA ePA signAtories

Table 5: Central African EPA Participant’s exports to the UK and the EU (€,000)

Country 2010 2011 2012 2013 2014 2015Cameroon EU 2,009,099 2,166,289 2,115,405 2,370,316 2,150,214 1,670,517UK 121,075 59,187 159,106 112,860 184,960 142,886UK % EU 8.60%

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sAdc ePA signAtories

Table 6: SADC EPA members’ exposure to the UK Market in their exports to the EU (€,000)

Country 2010 2011 2012 2013 2014 2015South Africa EU 20,421,294 21,759,968 20,510,952 15,556,914 18,512,838 19,362,935UK 7,003,520 7,010,559 7,486,681 3,323,871 5,570,671 5,164,612UK % EU 26.70%Namibia

2010 2011 2012 2013 2014 2015EU 1,159,048 1,445,703 1,330,226 941,293 963,179 1,033,817UK 321,275 540,217 441,059 96,198 54,845 51,933UK % EU 5.00%Swaziland EU 57,033 167,349 180,231 230,186 150,756 138,672UK 15,134 15,445 15,986 11,483 23,306 14,358UK % EU 10.40%Botswana EU 837,891 2,922,979 3,018,708 3,441,851 1,821,930 1,503,238UK 656,613 2,772,959 2,792,043 2,828,447 29,294 28,285UK % EU 1.90%Lesotho EU 139,307 243,390 220,872 186,589 247,449 254,537UK 1,585 1,150 1,757 576 434 699UK % EU 0.30%Mozambique EU 1,396,242 1,323,517 1,251,008 1,332,457 1,366,373 1,435,057UK 82,316 88,021 69,568 103,728 96,808 102,914UK % EU 7.20%

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After brexit...

esA ePA signAtories

Table 7: ESA EPA Group Members’ exports to the UK and the EU (€,000)

Country 2010 2011 2012 2013 2014 2015Mauritius EU 884,886 930,499 1,049,880 1,086,291 959,639 904,552UK 71,667 279,026 301,254 288,481 246,708 243,036

2010 2011 2012 2013 2014 2015UK % EU 26.90%Madagascar EU 481,500 549,098 583,090 737,967 840,356 936,337UK 33,796 35,344 28,958 37,190 52,559 53,807UK % EU 5.70%Seychelles EU 71,667 279,026 301,254 288,481 246,708 243,036UK 53,512 59,490 62,956 85,824 79,913 83,348UK % EU 34.30%Zimbabwe EU 299,400 446,024 417,489 387,621 510,294 400,430UK 33,712 66,751 23,638 40,472 34,478 46,136UK % EU 11.50%

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PAciFic ePA signAtories

Table 8: Pacific EPA participants’ exports to the UK and to the EU (€,000)

Fiji (k) 2010 2011 2012 2013 2014 2015EU 40,358 68,323 46,113 84,779 98,838 86,475UK 5,256 63,986 40,946 59,047 75,072 38,819UK % EU 44.90%PNG (k) EU 619,422 901,205 986,024 753,665 794,235 733,726UK 65,369 147,498 149,361 136,994 160,936 140,925UK % EU 19.20%

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After brexit...

cAribbeAn ePA signAtories

Table 9: Caribbean EPA country exports to the EU/UK in 2015 (€)

Country UK EU %St Lucia 7,759,682 9,969,361 77.80%Belize 112,302,658 152,553,289 73.60%Guyana 77,594,917 226,094,411 34.30%Jamaica 73,366,337 222,632,735 33.00%Dominica 1,057,639 3,679,888 28.80%Dominican Republic 191,338,857 833,859,529 22.90%Barbados 6,806,508 38,737,240 17.60% Haiti (LDC) 5,800,941 33,524,594 17.30%Trinidad & Tobago 156,776,264 1,243,259,272 12.60%Grenada 637,588 5,141,909 12.40%St Vincent & Grenadines 979,540 10,041,760 9.80%St Kitts & Nevis 370,151 25,870,489 1.40%Antigua & Barbuda 2,204,602 124,569,467 1.20%Bahamas 6,507,574 756,166,914 0.90%

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Here we see UK exports to partner countries from 2010 to 2015.

Whilst less than the UK’s top five trading partners ( US, Germany, France, Switzerland, and China) exports to ACP countries still exceed Australia, Brazil, Canada, and India.

Figure 8: UK exports to partner countries from 2010 to 201530

Annex 2visuALising dAtA


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After brexit...

The following is a breakdown of the ACP aggregate of the same data.

