- Goods exported from SACU member states will now be covered by the SADC-EU Economic partnership Agreement
- Under the EPA, UK has undertaken to provide duty-free, quota-free access to goods exported from the SACU member states, except for South Africa.
- Certain tariff rate quotas apply to South African exports.
Until 31 December 2020, goods exported from the Southern African Customs Union (SACU) member states and from Mozambique to the United Kingdom (UK) will were covered by the SADC-EU Economic Partnership Agreement (EPA), which was in force since October 2016.
Provisional application with Mozambique began in February 2018. This agreement was negotiated and concluded while the UK was a European Union (EU) member. It eliminated tariffs and quotas on all goods imported from Botswana, Eswatini, Lesotho, Mozambique and Namibia into the EU, as well as on more than 90 percent of goods imported by the EU from South Africa.
Certain tariff rate quotas apply to South African exports. It also provided for a gradual reduction of duties in the SACU Member States and Mozambique on goods originating in and imported from the EU.
The UK post-Brexit policy was that from the beginning of 2021, trade between itself and its other trading partners will be governed by new bilateral FTAs, also referred to as Economic Partnership Agreements (EPAs). The UK’s trade with the EU will take place in terms of the FTA presently being negotiated with the EU.) On 11 September 2020, the UK government, for example, announced it had reached a new trade agreement “in principle” with Japan. EU external trade agreements from the period when it was an EU member will be “rolled over” by the UK. In the absence of new FTAs, WTO rules and tariffs will apply.
Some of the agreements to be rolled over (such as the EU’s EPA with SACU and Mozambique) have been negotiated and signed but can only enter into force once the UK finally leaves the EU on 31 December 2020. They must be ratified by all the participating parties (in terms of domestic rules and constitutional requirements) and must formally enter into force in terms of their individual entry into force provisions.
The SACUM-UK EPA
The SACUM-UK EPA was signed by all the parties in October 2019. Under this EPA, the UK has undertaken to provide immediate duty-free, quota-free access 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.
In the SACUM-UK EPA, commitments on tariffs for both the UK and SACUM have been transitioned from the SADC-EU EPA without changes. This means that tariff preferences applied by the UK to goods from SACUM will remain the same as those applied by the EU under the SADC-EU EPA, and likewise those countries will continue to apply the same preferences to goods from the UK that they are currently applying to like 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. Five important matters required attention during the SACUM-UK negotiations:
Tariff-rate quotas; sourcing of inputs from the rest of the EU into UK production for export (cumulation provisions); treatment of bilateral safeguard measures; transitional arrangements; geographical indications; and the built-in agenda.
The parties negotiated a new provision, in the rules of origin dispensation, allowing the UK and SACUM to fully cumulate with EU inputs for production to export goods to each other, and still obtain the preferential tariff. This is aimed at ensuring continuity in highly integrated value chains across EU-SA-UK, notably for automotives.
This provision applies for three years, pending the outcome of a new trade arrangement between the UK and EU. This period can be extended.
Under the “built-in agenda”, the parties have agreed to consider areas requiring technical adjustments, including resolving and reaching solutions for errors inherited from the existing SADC-EU EPA, and to further strengthen their trade links. The built-in agenda specifies a range of issues that the UK and SACUM will consider as part of future negotiations, including a review of the cumulation provisions that currently apply among SACUM. This review will begin no later than 15 months from entry into force of the SACUM-UK EPA.
The built-in agenda will be kept under ongoing review and be revised as necessary by the Trade and Development Committee.
One logistical implication needs to be mentioned. With regard to goods exported to the UK under the SACM-UK EPA via the EU, they will have to be under “customs supervision” in order to be cleared de novo upon arrival in the UK. It should also be mentioned that this agreement does not cover trade in services. It means, in principle, that separate trade in services agreements may in future be concluded, including on a bilateral basis.
Formal entry into force of the SACUM-UK EPA can only happen once the transition period agreed in the Withdrawal Agreement between the UK and the EU (when EU rules still apply to EU-UK trade) has come to an end on 31 December 2020. Only then, when not any longer bound by the common external tariff of the EU, will the UK be able to implement its own trade agreements. It will then be free to negotiate and ratify new trade in goods agreements. Deals on trade in services will obviously also be possible.
The relevant website of the UK Government says the SACUM-UK EPA “is expected to take effect from 1 January 2021”. Since this is a new trade agreement and requires to be ratified by all parties, a number of steps must still be taken. Article 112 of the Agreement deals with its entry into force and stipulates that this Agreement shall be signed, ratified or approved in accordance with the applicable constitutional or internal rules and procedures of each Party. The parties have agreed that pending entry into force of this Agreement, they will provisionally apply the provisions of the Agreement, to the extent that internal requirements allow such provisional application.
In November 2019, the UK Secretary of State for International Trade presented a written Report on Continuing the United Kingdom’s Trade Relationship with the Southern African Customs Union Member States and Mozambique to the British Parliament.
With respect to Entry into Force, it says that the provisions in the existing EPA have been replaced in the SACUM-UK EPA with new provisions to ensure that, whatever the scenario in which the existing EPA ceases to apply to the UK, this new EPA can enter into force as swiftly as possible.
For the SACUM-UK EPA to enter into force, it must first be ratified by all the Parties. Notifications need to be exchanged regarding the completion of the necessary domestic procedures.
Under UK domestic law, before a treaty subject to ratification (as the SACUM-UK EPA is) may be ratified, it must be tabled in Parliament for scrutiny under the Constitutional Reform and Governance Act (CRAG) of 2010. In the SACU member states (with the exception of Botswana), the national parliaments must approve new treaties before the executive branch of government can deposit instruments of ratification.
The five member states of SACU and Mozambique have certainty about their future trade with both the EU and the UK, provided the SACUM-UK EPA enters into force as planned. The necessary steps are said to be attended to.
The facts around the SACUM-UK EPA serve as an important reminder of the benefits associated with rules-based trade arrangements. Proper trade governance requires that binding trade agreements are negotiated and adopted.
They provide, in addition, certainty in instances of unexpected external developments such as Brexit. From the beginning of 2021, trade between the UK and the EU should take place under the new trade agreement presently being negotiated between them. If they fail to reach agreement, their mutual trade in goods will take place under WTO rules and MFN rates of duty.
Trade in services will also be affected. Should this happen, the SACUM states will continue to trade with both the EU and the UK under their respective EPAs and the applicable preferences