Post-Brexit trade: A missed opportunity for development?

BERLIN — During a visit to South Africa in August, British Prime Minister Theresa May announced that her government had secured its first post-Brexit trade deal: an agreement between the United Kingdom and six southern African countries, which she said would “build a closer trade and investment partnership in the future that brings even greater benefits for both sides.”

But the deal is actually a replication of an existing European Union arrangement with those six countries, known as an Economic Partnership Agreement, or EPA.

As the U.K. works to secure new and better trade deals in the run-up to its departure from the European Union, many headlines have focused on the potential of African markets to buoy a post-Brexit economy, raising hopes of a boost for Africa, too.

But four months before the departure date, many campaigners say that yet another opportunity to build more sustainable trade relationships between the U.K. and African countries has been missed as overwhelmed officials focus on maintaining the status quo.

EPAs, which first emerged in the early 2000s, were meant to be about more than free trade — they were also tools for the EU to encourage sustainable development in countries in Africa, the Caribbean, and the Pacific. Critics were disappointed with the actual development opportunities integrated into EPAs, though.

In particular, there were concerns that opening markets, even gradually, to European goods could sink nascent African industries. The hope was that post-Brexit trade negotiations would be an opportunity to revisit some of those discussions.

But representatives from African countries, particularly those that depend on the U.K. market, say they have little leverage to encourage the U.K. to think beyond EPAs. Their priority has become ensuring they can maintain existing trade relations in Brexit’s aftermath.

“If the U.K. is to roll over those existing arrangements, it’s not going to make that situation any worse,” said Peg Murray-Evans, an expert on European and African trade relations at the University of York. “But it’s not going to make them any better.”

Opportunity for change

EPAs emerged from the Cotonou Agreement — a framework for development cooperation between the EU and 78 African, Caribbean and Pacific, or ACP, nations — as regional trade agreements intended to encompass sustainable development and poverty reduction.

One of the hallmarks is that EPAs opened up EU markets immediately to ACP exports while giving ACP countries a transition period to gradually open their markets to EU imports, in an attempt to guarantee that local industries wouldn’t be overwhelmed. There are currently seven regional EPAs, five of which focus on Africa.

The agreements have drawn criticism, not just over concerns about stunting nascent industries, but also over the loss of local revenue as import taxes are eliminated; and about the exclusion of small- and medium-sized enterprises from accessing markets.

“Many of them are still in the early stages of implementation, so in some respects, it’s a chicken and egg [in that] we’re highlighting some of the potential problems with the agreement,” said Helen Dennis, policy and advocacy manager at Fairtrade, a foundation that attempts to address trade injustices.

“Some of the challenges are to do with the relationship we want to have with Africa going forward,” she said, including the sense that EPAs have been imposed on the continent in place of its own priorities, such as strengthening regional trade.

Those countries most acutely concerned about the impact of EPAs have leveraged their membership of regional free trade agreements in an attempt to fend them off.

An EPA with West Africa, for instance, is contingent on its acceptance by the Economic Community of West African States, a regional trade bloc. But Nigeria, the linchpin of the regional economy, has refused to sign it, over concerns it would stifle the country’s industrialization. Tanzania has played a similar role in the East African Community. Their objections have delayed official implementation of EPAs, even as more amicable nations have moved forward with interim deals.

Critics of the original EPAs were looking to the U.K. to reconsider the agreements as it pursued post-Brexit trade deals. Instead, the government has focused on replicating the model. As well as the arrangement with the Southern African Development Community, it was also announced last month that the U.K. is working to copy an EPA with Eastern and Southern African countries.

Fairtrade’s Dennis warned the EPAs that will prove most difficult to replicate are those — with ECOWAS and EAC countries — that have also caused problems for the EU. The pressure to get these deals in place ahead of the U.K.’s March 2019 split from the EU could open up an opportunity to push for more development-focused policies integrated into the arrangements. As an added pressure, the EU is looking to revisit the EPAs, which might mean the U.K. replicates deals that are soon outdated.

But another possibility is that, refusing to agree to a replicated EPA, hold-out countries could enter a post-Brexit era with no trade deal in place at all, which observers worry is the more likely scenario.

“Some African countries are growing quite quickly, but in comparison to the EU, Africa is a tiny market,” Murray-Evans said. As a result, rolling over existing deals appears the most pragmatic strategy for May’s government.

The bottom line

Many African governments are also taking a pragmatic approach. For countries who have existing deals with the U.K., “the immediate concern is preventing disruption,” said Isabelle Ramdoo, a senior associate and development economist at the International Institute for Sustainable Development. She served on Mauritius’ team in negotiating the Eastern and Southern Africa EPA that provisionally came into force in 2012.

“Ultimately, the bottom line is access to the market,” she said.

If the recently-announced Brexit deal passes, that will offer some breathing room on reaching new agreements, with the U.K. able to trade under EU arrangements until 2020. But observers said the U.K. government will have any number of competing priorities to address in that window, and it remains in the interest of African governments to lock in arrangements as soon as possible. If the deal doesn’t pass, the stopwatch expires on March 29, 2019.

Some experts said that too much emphasis was being placed on the development potential of EPAs, in any case. “The expectations have been too high,” said Clara Brandi, an economist and political scientist with the German Development Institute. “[EPAs] can generate opportunities for growth and new training opportunities, but [they’re] not always generating development.”

For Dennis, “the EPAs are one piece of the jigsaw,” pointing out that much of their work around development, such as improving business regulations, sits outside the trade agreements. “But EPAs are still an important piece of that jigsaw,” she said, and the opportunity to build a greater role for them in development is quickly being bypassed.

Over the coming weeks, as the U.K. prepares to leave the EU, Devex will be exploring the impact of Brexit on aid. Read about what’s at stake for aid in the Brexit deal; whether the U.K. can really continue contributing to EU aid projects, as it hopes it can; and why U.K.-based NGOs are heading for Europe. Have a topic you’d like to see covered? Tell us in the comments below.