Brexit and the East African Community – a promising future for whom?

Brexit and the East African Community – a promising future for whom? By Jacqueline Eckert

 

12 December 2016 – Brexit is causing a wave of uncertainty in East African countries and the pressure of signing EU trade deals is not easing the unpredictability. The United Kingdom, after its decision to leave the European Union on the 23rd of June 2016, will remain party to all EU trade agreements until it formally leaves the bloc. Until then, the UK is in no position to conduct any separate negotiations of its own. What does this mean for African countries?

Upon leaving the EU, the UK will leave EU trade agreements and African countries will lose any preferential access to the UK market that those agreements currently confer. Africa accounted for 5.1% of global gross domestic product (GDP) in 2015, compared with 2.4% for the UK as part of the EU. There will thus be increasing pressure over the upcoming years on the UK from African governments and UK-based development organisations to make sure that African countries do not face increased trade barriers with the UK.

The EU is currently in the process of finalising the Economic Partnership Agreement (EPA) with the East African Community (EAC), the negotiations have been concluded but it now needs to be ratified by each country involved and this is where the sticking point lies. The agreement bans unjustified or discriminatory restrictions on imports and exports and which contributes to the EAC’s efforts to eradicate non-tariff barriers (NTBs) in intra-EAC trade.  Does the UK have any political reasons to seek to preserve such a quota free access to the British market that the large majority of African countries are a part of? Before answering this question, the article will explore the current trade situation of the EU and EAC and will then proceed to look at what opportunities post-Brexit UK faces with regards to UK-Africa trade relations.

The uncertainty of the present and future

The Kenyan flower export is in the current spotlight of Brexit as is the recently ratified EPA. The Kenyan Flower Council states that the floriculture sub-sector has recorded the highest growth in volume and value of cut flowers exported over the years, with Kenya attaining lead supplier status to the EU against its competitors, with 38 per cent of all cut flower imports into the EU including the United Kingdom originating from Kenya. Kenya’s flower industry therefore has an acute interest in securing this market following the exit of the UK from the EU.

Speaking on the EAC-EU Economic Partnership Agreement, members of the East African Community — Kenya, Uganda, Tanzania, Burundi and Rwanda — ratified the Agreement except for Tanzania due to the political uncertainty of Brexit. The European Commission declared that if Kenya does not ratify the EPA by October 2016 it will lose its tariff-free access to EU markets. However, the fragility of the European economic system as well as the upcoming renegotiations between the EU and Britain has created increasing political uncertainty amongst many African countries.

Tanzania for instance wishes to protect the economic interests of its country by empowering the manufacturing industries and asked for an extension, until early 2017, for the ratification of the agreement to undertake this reflection. Kenya has ratified the Agreement nonetheless. Professor Horace G. Campbell , from Syracuse University, New York has warned that: “If this is the path the East African region wishes to follow, then it should do so with full knowledge of the consequences and prepare to deal with them…But the choice should be a conscious one, and fully informed.”

The flower lobby, which has an extensive strategic control over the financial sector in Kenya, has increasingly pushed Kenya to sign the EPA as a failure to do so would have threatened Kenya’s €1.1bn annual flower and horticulture exports to the EU and the goods would have acquired tariffs. But what about the private sector and domestic industries that would be in competition with European imports? The EPA forces African countries to open 80% of their markets to European imports. In exchange, African states receive customs-free access to the European market.

Combining development work with a trade deal has both good and bad implications. While the EPA certainly shows many valuable and positive features that can benefit East African countries, in the long term, it seems like it would be an unsustainable market strategy for certain countries particularly those who also rely on infant industries and services. These could likely suffer if they must compete with heavily subsidized cheaper imports from Europe.

Trade settlements with the UK on the other hand could be negotiated once the country formally leaves the EU. An area of potential cooperation between a post-Brexit Britain and Africa is in agricultural biotechnology, which remains largely unexplored. In terms of the Common Agricultural Policy (CAP) Britain usually has been one of its major critics. Brexit may give Britain an opportunity to renegotiate with African countries with regards to agriculture that addresses the needs of some of these economies.

In a more realistic view though, in the light of recent British narratives, it is likely that Brexit instead will bring a renewed focus on Britain’s relationship with its Commonwealth with the reality that African countries are likely to be largely of less significance on the UK’s list of priority countries for trade deals.

In other words, there will likely be no immediate restoration of trade relations with Africa during post-Brexit. But only time will tell…

 

Photo: Henri Bergius under Creative Commons – Share Alike 2.0 Generic

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