Figure 9: ACP Aggregate Breakdown

Here we see UK imports from partner countries, again the ACP precedes India, Brazil and Australia.

Figure 10: Five Year Bar Chart – UK Imports31


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The following graph shows business investment and GDP Growth projections for the UK. Investment drops and levels off with GDP growth post Brexit in this projection.

Figure 11: Business Investment and GDP Growth32

32. Goodwin, A., & Beck, M. (2016). The UK Economic Outlook. Institute for Fiscal Studies. Retrieved from: https://www.ifs.org.uk/uploads/gb/gb2016/gb2016ch2.pdf

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Region Current Status Next Steps

West Africa Two West African countries, Côte d’Ivoire and Ghana, initialled bilateral “stepping stone (or “interim”) EPAs” with the EU at the end of 2007. The stepping stone EPA with Côte d’Ivoire was signed on 26 November 2008 and ratified by the National Assembly on 12 August 2016. It entered into provisional application on 3 September 2016. The stepping stone EPA with Ghana has been signed on 28 July 2016 and ratified on 3 August 2016 by the Ghanaian Parliament. Negotiations of the regional EPA were closed by Chief Negotiators on 6 February 2014 in Brussels. The text was initialed on 30 June 2014, and on 10 July 2014 ECOWAS Heads of State endorsed the EPA for signature. The signature process is currently ongoing.

Stepping stone EPA with Ghana: the agreement will enter into provisional application after the consent of the European Parliament. Regional EPA: After signature by the Parties, the agreement will be submitted for ratification

Central Africa Cameroon signed the EPA between the EU and Central Africa as the only country in the region on 15 January 2009. The European Parliament gave its consent in June 2013. In July 2014 the Parliament of Cameroon approved the ratification of the Agreement and on 4 August 2014 the agreement entered into provisional application. The first EPA Committee between Cameroon and the EU took place in May 2015. It discussed relevant issues in the implementation of the Agreement (Rules of procedure of the EPA Committee, Rules of origin, liberalization timetable, etc.). Contacts are ongoing between the region and the EU on accession to this EPA.

Meeting of EPA Committee set for Yaoundé in 2016

Annex 3overview oF economic PArtnershiP Agreements

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Eastern and Southern Africa (ESA)

In 2009 Mauritius, Seychelles, Zimbabwe and Madagascar signed an Economic Partnership Agreement (EPA). The Agreement is provisionally applied since 14 May 2012. The European Parliament gave its consent on 17 January 2013. The inaugural EPA Committee was held in October 2012 in Brussels, and the latest, fourth, meeting took place in November 2014 in Zimbabwe. The Customs Cooperation Committee and the Joint Development Committee also met alongside the EPA Committee.

Meeting of the EPA Committee: The fifth meeting will take place on 12 and 13 December 2016.

East African Community (EAC)

The negotiations for the regional EPA were successfully concluded on 16 October 2014. On 1 September 2016, Kenya and Rwanda signed the Economic Partnership Agreement between the East African Community and the EU. All EU Member States and the EU have also signed the Agreement.

The ratification process is ongoing with Kenya and Rwanda having signed and Uganda, Tanzania and Burundi actively considering signature in the next months. The EAC Summit on 8 September 2016 expressed a willingness to move ahead as a region.

SOUTH AFRICAN DEVELOPMENT COMMUNITY (SADC) EPA Group

On 15 July 2014, the EPA negotiations were successfully concluded in South Africa. This ended ten years of negotiations and produced a comprehensive agreement with the whole SADC EPA Group including South Africa. The agreement was signed by the EU and the SADC EPA group on 10 June 2016.

The agreement applies provisionally (pending ratification by all EU Member States) as of 10 October 2014.

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After brexit...

CARICOM The CARIFORUM – EU EPA was signed in October 2008 and approved by the European Parliament in March 2009. The EPA joint institutions have met regularly since 2010: The Joint CARIFORUM-EU Council (ministers) held its third meeting also in Georgetown in July 2015. The Trade and Development Committee (senior officials) held its fifth meeting in Georgetown, Guyana in July 2015 · The Consultative Committee representing civil society held its second meeting in Brussels on 18th/19th April 2016

approved by the European Parliament in March 2009. The EPA joint institutions have met regularly since 2010: The Joint CARIFORUM-EU Council (ministers) held its third meeting also in Georgetown in July 2015.

Pacific Signed by the EU and Papua New Guinea (PNG) on 30 July and by Fiji on 11 December 2009. The EP gave its consent on 19 January 2011. The Parliament of Papua New Guinea ratified the EPA on 25 May 2011. On 17 July 2014 Fiji decided to start provisionally applying the Agreement. The fourth meeting of the Trade Committee established under the EPA took place in Brussels in June 2015.

