January 1, 2021, the global landscape changed in two historic and divergent ways. Britain completely left the European Union in search of greater control over its own borders, while the countries of Africa took a key step towards harmonization and the vision of an African single market.
Brexit: New EU-UK Trading Rules
Concluded on Christmas Eve (2020), the EU-UK Trade and Cooperation Agreement sets out the rules governing the post-Brexit trade relations between Britain and the European Union (EU). Britain has stopped operating within the rules of the EU single market and there is now an EU-UK customs border. Who are the winners and losers under this Agreement?
Dubious winners – trade in goods. Goods traded between the EU and the UK will remain duty-free and quota-free. However, they must now traverse the customs border and comply with the accompanying formalities and customs procedures. It will take some time to see what the impact – minus pandemic complications – will be on EU-UK trade flows. However, the EU has been the UK’s largest trading partner. New regulations and the accompanying border and customs procedures will inevitably bring added costs and delays to manufacturers and their consumers.
Very clear losers – trade in services. The Agreement does not include any detailed coverage of services, which has been left to a future deal. Services make up almost 80 percent of Britain’s economy. The UK has enjoyed a trade surplus in services with the EU and London has served as Europe’s financial center – a position it is in jeopardy of losing. There are no provisions on passporting. British citizens have said “good-bye” to free movement and now require tourist and work visas to travel to and work in continental Europe. They have lost automatic recognition of their professional qualifications and licenses, which will now need to be verified at the national level. For professionals accustomed to providing their services within the world’s largest economic bloc, this outcome is a worst-case scenario.
The Agreement captures the Brexiters’ desire for increased sovereignty at the loss of decreased access to what has been its largest trading partner. Will it be worth it? It also avoids the worst-case scenario of a hard Brexit that would have reintroduced duties and even more barriers to trade. Both sides have a lot of hard work ahead to build a successful post-Brexit relationship.
African Continental Free Trade Agreement (AfCFTA)
Also on January 1, 2021, the world welcomed the African Continental Free Trade Area (AfCFTA). Negotiated by 55 African countries in 2018, the Agreement Establishing the African Continental Free Trade Area has the vision of creating a single African market. AfCFTA’s mission is to accelerate intra-African trade and boost the continent’s position in global markets. The Agreement provides a roadmap to build the trade ties that have long been stifled by the legacy of colonialism which required that trade routes run through the metropolis of these former colonies. It is still easier today, for example, for Gabon to trade with or travel to France, or for Botswana with Britain, than with their neighbors.
AfCFTA promises to connect 1.3 billion people across 55 African Union member states, ironically building on and spurred by the successes of the European Union, which Britain has just left. It will comprise a continental customs union which eliminates tariffs and reduces non-tariff barriers on the majority of African goods traded within the region; and facilitate the movement of natural persons, businesses, and capital within the region, and external investment in member countries. Implementation of the AfCFTA has the potential of increasing intra-African trade by over 50 percent, according to the United Nations Economic Commission for Africa (ECA).
Needless to say, this is a hugely ambitious project. Just getting started, it has yet to be ratified by a dozen or more of the signatories.
This process too, will have winners and losers among countries, companies, and consumers. The defining moments will occur at ports, airports, and government agencies across the continent. When a product from Burkina Faso arrives in South Africa, for example, how will it be treated, particularly as compared to a similar product from the United States or France? How readily can a service professional, entrepreneur, or company enter into a new market, launch an enterprise and/or begin to offer services? Which countries will move quickly to reduce the barriers and permit entrepreneurs and companies to implement their ideas and innovations? Which companies will ramp up to take advantage of the increased market access? Which countries and companies will become the most competitive in this new market?
Vibrant economies Kenya, Nigeria and South Africa are already on the way. However, even within these countries there is work to be done to create the business enabling environment to provide a more level playing field for SMEs and MSMEs. With the help of international partners, and led by the African Union, the work of building the AfCFTA is just getting started but promises a new and brighter future for the continent.
Contact us, DevelopTradeLaw LLC, a law firm in Washington DC to learn more and to let us know your views on this topic. We provide customs and trade law consulting services in New York, Texas, Miami, Baltimore, San Francisco, Los Angeles and other cities in the US. Founder and CEO, Andrea M. Ewart, Esq. is a seasoned international trade and customs attorney and policy adviser for various companies and governments with a demonstrated history of successfully developing and implementing sustainable and dynamic trade programs. She is experienced in creating partnerships with various business-support organizations to drive compliance and growth for international companies. The International Trade Attorney brings over 2 decades of trade law consulting experience in understanding and teaching trade regulations to clients of/with varying backgrounds and expectations in preparation to be competitive in international business. Andrea also reviews and audits existing compliance programs to identify areas of improvement to fit the needs of the organization while meeting the challenges of operating globally.