Impact of the EU-UK Trade Agreement on Caribbean Exporters

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The Impact of the EU-UK Trade andCo-operation Agreement on Caribbean Exporters

While the UK sought to ensure continued duty-free access for developing country exports to the UK, consistent with the pre-existing common EU trade framework the UK had applied, the absence of ‘diagonal cumulation’ provisions meant that, unless specific shipping procedures were followed or rules on the use of non-originating content were complied with, the duty-free access arrangements in favour of Commonwealth exporters applied only to goods directly shipped to the UK. Similar issues also face Commonwealth exporters serving EU markets via initial ports of landing in GB. Along these routes, specific shipping procedures or rules on the use of non-originating content also need to be complied with, if goods shipped via the UK are to enjoy duty-free access upon entry to the final EU market served. What is more, the absence of specific arrangements for dealing with non-tariff trade issues previously covered by the single market regulatory framework has led to border clear- ance and trade administration complications for Commonwealth exporters who ship prod- ucts to final markets along triangular supply chains – that is, supply chains that involve the crossing of an EU–GB customs and regula- tory border to deliver goods to the final cus- tomer. This includes consequences arising from the EU and UK now being two distinct phytosanitary territories, with their own sepa- rate regulatory frameworks and phytosanitary import control arrangements. This poses par- ticular problems for fresh and chilled produce,

in which a range of Commonwealth African, Caribbean and Pacific (ACP) group exporters have substantial export interests and for which triangular supply chains play an important role. These complications have in turn given rise to logistical challenges in the onward shipment of products across the new EU–UK customs and regulatory border. The main focus of this study is three-fold: 1. To break down the impact of the Brexit pro- cess on the functioning of Commonwealth Caribbean triangular supply chains, based on the underlying motivation for the utili- sation of triangular supply chains in deliv- ering goods to the final market and the very real constraints on direct delivery to markets. 2. To identify appropriate areas for unilat- eral 9 policy action by EU and UK authori- ties to address issues of concern for Commonwealth exporters, so as to facili- tate the maintenance of existing triangular supply chains where possible. 3. To identify potential business-level responses and supply chain adjustments to address the challenges faced along triangu- lar supply chains, with reference to illustra- tive products and final markets served, in light of the specific constraints now faced in the international shipment of goods aris- ing from the knock-on effects of the Covid- 19 pandemic.

2. The general Caribbean-EU trade context and Brexit effects along triangular supply chains

Caribbean manufactured product exports to the EU in 2019 were dominated by oil-related products and associated chemical products (20.2 per cent of total exports, valued at €927 million). Textiles and clothing, footwear, and headgear accounted for only 1.5 per cent of total Caribbean Forum (CARIFORUM) exports to the EU in 2019 (€67 million). Miscellaneous manufactured products accounted for 0.2 per cent of total exports to the EU (€9 million). If we look at the structure of exports of Caribbean countries that are part of the ACP group to the

EU28 market in 2020, we find the following composition: • 35.5 per cent of exports are accounted for by mineral products, base metals, and pearls and precious metals (and articles thereof), on which most-favoured nation (MFN) tar- iffs are zero and on which no phytosanitary issues arise. • 32.3 per cent of exports are accounted for by manufactured exports, dominated by chem- ical products (12.4 per cent), on whichMFN