15
14 October 2016 Brexit – possible scenarios, likely implications Based on a blog by Chris Stevens, Jane Kennan and Matthew Stern. Available from: www.dnaeconomics.com Mandela Institute
14 October 2016
Brexit – possible scenarios,
likely implications Based on a blog by Chris Stevens, Jane Kennan and Matthew Stern. Available from:
www.dnaeconomics.com
Mandela Institute
What is going on?
3
Trade scenarios
1. Maintain the status quo
a) Full de facto replication of current EU tariffs
b) Replicating the Generalised System of Preferences (GSP)
c) GSP plus EPAs/FTAs
2. Option 2: an improved UK GSP
3. Option 3: a very liberal MFN trade regime
4. Option 4: a set of free trade agreements
Source: Trade implications of Brexit for Commonwealth developing countries, Christopher Stevens and Jane Kennan, The Commonwealth Trade Hot Topics, Issue 133
4
Trade scenarios; tariff implications for RSA exports
1. Maintain the status quo
a) Full de facto replication of current EU tariffs
b) Replicating the Generalised System of Preferences (GSP)
c) GSP plus EPAs/FTAs
2. Option 2: an improved UK GSP
3. Option 3: a very liberal MFN trade regime
4. Option 4: a set of free trade agreements
Source: Trade implications of Brexit for Commonwealth developing countries, Christopher Stevens and Jane Kennan, The Commonwealth Trade Hot Topics, Issue 133
Preference erosion
5
Risks
1. WTO compliance
2. UK commercial interests
3. Readiness and willingness of partner states
4. Time
How bad can it be?
7
RSA trade with the UK vs world trade
-500
0
500
1000
1500
2000
2500
0%
2%
4%
6%
8%
10%
12%
RSA
-UK
Tra
de
bal
ance
(U
S$ m
n)
RSA
Exp
ort
/im
po
rts
as %
wo
rld
tra
de
Trade balance Exports/total exports Imports/total imports
8
RSA trade with the UK vs EU trade
-500
0
500
1000
1500
2000
2500
0%
5%
10%
15%
20%
25%
30%
35%
RSA
-UK
tra
de
bal
ance
(U
S$ m
n)
RSA
exp
ort
s/im
po
rts
as %
of
EU t
rad
e
Trade balance Imports/EU imports Exports/EU exports
9
Who is in the firing line?
1. The big fish!
a) Exports to the UK >US$ 5mn (average between 2013-15)
b) 91% of total product lines
2. The sensitive types!
a) MFN tariff 5% points or more higher than the preferential tariff
10
High risk products
• US$ 854 million in exports
• 15% of total RSA exports to the UK
• 3 main sectors:
6%
6%
1%
86%
Fruit
Vehicles
Wine
Other at-risk products
Remaining exports
Share of high risk products as % of total EU imports from RSA
11
Fruit • Annual exports of $503 mn of ‘sensitive’ fruits
• 9% of the UK’s total imports from South Africa
• UK accounts for 88% of the EU market
• Vulnerable products include:
– Grapes (EPS)
– Apples (EPS)
– Lemons (EPS)
– Plums (EPS)
– Nectarines (EPS)
– Peaches (EPS)
– Melons (MFN: 8.8%)
– Raspberries (MFN: 8.8%)
12
Wine • Annual exports of $148 mn of ‘sensitive’ wine
• 3% of the UK’s total imports from South Africa
• UK accounts for more than 50% of the EU market
• EU tariff equivalent >30%
(http://www.wineinstitute.org/international_trade_policy)
13
Vehicles • Annual exports of $149 mn of ‘sensitive’ products
• 3% of the UK’s total imports from South Africa
• UK accounts for around 25% of the EU market
• EU tariff equivalent = 10%
14
Conclusion
• South Africa, and SACU, need to prepare to negotiate a new trade
arrangement with the UK
• The timing and outcome of these negotiations remain uncertain
• For some high risk exporters, it would be good to start thinking about
adjustment options now
• For all exporters (and importers), it would be good to start thinking
about the opportunities that a reformed trading arrangement with the
UK might bring
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