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#Brexit: UK plays hardball on trade negotiations, even though no one knows what's happening next

Mar 19 2019 20:37
Lameez Omarjee

The UK wants better treatment in trade arrangements with Mozambique and member states of the Southern African Customs Union, which includes SA. But giving the UK what it wants isn’t that simple.

There's a clause in an existing trade agreement with the EU, which states that anything better offered to the UK must equally be extended to the EU, Trade and Industry Minister Rob Davies said.

The minister briefed media on Monday on progress on talks between SACU and the UK for trade arrangements to continue once the country leaves the EU. However, the matter was not concluded on Friday, when an inter-ministerial meeting was held. Parties will continue to engage each other on outstanding issues, Davies said.

But the trade arrangement hinges on what the UK and EU agree to as trade partners.

UK Parliament will on Tuesday evening vote on Prime Minister Theresa May's withdrawal agreement with the EU - this after it voted against it twice before.

Bloomberg reported that the UK's speaker of Parliament John Bercow has said that the House of Commons will only vote on May's deal if it is substantially different to what she has already put forward.  

So far the UK Parliament has voted not to leave the EU without a deal. The worst-case scenario would be for the UK to crash out of the EU without a deal on March 29, Davies said. Trading partners would revert to tariffs set out by the World Trade Organisation, which are less favourable than current trade agreements.

Davies also explained what the UK's conditions are for a trade arrangement SACU and Mozambique.

The Southern African Development Community (SADC) has an Economic Partnership Agreement (EPA) with the EU, this agreement applies to the UK for as long as it is part of the EU. However, with the UK's exit from the EU, the current EPA will no longer apply to it. This is why SACU and Mozambique want to rollover the EPA as a standalone agreement with the UK to ensure that trade is uninterrupted as the UK transitions out of the EU, a process expected to be complete by 2020.

But there are two issues in the EPA which need to be ironed out. These relate to sanitary and phytosanitary (SPS) measures and cumulation.

The EU has set requirements for exporters of agricultural products to meet, so that they can be issued an SPS certificate. The UK has agreed that the SPS certificates will still apply to SA exporters, but there is disagreements on the time frame of how long the certificates will apply, Davies explained.

Further, the UK wants to be able to withhold certificates on "reasonable grounds". SACU and Mozambique are seeking clarity on the grounds by which the UK can withhold certificates, Davies said.

The second matter relates to cumulation – this is when material of a third country or processing done in a third country is accepted as being from parties to trade agreements.

To benefit from preferential tariff rates offered by a trade agreement, a UK exporter must prove the product it is selling meets the Rules of Origin in the agreement, or that the product is actually from the UK or substantial work was done on it in the UK. This same rule applies to the SACU and Mozambique for exports to the UK, Davies explained.

The UK wants full cumulation, which essentially means it would be treated better than the EU.

According to Davies, the UK Minister of State for Trade Policy of the Department for International Trade George Hollingberry, this is a "red line" the UK won’t budge.

SACU could not agree to this as yet because there are considerations to make as the EPA with the EU has a clause that states if anything better is offered to another country - in this case, the UK - the same should be offered to the EU.

In turn the EU cannot discuss matters related to cumulation once it is known if the UK will leave the EU with a withdrawal agreement or if it will crash out, Davies said.

Davies said that SA's options depend on the outcomes of the UK's votes. If the UK cannot nail down a deal in tomorrow's vote, they will apply for an three-month extension from the EU to finalise a withdrawal agreement at the end of June.

If this fails, then the UK will crash out of the EU.

theresa may  |  rob davies  |  uk  |  south africa  |  brexit  |  sa economy  |  uk economy  |  trade
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