Posted: March 18, 2019
SACU, Mozambique and the UK Ministerial discussions to resolve outstanding issues on the roll-over EPA
|The Minister of Trade and Industry, Dr Rob Davies says discussions to resolve outstanding issues on the roll-over Economic Partnership Agreement (EPA) between the Southern African Customs Union (SACU), Mozambique and the United Kingdom (UK) were held on 15 March 2019. Minister Davies was briefing the media in Parliament on the outcomes of the ministerial meeting co-chaired by Botswana’s Minister of Investment, Trade and Industry Ms B.J. Kenewendo, who is also the coordinator for SADC EPA Group, and UK Minister of State for Trade Policy of the Department for International Trade, Mr G. Hollingberry.
“The meeting noted that the UK’s EU Withdrawal Act of 2018 provides for incorporation of EU legislation that was operative before the UK exits the EU and will form part of domestic law of the UK on the day the UK exits the EU. Therefore, sanitary and phytosanitary (SPS) legislation of the EU will be domesticated into UK legislation and continue to apply in the UK. Differences between the Parties were significantly narrowed in relation to timeframes for continued recognition of SPS import requirements and the meeting acknowledged that market access for agriculture products is critical to SACU and Mozambique” said Davies.
In relation to cumulation, Minister Davies said “in order to benefit from the preferential tariff rates offered by a trade agreement, a UK exporter must prove that the product it is selling is meeting the Rules of Origin in the agreement and as such that the product is actually from or has had sufficient work done in the UK. This also applies to SACU and Mozambique when exporting products into the UK. These rules of origin exist to ensure that the benefit of preferential access in terms of a free trade agreement goes to the countries party to the agreement, and not to non-Parties”.
The meeting provided an opportunity to better understand each other’s positions in relation to continued recognition of EU materials and processing. Cumulation is when material of a third country or processing done in third country is accepted as being from the parties to the agreement. The Parties agreed that the objective of the exercise, as per the agreed terms of reference, is to roll-over the EPA and not to renegotiate the terms of the EPA. The EPA does not provide for cumulation on the basis being advanced by the UK namely full cumulation with EU material, especially in cases where the EU material is subject to a higher duty when exported to SACU and Mozambique than when the material is exported from the UK. SACU and Mozambique are unable to give any better treatment to the UK than the EU. The SADC-EU EPA has a most favoured nation (MFN) clause which provides for any better treatment granted to an economy that contributes more than one point five percent (1.5%) of world trade to be extended to the EU. In this regard, the Parties have agreed to continue to engage with a view to find an amicable solution that takes into account the interests of both Parties and promotes mutually beneficial trade, including regional cumulation for SACU and Mozambique.
Furthermore, the meeting discussed the need to conclude a bridging mechanism in the form of a Memorandum of Understanding (MoU) while the parties finalise all the processes to bring into force the rollover EPA. There is agreement on the objectives of the MoU and that it should carry over the effects of the SADC-EU EPA for a limited period of six months to ensure that there is no disruption of trade if the UK exits the EU without a deal. There are divergences on the basis for the conclusion of the MoU and whether it should be concluded once all the outstanding issues (cumulation and SPS) in the roll-over EPA are agreed. The Parties have agreed to continue discussions in this regard.
In addition, the meeting discussed the potential for preference erosion for SACU and Mozambique’s products into the UK arising from the tariff schedule that will apply to general trade with the world, if the UK leaves the EU without a deal, issued by the UK Government on 13 March 2019.
SACU and Mozambique noted that the UK Parliament voted in favour of the extension of Article 50 on 14 March 2019. Should this be agreed by the EU, the UK will remain in the EU and will continue to be bound by the terms of the SADC-EU EPA for a period to be agreed with the EU. The UK Parliament is also likely to once more consider the Withdrawal Agreement on 19 March 2019, which if approved will imply that the UK remains part of the EU until December 2020 with the SADC-EU EPA continuing to apply to the UK. South Africa and other regional partners will continue to monitor these developments.