Preview of UK's EU trade policy role overs ahead of 'UK-Africa Investment Summit 2020'
As the UK gears up for its very first UK-Africa Investment Summit in January 20th 2020, taking from its Brexit position and the competitive Global interest to strengthen trade relations with Africa we have thought to preview the current UK-Africa trade relationship.
Public statements by officials and generalists of Africa's trading relationship with the UK and EU countries have been spewed around with very little degree of accuracy in them. This often has the effect of discouraging African companies from considering the UK or the EU as an export destination. With the UK's exist from the EU some of these rules may change however, no signs from law makers thus far showing higher barriers of trade. The UK has already declared for some regions such as East Africa that it will role over the trade agreements that the African countries had whilst Britain was in the EU. So we've compiled some publicly declared myths that may lesser discourage African businesses from exporting
“But ‘as strong as we are now’ means that we impose 50% tariffs on rice, maize and other cereals [on African countries]. Over 300% tariffs on processed sugar.”
Sarah Smith, Today Programme, 28 August 2018
“And yet time and again we [in Nigeria] are hit by EU tariffs on products such as sugar cane and rice… Rice, maize and other cereals face tariffs of more than 50 per cent.”
Atiku Abubakar, 26 August 2018
The EU does charge tariffs on imports of all these goods, but most African countries aren’t subject to them. This is because the EU has special schemes in place with the majority of African countries that mean that they can import almost all of their goods into the EU tariff-free.
The UK is currently part of the EU customs union: this means that the EU as a whole decides what taxes—or tariffs—to charge on goods coming into the EU customs union area. These tariffs are all agreed with the World Trade Organisation (WTO), the body that regulates international trade.
The EU’s average tariffs look like this:
These categories are for average tariffs. In reality, goods are classified into more detailed categories. So, for example, there isn’t one tariff for “sugars and confectionary”, but a number of different tariffs depending on things like how the sugar has been processed.
Some tariffs are charged as a percentage of the value of a product (“ad valorem” is the technical term for this).
Other tariffs are charged as a set value per unit (these are called “specific” duties). This means that the value of specific duties will vary depending on the price the exporter charges: if they halve their price, the tariff will double as a percentage of the product’s value.
The EU’s tariffs for the products in the claim, expressed as percentages, are as follows:
All of these tariffs are lower than those in the original claim. However, these rates are calculated using average prices. This means that if the price of a good was lower than the world average in a particular country, this country’s exporters would experience the tariff as a higher percentage of the product’s value.
So if, for example, Nigeria’s sugar price dropped to a quarter of the world average, it would face a tariff of over 300%. So that's unlikely to be a typical rate.
However, in reality, the majority of African countries aren’t subject to these tariffs. This is because these tariffs are the highest that the EU can charge: countries can negotiate reductions to these tariffs, so long as they do so following the rules set by the WTO.
The EU has a number of schemes in place that reduce the tariffs that apply to different African countries. These include:
Generalised Scheme of Preferences (GSP) and Generalized Scheme of Preferences Plus (GSP+)
These schemes enable the EU to offer preferential treatment, including tariff reductions, to products originating in developing countries. Together, the standard GSP and GSP+ cover seven African countries: Cabo Verde, the Republic of the Congo, Cote d’Ivoire, Ghana, Kenya, Nigeria and Swaziland. These reductions only apply to imports from developing countries, and not the other way round.
Everything But Arms
This is a particular form of GSP scheme provides tariff free access to the EU customs union for products from places that the UN judges to be the “Least Developed Countries”, including 34 in Africa (not including Nigeria). As the name suggests, it applies to everything but weapons, so rice, maize, cereals and sugar are all covered. Again, this is a unilateral scheme: meaning that the EU drops these tariffs without asking these countries to do the same in return.
The UK government has pledged to continue this scheme after Brexit.
Economic Partnership Agreements
These are agreements between the EU and African, Caribbean and Pacific countries. Similarly, they provide for tariff free access to the EU for everything apart from arms. The EU has EPAs with a number of groups of African countries: the Southern African Development Community, Central Africa, West Africa, Eastern and Southern Africa.
Generally, they provide immediate tariff-free access for non-EU countries to EU markets, whilst the EU gets phased access—increasing over time—in return. They also aim to reduce non-tariff barriers, such as the difficulties African producers face in meeting EU product standards.
Africa's Economic Growth
Data from the International Monetary Fund (IMF) has five of the ten fastest growing economies in 2018 in Africa. These countries are Libya, Ethiopia, Côte d’Ivoire, Rwanda and Senegal. This means that there may be significant economic opportunities there for the Britain as it seeks to expand trade relationships outside the European Union. Current levels of UK's Exports and Imports from Africa compared to the EU are significantly lower demonstrating a huge opportunity for African companies to step up to the plate that Brexit offers. This is also important for the UK as imports give consumers greater choice, and can reduce prices paid by shoppers and businesses for products.