Impact of the EU-UK Trade Agreement on Caribbean Exporters

International Trade Working Paper 2022/01

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Executive Summary

As a result of the UK’s departure from the European Union (EU) customs union and single market, new trade challenges have sur- faced along triangular supply chains where goods have to cross on EU/UK border prior to delivery to the final customers. This affects Caribbean countries exports to the UK and the EU markets. Five main areas of impact on the functioning of triangular supply chains are:

Policy responses could include: • The unilateral adoption by the UK and EU of diagonal cumulation arrangements for DFQF beneficiaries, which can be achieved through a modification of the ‘direct trans- port’ article of EPAs and the introduc- tion of simplified verification or origin arrangements. • Establishing simplified system for issuing phytosanitary re-export certificates and waiving the need for re-export certificates where controls carried out on entry prior to re-export. • Promoting a dialogue on policy initiatives to simplify trade administration on re-exports and the extension of support to strengthen internal business capacity to meet trade administration requirements. • Simplifying systems of trade administra- tion for re-exports along triangular supply chains (including providing greater clarity on practical use of CTC processes for coun- tries enjoying full DFQF access to EU and UK market). • Addressing border control challenges which arise from the serious infrastructure, staff- ing and IT system constraints faced in oper- ating new UK/EU border controls. Private sector responses include reorien- tating routes to market to avoid crossing EU/ UK borders or making greater use of the CTC process.

• Rules of origin/MFN tariff issue. • Phytosanitary import controls. • Trade administration challenges. • Border control challenges. • Logistical challenges

Agri-food products are most seriously affected since these products face the highest MFN tariffs, strict phytosanitary import con- trols and are often more commercially sen- sitive to delivery delays. The worst affected appear to be sugar, rum, fruit and vegetables (including bananas), fisheries products and to a lesser degree cocoa-based products. Those less affected tend to be larger exporters with close corporate links, greater internal administrative capacities, greater familiarity with Common Transit Convention (CTC) procedures and who ship less price sensitive products to both the UK and EU. Responses to these challenges are possible at two levels: policy initiatives or private sector adjustments.