The UK and European Union are currently in the final stages of negotiation on the terms of their ‘divorce’. The talks have been characterized by a lot of talking, sulking, walk-aways, and renegotiations. It remains to be seen if the process will end in a deal or no deal as to the terms of trade. While the bickering goes on between the ‘parents’, it raises the issue of what will become of the ‘children’ after the break-up.
The European Union is one of the major trading partners on the African continent. Countries like South Africa are the largest beneficiaries of this trade. Trade arrangements with the UK were initiated within the auspices of the European Union. As the UK sets out on a solo mission, what will become of these deals?
According to forecasts by the London School of Economics, if the trade deal falls through, the UK would make losses greater than those brought about by COVID. Failure to negotiate an amicable trade deal would mean the UK reverting to the WTO rules, but what will this mean for Africa?
In the same vein, the UK through the DFID is one of the major development funds giving aid to Africa. If a no-deal will the UK still be in a position to continue to proffer aid?
What is the Brexit trade deal?
The United Kingdom made a decision to exit the European Union which came into effect on 31 January 2020. The long protracted decision which was initially broached in the 1970s was endorsed on the political front. While on paper it is, for all intents and purposes, a done deal, the terms of trade after Brexit are far from concluded.
There is still a need to outline how the European Union and the United Kingdom will relate in terms of trade after the exit.
The EU remains the UK’s largest trading partner and a significant contributor to inflows into the nation. This has created the need for continued talks on the Brexit trade deal to finalize how logistics for this trade and indeed the relationship between the two entities will move forward after the exit.
Indications from the talks have revealed the possibility of a no-deal on trade which would mean that WTO rules will apply by default.
The talks for the deal settlement that is still ongoing, have been intense, to say the least. The troubled talks have been a rollercoaster of sorts. Characterized by impasse due to disagreements on terms, followed by resumptions and renewed optimism. As this teetering continues, we await to see if it will end in a deal or no deal.
Implications of an impasse in the UK/EU trade deal
The UK contributed significantly towards the EU’s development arm, the European Development Fund. There is hope that the UK, separate from the EU, would be more effective in giving aid under the auspices of organizations like the DFID. As part of the European Union, some decisions were influenced by the community. For example, in 2016 the EU cut funding to the African Union Mission in Somalia (AMISOM) amid UK opposition. Which has sparked optimism of increased aid. However, a less than amicable exit would be costly to the UK potentially hampering its ability to proffer increased aid.
There are expectations in most quarters for increased UK/Africa trading after Brexit. The UK is currently the fourth major trading partner with Africa and expectations are high that this trade will continue to increase as the UK strives to establish itself as a dominant player outside of the EU. However, in the event of a bad breakup, there is a possibility of contraction in the UK economy that would negatively impact trade expectations.
UK / Africa trade
The UK has sizeable trade interests in Africa. South Africa particularly is the largest single trading partner with the UK on the continent. 2018 statistics indicate that trade between the UK and the Southern African country reached R142B (over US$8B). Nigeria trades close to US$6.5B worth of goods with the UK. While Kenya is the third-largest trade partner on the continent.
In recent years, the UK is increasingly adopting outwards looking policies. Of note is the interest that has been shown towards Africa. Specifically, the UK/Africa trade summit was seen as an indicator of the desire of the UK to establish win-win trade arrangements with African countries.
UK/ Africa trade after Brexit
The nature of dealings between the UK and Africa remains uncertain. It is still debatable whether Brexit will have an impact or not. The contentious negotiations further complicate the puzzle. On the one hand, there is the possibility of increased trade but on the other, if the deal falls through this might not be the case.
It is also important to note that there could be minimal to no effect at all.
As the UK seeks to establish itself as a formidable force outside of the EU, there may be a drive towards increased trade with Africa. However, there is a major possibility that this trade may be predicated on the extraction of materials and the traditionally established roles with Africa being the subordinate partner. Needless to say, this is not what Africa needs, there is general agreement in spite of political differences that Africa needs to deepen trade on the continent as well as boost its manufacturing capabilities.
Much ado about nothing
Grandstanding and politicking aside, the crux of the matter remains that most trade deals are unlikely to be affected. The UK has already begun negotiations in most countries in Africa for a continuance of trade deals brokered during the EU era. For example, recently Kenya retained a trade agreement with the UK for duty-free access for Kenyan exports to the UK which is in effect similar to the deals brokered under the EU.
Further to this, the UK plans to roll over existing trade agreements with Africa made under the auspices of the EU, this is neither prudent nor beneficial to the continent.
It is only after these deals run their course that Africa may potentially be able to negotiate other trade agreements. However, Africa approaches these negotiations as an unequal partner. This will likely place the continent at the receiving end of unfavourable deals that it most likely has no option to accept given the limited negotiating power.
Unfortunately, Africa continues to trail in negotiating power because of the aid commonly attached to trade deals. As a beggar, it is very hard to become a chooser. This is why Africa must focus on lasting solutions to challenges hindering trade and productivity on the continent.
Whether the trade talks will end in a deal or no deal verdict is anyone’s guess. The only certainty is that the UK will be on an agenda to assert dominance. Africa can take advantage of this by establishing itself as an equal negotiation power to take advantage of the trade opportunities.
Original article on The Exchange