On the 25th March 2019 the Minister of Investment, Trade and Industry made a statement to the National Assembly on the progress of the SACU + Mozambique and the United Kingdom negotiations for an Economic Partnership Agreement. The crux of the statement was as follows:
1. As from 10th October 2016 Botswana, together with her SACU colleagues and Mozambique, have been trading with the UK under the European Union-SADC Economic Partnership Agreement (EU-SADC EPA). However, following the UK’s decision to exit the EU commonly referred to as Brexit, it came to light that without an alternative trade arrangement with UK, trade will be disrupted as the current concessional trade terms under the EU-SADC EPA will no longer be applicable and there will be no legal basis for trade between UK-SACU and Mozambique. Consequently, SACU and Mozambique and the UK decided to negotiate a roll-over of the EU SADC EPA to avoid disruption to trade, in anticipation of Brexit on 29th March 2019.
2. The roll-over of the EU SADC EPA was agreed back in July of 2017 and negotiations have hitherto been ongoing with the singular purpose of avoiding a cliff edge on the terms of trade by making the necessary technical amendments to the Agreement with UK operable. This agreement was to commence on the 1st of April after the UK exits the EU especially in the event of a hard BREXIT where there is no Withdrawal agreement between the UK and the EU.
3. In August 2018 the co-chairs Minister George Hollingberry of the United Kingdom and Hon Minister Bogolo J. Kenewendo of Botswana in the presence of Prime Minister Teresa May and President Cyril Ramaphosa, signed an MOU showing commitment to the negotiations and the continuity of trade. This Agreement would afford all Botswana exports, except for arms and ammunition, duty-free and quota-free access into UK in return for zero or reduced tariff duties for agreed imports.
4. To date, I can safely state that approximately 95% of the text has been agreed and stabilized. However, the Agreement could not be concluded after several Joint Senior Trade Officials Meeting due to fundamental policy differences on cumulation of EU materials and processing and on the transition for Sanitary and Phyto-sanitary Measures (SPS), which were subsequently elevated to Ministers for guidance. Consequently, relevant SACU, Mozambique and UK Ministers engaged on a telephone – conference call on 15th March 2019 with a view to unlocking the impasse on the UK-SACU and Mozambique Economic Partnership Agreement (UK-SACUM EPA) negotiations. Unfortunately, the Ministerial engagement could not make headway as the two Parties had no meeting of minds on the issues of cumulation and sanitary and phyto-sanitary standards provisions. Continuous dialogue on these will ensue with a view to finding common ground.
5. With regard to cumulation, in order to benefit from the preferential tariff rates offered by the trade agreement, a UK exporter must prove that the product meets the Rules of Origin in the agreement and as such the product is actually from or has had sufficient work done in the UK. This applies in the same manner to SACU and Mozambique products going the other way. These rules of origin exist to ensure that the benefit of preferential access in terms of a free trade agreement goes to the intended country party to the agreement, and not to non-Parties.
6. SACU+M re-emphasized that as per the agreed terms of reference, the parties are to roll-over the EPA and not to renegotiate the terms of the EPA and in that regard the EPA does not provide for 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 as this will open up the block to new issues with rage EU.
7. SPS on the other hand refers to standards contained in rules and protocols for plant and animal products aimed at preserving health and bio-security. One of the main arguments for BREXIT is the need to strengthen the UK’s sovereignty and be able to make its own rules. That said there is a transitional period where EU legislation that was operative before UK exits the EU will form part of their domestic law; sanitary and phyto-sanitary (SPS) legislation is one of our main interests given that they have a direct impact on our agricultural exports. SACU+M and UK’s differences have been narrowed down to timeframes for continued recognition of SPS import requirements to ensure there is time provision for compliance adjustments and that compliance to new UK rules won’t be costlier than of the EU.
8. It is of paramount importance to Botswana as exporter of agricultural products to have certainty of what the applicable rules are post Brexit.
9. In lieu of the above stated divergences, 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.
10. Preliminary findings have revealed that the UK remains one of the most strategic trading partners for Botswana, ranking as number 13 in the World as a destination for Botswana’s total exports between 2013 and 2017. During the same period, UK ranked the 10th most important source of Botswana’s imports.
11. Botswana’s major exports to UK are diamonds (at P519 million, transmitting to 52.7% total share in 2017 and 2018 exports) and beef (at P151 million or 40.4% total share in the same period). In the same period Botswana exported 157 product lines to the UK.
12. On the other hand, imports to Botswana are fairly diversified, with over 1939 tariff lines being imported from UK. Opportunity for further diversification remains with total 7910 lines that UK can export to Botswana.t
13. On the request by UK for unrestricted cumulation, 1126 (or 14% of total lines in the SACU Tariff book) would ideally attract duty when imported into Botswana. Products using these inputs would ideally be subject to tariff duties from UK. Acceding to the request by UK will reduce SACU tariff revenue collected from EU as these products will benefit from unwarranted concessions via the UK.
14. On the whole though, if an Agreement is not reached with UK upon Brexit, exports from Botswana to the UK will be subjected to tariffs and trade under terms extended to other World Trade Organization Members, opening Botswana to stiffer competition from more competitive members. WTO terms will affect only 5 of 157 products being exported to the UK, including one line of beef which contributed 13.25% of Botswana’s exports to UK in 2017 and 2018 respectively.
15. On 21st March 2019 the European Council convened a Special meeting where the Brexit issue was the paramount item on the agenda. Of particular importance and relevance to us is that the Council decided inter alia the following, and I quote verbatim:
“The European Council agrees to an extension until 22nd May 2019, provided the Withdrawal Agreement is approved by the House of Commons next week. If the Withdrawal Agreement is not approved by the House of Commons next week, the European Council agrees to an extension until 12th April 2019 and expects the United Kingdom to indicate a way forward before this date for consideration by the European Council.”
16. This means, therefore, that barring a vote in favour of the Withdrawal Agreement in the House of Commons, SACU and Mozambique have a short extension to conclude negotiations from March 29th to 11th April 2019 if there is to be no disruption of trade nor erosion of preferential market access to the UK market. As such, we shall continue to exert our best efforts to see to it that the negotiations are brought to a conclusion within the set timelines.
17. Botswana, as a member state and as the coordinator and co-chair on the side of SACU+M, remains committed to these negotiations and to reaching an agreement that takes into account the interests of both Parties and that ensures no trade disruption between the parties and promotes mutually beneficial trade, including encouraging regional integration of SACU and Mozambique.