A deeper UK engagement with African trade is sensible and beneficial, however, negotiators will need to wake up to complexities of hashing out any deals on the continent.
When The Times reported that some Whitehall officials had been using the term ‘Empire 2.0’ to describe post-Brexit UK’s campaign to cosy up to its former colonies, there was a significant backlash among some members of the 52-state Commonwealth. Yet despite the unofficial branding, the official line is one of reciprocal trade deals and closer foreign policy – both of which will be welcome to the UK and its allies.
The UK has already begun the diplomatic maneuvering to get the work done, with Foreign Secretary Boris Johnson ouring countries such as Uganda, Ghana, Kenya and The Gambia (which recently announced intentions to rejoin the Commonwealth) last month. Chancellor of the Exchequer Philip Hammond also stopped by South Africa in December, and Liam Fox, Trade Secretary, hosted ministers from the Commonwealth on 9th – 10th March in London.
Far from the EU’s cold shoulder, in some cases Africa has spoken back. Ghana was the first African country to throw its hat in the ring under its previous administration (Ghana changed leadership in December) readying its delegation as early as June. Regional giant South Africa also expressed interest, with Minister of Trade and Industry Rob Davies visiting Fox in London in late January.
That said, however well-intentioned, lofty statements of a Commonwealth revitalised need to start factoring in pretty serious challenges to the master plan.
Dealing with an African FTA
One highly optimistic scenario the UK government is gunning for in the long term is a situation where it is in talks with an Africa-wide free trade area (FTA). The idea stems from 2011, when Commonwealth states agreed in principle to create an African FTA.
The EU’s experience of dealing with African trade deals through Economic Partnership Agreements (EPAs) thus far offers lessons. Up until now, the EU has engaged the continent in country groups (a) partly by necessity given that many African countries are bound by the rules of their own trade blocs, which require them to act as a group, and (b) because diplomatically speaking, the continent is a patchwork of divergent interests that could not be unanimously appeased.
This last point is important because it encapsulates one of the very reasons for the UK leaving the EU in the first place. As such, this FTA is unlikely to materialise anytime soon, and if it does, engaging it will be no less tedious than the EU back-and-forth Brexiteers hoped to avoid.
Basing trade deals on EU EPAs
In an effort to avoid building from the ground up, the UK has proposed that its future dealings with Africa could resemble the EPAs that the EU is currently negotiating across the continent. This is pragmatic. It avoids a whole lot of additional dialogue and paperwork, and several African countries have already signed up to an EPA.
On the one hand, the UK could represent a more straightforward trading partner; no longer the 28-state EU behemoth, but instead just one of its former members. Take South Africa which, although it signed an EPA as part of a subgroup of SADC, complained of insufficient access for its fruits and wines. Indeed, countries like Spain have felt the heat and pushed back against competitive South African imports. South Africa has expressed optimism that the UK economy will present less of a head-on collision.
Nonetheless, it is hard to see where the UK could reach a compromise that would satisfy countries such as Tanzania and Nigeria currently vetoing EPAs, and simultaneously achieve a good deal for itself. Tanzania will not back off from its industrialisation plans, begging the question of how the UK will get its value-added goods into the EAC. Nigeria’s hardline Buhari shows little sign of abandoning his diversification program that includes services – something in which the UK is especially strong but which has not even been discussed with the EU. EPAs are therefore a good place to start, but not a good place to end.
Facing up to the figures
The UK will do well to acknowledge the power balance it left behind when joining the EU in 1973. Trade between Africa and the EU stands at $280.9 billion (2016), of which the UK represents around just 15.7% according to the European Commission.
It might attempt to offer a better deal, yet given that many EU EPAs include a ‘Most Favoured Nations’ clause, the UK would in some cases never receive a better deal than the EU regardless of what it offered Africa. The real winner in Africa, however, is China: at the start of 2016, the China-Africa Industrial Forum put total trade between the two at $300 billion (more than 20% of Africa’s imports are Chinese).
This is not to say that the UK is expected to outdo either China or the EU, but simply that negotiators should not expect Africa to come in desperation. Many African states will come knowing the UK is an attractive, but not paramount, trading partner.
Sudanese President Omar al-Bashir (center) looks at Chinese President Xi Jinping. Source: Getty
So what can we expect?
The reality is that African countries will firm deals with the UK for two key reasons: first, many will seek to maintain their current trade flows without disruption (especially the likes of South Africa, which relies heavily on the UK export market). Secondly, the Commonwealth Secretariat estimates that arriving at no deal would cost Africa $800 million annually in export duties to the UK.
It is already apparent that the UK will focus on certain key players on the continent such as Kenya, Nigeria, and South Africa. Whether this can move forward will depend on whether African states will choose to act in trade blocs or not (lessons from the EPAs suggest some will go it alone). However, these deals will not come easily. Many interesting markets represent a challenge the UK has not dealt with alone: African states looking beyond primary goods with an eye on industrialisation and consciousness of previous trade mistakes.
Finally, Prime Minister Theresa May will take-over from Prime Minister Muscat of Malta as chair of the Commonwealth from 2018 to 2020, in a position that rotates, and will surely push for an agenda favouring the UK.