The fifth meeting of the Trade Committee under the EPA will take place in Brussels in November 2016.

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Opening Address by Baroness Glenys Kinnock of Holyhead

At the ramphal institute Workshop “AfterBrexit:SecuringACPEconomicInterests”

tuesday 9:30 a.m. the 8th November 2016 AtthePolicyInstitute1stflooroftheVirginiaWoolfBuilding

King’s College London

Chair of the Ramphal Institute, Patsy Robertson, who has welcomed us so warmly to King’s College this morning; Mr Viwanou Assistant Secretary General of the ACP who is joining us via Skype; Dear colleagues and friends -

I am very pleased that the Ramphal Institute, of which I am proud to be a Patron, is supporting the discussion we are having this morning and is preparing a briefing for the ACP.

After the UK joined the EEC in the early 70’s, Sir Shridath was a leading architect of the arrangement that forged its new economic relationship with ACP countries - which is the Lomé Convention.

Now that it is leaving, it seems fitting that the Institute that bears his name, and seeks to continue his pioneering work in support of the international development, should be active as well.

This time, however, not in the creation of an ambitious and new opportunity for trade and development cooperation, but more modestly, to help the ACP group protect and preserve its vital interests – and to ensure that it does not find itself being an unwitting victim of Brexit.

Annex 4Address by bAroness kinnock

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After brexit...

Today I want to compliment and to thank the authors of the brief and for putting it together in what has been a remarkably short time.

Like all of you, I only saw the notes last night so I have only been able to skim through them.

I can, however, confirm that the right questions are indeed being asked, and in addition the issues which need to be grappled with are being aired.

What will happen to ACP countries that have been exporting to the UK under EPA –or one of the other EU arrangements?

What we really, need to know is that if Brexit reduces the benefits that EPAs provide, where exactly does that leave the ACP?

This issue is not just important for the ACP, it is definitely critical for the United Kingdom itself.

Even though the media focuses mainly on markets like China, India, the US, Canada and of course the EU itself, the UK’s trade, investment and other economic relations with the ACP countries are vital to the health and wellbeing of the UK economy.

A couple of weeks ago, I tabled a written question to the Minister in the House of Lords, who is responsible for international trade.

I asked whether HMG intends to maintain, or improve, Commonwealth trade with and preferential access to, the UK market, particularly in relation to critical commodities, such as bananas and sugar after the UK leaves the EU and if so, how exactly will that be achieved?

Unfortunately, his answer, essentially said, that the British government is reviewing its trade policy and is forging a new role for the UK in the world which includes our 52 Commonwealth partners.

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That statement, as the UK prepares to leave the EU, left me, and others absolutely none the wiser!

It is no secret that in Parliament many of us are most concerned at the lack, both of transparency in the Government’s approach, and of clarity over its exit strategy.

You can certainly rest assured that I will be continuing to seek clarity and clear answers from the government on its negotiations and on its preparations.

We need to be sure, not only that the UK’s own economic interests are safeguarded, but also that those of our long-term ACP partners are not sacrificed.

I am certainly encouraged by the High Court’s reaffirmation last week, of the sovereignty of Parliament.

That should, at least, remind the British government of the need to be open with us - rather than to keep us in the dark until it has invoked Article 50 and concluded its negotiations!

The legislature would then be faced with the Hobson’s choice of accepting whatever fait accomplit was negotiated and without the option of a real alternative.

So much hangs on the deliberations taking place here and elsewhere, and it is particularly important that we all seek to come to credible, and realistic, conclusions which are founded on sound, reliable analysis of the facts, rather than sentiment, or wishful, or selective assumptions.

Let me finally wish you every success, and all the very best with your critical, and essential, deliberations which are so important and indeed when so much is at stake, for so many people, who understandably, fear the effects of Brexit and who will definitely need our continued support.

The UK’s withdrawal from the European Union will have major and far reaching consequences, way beyond the UK. Countries of the African Caribbean and Pacific (ACP) Group are among those expected to be most affected since the UK in an important development partner and total trade is substantial; US$18.6 billion in 2015. However ACP countries’ relations with the UK for the last 40 years have been within the EU’s regulatory and institutional framework.

This study examines the implications for both the UK and the ACP and its findings are expected to help avoid or minimise any negative consequences of Brexit and identify and capitalise on opportunities that might arise or be created.

securing economic interests - ramphal institute1. ensure that the quantum of development assistance...

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