The SACUM-UK EPA and TRQs

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The SACUM-UK EPA and TRQs

The SACUM-UK EPA and TRQs

Great Britain has left the European Union’s (EU) single market and customs union. This has meant that the preferential agreement between the EU and the Southern Africa Development Community (SADC) economic partnership agreement (EU – SADC EPA) ceases to apply on any future trade effective 01 January 2021. To prevent disruption of trade, ensure preferential access is not affected and to create certainty about their future trade with the United Kingdom (UK), the five member states of Southern Africa Customs Union (SACU) and Mozambique agreed to initiate negotiations to “roll over” the trade arrangements of the EU – SADC EPA into a new bilateral agreement. The SACU member states and Mozambique, and the UK concluded negotiations and signed the SACUM-UK EPA in October 2019. This ensures trade between SACUM, and the UK continues uninterrupted after the UK has exited the EU (European Union), and is applicable from 1 January 2021, following the conclusion of a free trade agreement between the UK and the EU on 24 December 2020.

The UK – an important market for SACU and Mozambique

The UK is an important trading partner to several SACUM countries as highlighted in Table 1 below. Important to note is that the UK is South Africa’s fifth largest trading partner with total trade amounting to USD 4.2 billion in 2020, which was up from USD 3.2 in 2016. The main exports include platinum, motor vehicles, wines of grapes, citrus and other fresh fruit, catalytic converters, and iron ore. UK on the other hand mainly exports manufactured goods, mostly to South Africa. These exports include printed materials, machinery and computer equipment, motor vehicles, whiskies, electric equipment including sound and visual equipment.

Mozambique also relies on the UK to a significant extent when it comes to exports. The UK is the 3rd top export destination for Mozambique accounting for about 11% share of its total exports. Aluminium, sugar, and edible vegetables are its top export products to the UK. Other SACU members have a small share of exports destined for the UK; however, Botswana and Namibia rely on the UK for their beef exports.

Table 1: Relative importance of the UK as a destination for SACUM exports (2020)

Country

Exports to UK in 2020 (USD millions)

% share of total exports

UK rank in export destinations (2020)

Main exported products (2020)

South Africa
4 231.0
4.9%
5th
Precious stones; machinery; edible fruits; wines; vehicles.
Botswana
2.5
0.1%
20th
Precious stones;
Lesotho
0.9*
0.1%
12th
Oil seeds and oleaginous fruits, Clothing
Namibia
38.0
0.7%
20th
Edible fruit and nuts; Wood and articles of wood; Meat and edible meat offal; Fisheries
Eswatini
10.8*
0.5%
18th
vegetables, edible fruit, nuts; Beverages, spirits, and vinegar; Clothing;
Mozambique
373.4
10.8%
3rd
Aluminium; Sugar; Edible vegetables and certain roots and tubers

* Data for Lesotho and Eswatini is for the year 2019 (latest available data)

Source: UN ITC TradeMap

Tariff Rate Quota Allocation by UK to South Africa

In October 2019, the SACUM-UK EPA was signed by all the parties. The terms of the SADC-EU EPA have been largely transposed into the new SACUM-UK EPA. Under this EPA, the UK has undertaken to provide immediate duty-free, quota-free access (DFQF) to goods exported from the SACU member states and Mozambique, except for South Africa. In exchange, the SACU member states, and Mozambique commit to gradual tariff liberalisation for goods imported from the UK. Some domestically sensitive products in SACUM are excluded from tariff liberalisation. The agreement also includes provisions on trade-related disciplines, dispute settlement, trade remedies, rules of origin, competition, and government procurement. It contains provisions on intellectual property and geographical indications too[i].

Table 2 highlights the latest EU-SADC EPA TRQ allocations for 2020 and the UK’s TRQ volumes. Given that in 2020, the UK was still trading under the EU-SADC EPA, it is not surprising that new changes will only be reflected as from 202. From the TRQ usage, it is crucial to note the significance of the wine allocation for the UK; this is an important market for South African wines. In 2020, South Africa failed to fully utilise its wine quota allocations due to disruptions caused by the COVID-19 pandemic. Another significant product is sugar; until 2016 South Africa did not export any sugar to the EU. About 50% of the TRQ is allocated to the UK. The SADC – EU EPA Sugar TRQ was fully utilised in 2020 by South Africa.

Table 2: EU – SADC EPA TRQs and UK’s allocation (2020)

Product

2020 SADC EPA TRQ Allocated (Kg)

Annual increase of UK TRQ volume (Kg)

2020 SA TRQ Volumes into UK (Kg)

% of SADC EPA TRQ Allocated

Cane sugar
150,000,000
--
71,365,000
48%
Frozen orange juice
1,120,000
6,500
356,500
32%
Wines**
114,236,000
656,580
70,826,320
62%
Canned fruit, except tropical canned fruit
57,156,000
--
18,181,000
32%
Ethanol
80,000,000
--
25,448,000
32%
Active yeasts
350,000
--
111,000
32%
Apple juice
3,946,000
37,000 until 2026 and thereafter 22,500
1,255,000
32%
Skimmed milk powder
500,000
--
159,000
32%
Butter
500,000
--
159,000
32%
Strawberries, frozen
407,500
2,500
129,500
32%
Glucose and glucose syrup, in the form of white crystalline powder
500,000
--
159,000
32%
Citrus Jams
100,000
--
32,000
32%
Tropical canned fruit
3,200,000
19,000
1,018,000
32%

** Wine Volumes are in Litres.

Source: Department of Agriculture, Land Reform & Rural Development; Department of Trade Industry and Competition

Despite the SACUM-UK EPA being almost a replica of the EU-SADC EPA, it is important to note that there are some changes which were required in respect to tariff rate quotas (TRQs). UK TRQs will increase by 16%, while average SA TRQs will increase by 38%, with growth of sugar and wine volumes 49% and 62% respectively. TRQ volumes into the EU under SADC–EU EPA are unchanged despite the exit of the UK from the EU[ii].


[i] Erasmus G. 2020. The UK-SACUM Economic Partnership Agreement, tralac Blog. October 5, 2020, Stellenbosch [online]: https://www.tralac.org/blog/article/14941-the-uk-sacum-economic-partnership-agreement.html

[ii] the DITC, 2019. Economic Partnership Agreement (EPA) between the Southern African Customs Union (SACU) and Mozambique (together SACUM) - United Kingdom (UK), Presentation to Portfolio Committee on Trade and Industry, Department of Trade, Industry and Competition, Pretoria. [online]: http://www.thedtic.gov.za/wp-content/uploads/SACUM-UK-EPA.pdf

About the Author(s)

Taku Fundira

Taku Fundira

Taku has more than 10 years’ experience particularly in international trade; economic development; research and policy advocacy, in East and Southern Africa. Key areas of interest include trade statistics; econometric modelling; trade and agricultural policy as well as market access issues. He is currently focusing on regional and global socio-economic policy and development issues aimed at addressing poverty and inequality in Southern Africa and how trade can work for the poor and marginalized. He holds a Masters’ Degree in Agricultural Economics from Stellenbosch University.

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