Brexit & UK trade, SSAfrica

Brexit, EU, trade: What’s in it for Africa?

Young African Businesswoman Analyzing GraphWould a United Kingdom that has left the EU be able to deepen trade ties with the Commonwealth, as many ‘Brexit’ proponents argue? Uzo Madu walks us through the arguments from a a specifically African perspective. A first version of this piece  appeared on her website What’s In It for Africa.

 

 

 

The United Kingdom’s Prime Minister, David Cameron is determined to change his country’s relationship with the EU in favour of greater control on the benefits available to EU migrants in Britain, an increased role in discussing Eurozone rules and no more political integration for Britain into this ‘ever closer union’. And this is exactly what he negotiated back in February in order to sway those supporting the Brexit campaign to vote to stay in. On 23 June, British and Commonwealth Citizens resident in the UK will decide whether Britain should leave or stay in the EU.

 

British accession to the EU: how it changed trade relationships with African countries

 

The accession of Britain to what was then the European Community in 1973 has been described by Paul Williams, as a painful process”, not least because it began with several false starts. After the Marshall plan in 1947 when countries set about to cooperate closer and the French favoured a customs union, the English wanted a free trade area and instead joined the ECSC. The next years, up until 1973, was characterised by vetoed applications for the British to join the EU.

 

The special relationship with the US, the Commonwealth, and the belief that purely economic integration (FTA) would be superior to deeper, politico-economic alternatives are often among the reasons for the delay in British membership. But then came 1973 and economic decline, reduced circumstances and withdrawal from the empire (beginning with India in 1947 and worked its way to Africa, Sudan and Ghana, in the 1950s). This change of circumstances made the move towards the European experiment both attractive and somewhat inevitable.

 

For Africa, British membership paved the way for the extension of the Europe-Africa cooperation to the Commonwealth countries. A key issue was what kind of relationship Commonwealth Africa should now have with Europe. The relevance of the British membership was felt by the African Commonwealth over and above other African countries. The British Accession agreement included provisions for those in Africa, the Caribbean, and the Pacific (ACP) group who enjoyed Commonwealth Preference and the Commonwealth Sugar Agreement. The latter was the precursor for the creation of the ACP as an institution to promote and strengthen solidarity between them and to maximise the strength of their negotiating position. This was all done under the Lomé convention.

 

The Lomé Convention: A high watermark for European-African relations

 

This first Lomé convention granted non-reciprocal trade preferences to ACP countries, for the export of agricultural and mineral materials duty-free to Europe and a compensatory mechanism to offset losses in export earnings due to price fluctuations. Furthermore, development funds afforded to the ACP region under the first Lomé convention amounted to 3 billion ECU over a five-year period (at that time the second largest European expenditure item after the CAP). This agreement was the high water mark’ for ACP relations with the EU, allowing for ‘a true sense of partnership’ and autonomy for ACP countries over their economic policies’. Despite the fact that later the EU demanded new conditions to the relationship, including on issues such as human rights, good governance and the rule of law, Lomé represented a good deal for ACP states.

 

The relationship has now come under pressure due to scrapping of the trade protocols. These put an end to preferential access to the EU market for bananas from ACP countries into the EU, reduced the scope of trade preferences because the EU has entered into free trade agreements with other countries and regions (e.g. Korea, Vietnam and the current TTIP discussions). There has also been regional disintegration resulting from the recent creation of regional Economic Partnership Agreement (EPA) between the EU and ACP countries (more here). As a result, the particularism that underpinned EU ACP relations for so long has largely vanished.

 

The African interest debate on Brexit

 

An ongoing ‘Brexit for Africa’ debate rests largely on three issues, the trade distortions brought about by the EU’s Common Agricultural Policy (CAP), the ability of Britain to enter international trade agreements when outside the EU, and a stop to migration preferences in favour of EU migrants over Commonwealth African migrants.

 

The Common Agricultural Policy (CAP)

 

The EU’s Common Agricultural Policy (CAP) affords subsidies to EU farmers causing a competitive disadvantage for African farmers in the European market since 70% of Africans are involved in agriculture, this is a particularly crucial part of the African economy. Regions with the highest dependence on agricultural exports include the West African Monetary Union where they account for an average of over two-thirds of total exports to the EU. The Eastern and South African region are also significant as it has the highest dependence on agricultural exports that are also covered by the CAP (notably sugar, fruit, vegetable and beef exports).

 

However, the UK has been one of the vocal voices within the EU criticising the subsidies. So the lack of UK influence in the EU might not be a positive thing for the evolution of the CAP in the future and since a UK exit does not mean the end of the CAP, the situation is likely to persist. Also, the UK is likely to have to compete with the EU following its exit and due to this competitive pressure, the UK may have to keep these farming subsidies in place, so as to be at a competitive advantage. So will a British exit mean better CAP conditions for African countries? Probably not.

 

Ability to enter into trade agreements

 

The second argument in favour of Brexit is that Britain outside the EU would have the authority to enter international trade agreements since trade issues are the sole authority of the EU, not the Member States. This argument speaks to the reduction of trade preferences afforded to African countries of late due to the EU entering into free trade agreements with other countries and regions.

 

However, it is important to consider that the great bulk of Britain’s turn away from the wider world, in terms of trade relations, came before Britain joined the EU and not after. And even after joining, other EU countries have done a better job than the UK in engaging with Commonwealth countries. To take a non-African example, between 2004 and 2013, Britain went from India’s fourth largest trading partner to outside its top 10. Germany’s performance was far better, even though it too was trading from within the EU’s borders. So will a British exit, in reality, mean better trade relations with African commonwealth countries? Probably, but Africa might have to wait in line, after the US, China, Japan, Brazil and India, to name a few.

 

Immigration

 

And, last but certainly not least, the immigration issue is the centre stage of the national debate on Brexit. The argument in the African context is that EU migrants have preferences to enter Britain over and above those from the African Commonwealth. Whilst the free movement of people is afforded to citizens of the EU (albeit with some restrictions in Britain since it is not part of the Schengen area and so an EU passport is still required) and does not extend to those in the African Commonwealth, it cannot be argued with any certainty that a British exit from the EU, one that is largely being fought on the issue of immigration, will result in fairer policies towards African Commonwealth Countries.

 

Perhaps the British response to the migratory flows recently give us a clear reflection of how the situation could play out for non-EU migrants. Furthermore, the recent UK Home Office Policy gives us an idea of the current approach to non-EU migrants. The new earnings threshold set for non-EU skilled workers who wish to settle indefinitely in the UK has now been raised to 35,000 GBP…So will a British exit mean fairer policies towards African commonwealth migrants? Probably not.

 

Overall, there doesn’t seem to be much in Brexit for Africa…

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