tralac Annual Conference 2017: International Trade Governance – quo vadis?

tralac Annual Conference 2017: International Trade Governance – quo vadis?

05 Apr 2017

tralac is hosting its Annual Conference this week, 6-7 April 2017, in Cape Town. The conference will examine international trade governance matters; reflecting in particular on recent developments such as Brexit, the Trump Presidency and their implications for Africa, as well as developments on Africa’s own trade and integration agenda.

Download the final programme

Two Conference Briefs provide the basis for this week’s Discussion; they focus on Brexit implications now that Article 50 has been triggered, and the factors that may well shape America’s policy for Africa.

Brexit implications now that Article 50 has been triggered

The UK’s divorce from the EU was formally triggered on 29 March 2017. The British Prime Minister’s notification letter states that Britain will leave the Single Market but wishes for a “deep and special partnership”; covering economic as well as security cooperation. If there is no agreement, future UK-EU trade will be conducted on WTO terms. Abrupt changes (a cliffedge) should be avoided. Implementation periods are necessary to adjust to new arrangements. The UK has also prepared its own Great Repeal Bill, which will convert the EU acquis into UK law to ensure continuity.

The EU President replied two days later. The EU Council meets on 29 April to approve final negotiating guidelines. In the light of the draft guidelines of the EU President the Union will negotiate two agreements with the UK; its withdrawal under Article 50 and a second agreement about future trade relations. In the meantime, there will be important political developments to watch; such as the elections in France and Germany.

Assume there is a UK-EU FTA, what rules will govern the UK’s other International Trade? WTO rules will apply since the UK reverts back to full WTO membership after Brexit. There is a problem though; since 1973 (when the UK joined the EU) its trade in goods was regulated by the EU common external tariff and EU tariff quotas. After 1973 the UK remained a WTO member but sans new Tariff and GATS Schedules. The old schedules predate the WTO. How will new UK schedules come about? What will the UK’s MFN obligations be? How will EU tariff rate quotas be decided? New negotiations with the WTO are also urgent.

What are the implications for SACU and for Africa? The EU of 27 will still be bound by the rights and obligations under its international agreements. The UK will no longer be covered by agreements concluded by the EU. The EU expects the UK will honour its international commitments accepted while an EU member. These agreements include the EPAs and several FTAs. Clarity about the UK’s relationships with African states is vital; the UK is a major investor, source of remittances, development aid donor, and trade (goods as well as services) partner. South Africa, Nigeria and Kenya stand to be most directly affected. How to fit these issues into the Article 50 process and when? What does the promise to avoid a cliff edge mean? The UK has suggested its own FTAs with Africa. What will they cover and how generous will the UK be? Services, finances, and investment are important for London. Will the UK also have its own GSP as restored WTO member? What could the Commonwealth contribute? African Policy Makers should clarify all relevant issues and act swiftly. The best scenario would be for at least the EPAs to be included under Article 50 talks on transitional arrangements. Commercial realities matter – where do SACU grapes and South African wine destined for the UK for example land? How do they then arrive on Tesco’s shelves? We should hope for a “deep and special UK-EU partnership”.

Download the full brief (PDF).

- - -

What considerations may guide a new American policy for Africa?

President Trump has not yet shown his African policy hand, nor has he nominated assistant secretaries of state for Africa and other regions of the world. There has only been the February 13 telephone calls to Nigeria’s President Muhammadu Buhari and South Africa’s Jacob Zuma. It is generally believed that terrorism and trade, US priorities, were discussed.

US-African trade and AGOA (which has been extended till 2015) are important. Some commentators view AGOA as more of an international development instrument than a trade deal; at least vis-à-vis certain African nations. There might be initiatives from Washington to formalize matters and develop ties which allow for the pursuit of specific bilateral interests.

AGOA is not a trade agreement. The non-reciprocal trade preferences enjoyed by Sub-Saharan Africa under this arrangement have their legal basis in American legislation. President Trump could alter AGOA via an executive order but this seems unlikely. The stakes are not high enough; and executive orders are not without political and legal consequences. The American constitutional system is firmly based on the separation of powers. Executive orders are subject to judicial review and may be overturned if they have been issued without a clear basis in a statute or the Constitution. It happened recently.

African nations can benefit from formal trade agreements with the US, if negotiated to reflect the necessary asymmetry. Such agreements are long term deals, are not susceptible to periodic legislative overviews and the threat of executive change. They are difficult to conclude but are more certain and predictable. Unlike AGOA, national policy objectives do not form part of their operational control. Certain African nations have in the past been kicked off the list of AGOA beneficiaries because of their domestic policies. The main difficulty is lack of detail regarding new American policies for Africa.

Download the full brief (PDF).