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ESA-UK Economic Partnership Agreement (EPA): Continuing the UK’s trade relationship with the Eastern and Southern African region

ESA-UK Economic Partnership Agreement (EPA): Continuing the UK’s trade relationship with the Eastern and Southern African region

07 Feb 2019

The United Kingdom has committed to continue its current trade arrangements with the Eastern and Southern Africa (ESA) States if it leaves the European Union without a deal on 29 March 2019, or at the end of an implementation period.

The ESA-UK Economic Partnership Agreement (EPA) will provide immediate duty-free quota-free access to goods from ESA States into the UK in exchange for more gradual tariff liberalisation from the ESA States.

EPAs are development-focused trade agreements that aim to promote increased trade and investment. They contribute to sustainable growth and poverty reduction in developing countries. The new ESA-UK EPA envisages development support from the UK to ensure that it is effectively implemented, and that the opportunities it offers can be fully realised by the ESA states.

Background

The United Kingdom of Great Britain and Northern Ireland (the UK) participates in a number of international agreements as a result of, or relevant to, its membership of the European Union (EU) and which help underpin the UK’s relationships with third countries and international organisations. The Government is seeking, as far as possible, to continue the effect of its current arrangements as the UK leaves the EU.

In order to transition the trade agreements that the EU has concluded with third countries, the UK has agreed with many third countries that the most appropriate and proportionate form of legal instrument to ensure continuity in the current circumstances is a short form agreement which incorporates by reference the relevant provisions of the underlying EU third country agreement with relatively few necessary modifications; the advantages of this form are set out in the Parliamentary Report.

However, the UK has simply chosen the form that the relevant States agree is the most pragmatic and sensible in the circumstances, taking into account the wishes of partner countries. Accordingly, some agreements have been drafted in long form to reflect these wishes. The UK-ESA EPA is a long form agreement.

The UK’s current trading relationship with the Eastern and Southern Africa States (Madagascar, Mauritius, Seychelles and Zimbabwe) is governed by the Interim Agreement establishing a framework for an Economic Partnership Agreement between the Eastern and Southern Africa States, on the one part, and the European Community and its Member States, on the other part (the ESA-EU EPA). The Agreement establishing an Economic Partnership between the Eastern and Southern Africa States, on the one part, and the United Kingdom of Great Britain and Northern Ireland, on the other part, is based on the ESA-EU EPA.

The Agreement creates an Economic Partnership Agreement between the UK and the ESA countries. It provides duty free and quota free access into the UK for goods originating from ESA countries. It also provides for a gradual reduction of duties in ESA countries for goods originating in the UK. It is intended to provide continuity of the UK’s and the ESA counties’ rights and obligations under the ESA-EU EPA.

The Agreement is intended to take effect when the ESA-EU EPA ceases to apply to and in the UK. It is expected that this date will be at the end of the Implementation Period if the Withdrawal Agreement is ratified or on Exit Day if no agreement between the UK and the EU Withdrawal Agreement is ratified or on Exit Day if no agreement between the UK and the EU is concluded. The purpose of the Agreement is to maintain the effects of the ESA-EU EPA.

Explanation of the Agreement

The existing EPA provides for provisional application, and indeed it is still currently provisionally applied by the EU. Given that the UK is seeking to maintain effects of the existing agreement with Madagascar, Mauritius, Seychelles and Zimbabwe as it leaves the EU, they have retained this provision in the ESA EPA. This provides the UK with the option of a proportionate approach to manage the demands on parliamentary time during this unique period, whilst minimising disruption to businesses and consumers as we leave the EU. Provisional application would allow businesses that use this agreement in the UK and ESA countries to continue to access this agreement.

Goods

Goods chapters in trade agreements set out the treatment and the level of access to the domestic market granted goods from partner countries. This includes setting tariff levels on various products, establishing bilateral safeguards and determining the Rules of Origin.

In the ESA EPA commitments on tariffs for both the UK and ESA countries have been transitioned without changes. This means that tariff preferences applied by the UK to goods from Madagascar, Mauritius, Seychelles and Zimbabwe will remain the same as those applied by the EU under the existing agreement, and likewise those countries will continue to apply the same preferences to goods from the UK that they are currently applying to goods from the EU.

In cases where import duties remain subject to staged tariff reductions, reductions will continue at the same pace as scheduled in the existing EPA.

Rules of origin

In free trade agreements, Rules of Origin are used to determine the economic nationality of a good. To qualify for preferential tariff rates, a good must “originate” in the territory of one of the parties to the agreement. Trade agreements may also allow materials originating and/or

As a member of the EU, all UK content is currently considered as “originating” in the EU and UK exports are designated as being of “EU origin”. This means that materials from, and processing in, the UK and the rest of the EU can be used interchangeably in bilateral trade with existing EU trade agreement partners. This will no longer be the case when existing EU trade agreements stop applying to the UK.

At this point, the designation of UK exports will shift from “EU” originating, to “UK” originating and EU content will (unless specific provision is made in new agreements) no longer count towards meeting the origin requirements for preferential treatment for either party. This would have implications for goods traded between the UK, EU and ESA.

To address these implications and to provide maximum continuity for business, it has been agreed in the ESA-UK Agreement that EU content and processing can be recognised (i.e. cumulated) in UK and ESA exports to one another. The cumulation arrangements are set out in detail in the Title II (Definition of the concept of ‘originating products’) of the Rules of Origin Protocol and subject to satisfying the conditions specified in the agreement.

If cumulation of EU content for the UK and the ESA countries were not permitted under the ESA-UK Agreement, some UK and ESA based exporters might find themselves unable to access preferences as they are currently able to under the ESA-EU Agreement. UK exporters to ESA who rely on EU content might have to revert to paying Most Favoured Nation (MFN) tariff rates, if they continued using EU content, or they might have to review and reassess their existing supply and value chains as a result of this change. The impact would, of course, vary across sectors.

The ESA-UK Agreement provides only for trade between the UK and ESA and does not provide for either party’s direct trade with the EU, including, for example, where UK and ESA based exporters use content from each other in exports to the EU.

The ESA EPA replicates the clause in the existing EPA which lists areas for future negotiations to expand the agreement. These include trade in services, technical barriers to trade, sanitary and phytosanitary measures, procurement, agriculture and intellectual property rights.

The timetable for these negotiations will be jointly agreed within six months of entry into force of the ESA EPA; this 6-month timetable is a new provision in the ESA EPA which does not have direct precedent in the existing EPA.

Source GOV.UK
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Date 07 Feb 2019
  10 minute read
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