Quotas pose complex challenge in post-Brexit trade deals

As the UK negotiates its exit from the EU, the future of existing trade agreements hangs in the balance. With the United Kingdom unable to negotiate any new trade agreements until it has officially left the European Union, current efforts were focused on the roll-over of existing agreements, said Catherine Grant Makokera, trade specialist and director at Tutwa Consulting Group. “The UK is concentrating on putting legislation in place to roll over its existing agreements as they stand so that it will continue to apply to trade until it is possible to individually negotiate new agreements.” Makokera said this was also the case for the SADCEU Economic Partnership Agreement (EPA). “It sounds easy to do, but it is not,” she told FTW. “You can roll over a large part of the technical provisions but there are some challenges around three outstanding big issues that will require a level of negotiation.” The first, she said, was the tariff rate quotas in the treaty. “These tariffs for certain products have been determined on the basis of the EU-wide market. For example, there is a tariff rate quota for bulk wine and for bottled wine that goes to the EU duty free under the EPA, but what will be the tariff rate quota between SADC countries and the UK market only? This is where trade statistics will become very important.” She said there was no certainty around how the tariff rate quota would be determined post Brexit. “Will it be based on the amount of wine that goes into the UK? About 70% of the wine goes to the UK, so will the tariff be based on 70% of what the EU gave us or will the UK not give us that big a quota? Working out the quotas is an important element of the negotiations.” She said several South African exports were quotabased including wine, fruit, vegetables, processed fruits, juices, pulps and sugar. Rules of origin were another concern, said Makokera. “If standards are the new big trade issue for traders, then rules of origin are the big issue for trade negotiators. It is the most difficult thing to get agreement on these days and is also the last thing that is put on the table before countries sign off. Rules of origin are at the heart of the re-negotiations of NAFTA and are at the heart of the slow process in negotiating the tripartite, continental free trade area.” She said EPA had quite complex rules of origin even though there were concessions made to South Africa in the clothing and textile industry. “It was made easier for South Africans to export clothing, requiring only one step in the processing chain to label it as ‘Made in South Africa’.” Makokera said EPA also included a very complex set of rules on accumulation that enabled companies to take various components from different countries, process them and then call the newly created product ‘Made in South Africa’. The third challenge, said Makokera, would be in relation to geographical indications and standards. “At this stage, it remains uncertain whether the British will insist on continuing with protection for geographical names. It was a big issue in the original negotiations of the EPA.” She said unless real negotiations started between the UK and South Africa around these issues Brexit would become a challenging experience all round. “We run the risk of ending up with quotas that make no sense to industry or rules of origin that don’t apply to big industries.”