Caution and patience needed before Brexit dividend will be felt by consumers

Africa Minister Harriett Baldwin says UK consumers and African economies can benefit from Brexit – but only in the long run.

She told BBC’s ‘Today’ program that she was not yet in a position for say if and when tariffs will be lowered – and that tariffs on African goods post-Brexit will be similar to how they are now.

The interview was given as Prime Minister is in South Africa at the start of a three-day trade mission to three African countries.

The UK presently applies the EU-wide terms of trade negotiated across the bloc.  This means a 50% tariff on rice, maize and other cereals; 300% tariff on processed sugar. This has been a long standing barrier for African countries that many farmers and producers feel is unfair – and the consequential effect is to push up prices for the consumer.

Acknowledging that Africa means consumer choices of fruit, vegetables and produce that cannot be grown in the UK, Baldwin said that Brexit gives scope to be: “at least as good as we are now” – a point which was challenged as hardly seizing the opportunities that Brexit should be offering.  The Minister sounded a cautious note in setting expectations that things would change anytime soon.

Theresa May’s has set out Britain's aim after leaving the European Union: to: "deepen and strengthen its global partnerships".  Travelling to South Africa, Nigeria and Keyna, she said that: "I am looking forward to discussing how we can do that alongside Africa to help deliver important investment and jobs as well as continue to work together to maintain stability and security."

The visit highlights concerns from all sides that a no-deal Brexit is a bad deal for the UK.  Brexiteers can now clearly see that the UK will continue to adhere to the EU rules and agreements on trade and tariffs outside the bloc.  Without this, UK will be unable to act as trans-shipment for any goods – and border and customs controls will apply – with the cost, complexity and delays that are feared.  We will be, as Boris Johnson said: “about to turn this country into a rules-taker from Brussels, with no say on those rules — not just for industrial goods and agri-foods but across a wide range of economic activity.”

Equally, the Remainers feel that the intense efforts going into Brexit – diverting skills and resources away from other Government priorities, could have resulted in adapting the EU from within.  And it is not lost on Brexit observers that the EU has used the leave vote as wake-up call and is, indeed, addressing many if not all of the issues that led David Cameron to call the referendum in the first place.

In coming insights, we will be applying the no-deal Government impact guidelines – ‘notices’ – that will address the impacts categorized into 84 aspects of government, civilian and commercial life.  Not all have yet been finalised and published – with agricultural and food on the future publications list.  We can already get a good insight from UK Government perspective from the Minister’s remarks – and some blunt views from the three African countries that are early on Mrs May’s visiting list.

If Africa is a microcosm of the prevailing view of the World, it is going to be a long time before there is any demonstrable Brexit dividend – and especially in the event of a no-deal. 

Chancellor, Philip Hammond noted in a letter to the Treasury Select Committee last week that a no-deal outcome would have “large fiscal consequences” amounting to an £80-billion-a-year increase in borrowing by 2033. 

Mrs May downplayed the comments saying that leaving the EU without a deal would “not be a walk in the park” but would “not be the end of the world,”.

On the political fallout of a no-deal Brexit, previous EU President, Herman Van Rompuy, believes there to be an "existential threat" to the UK – with a "big impact" on "regions such as Scotland".

Background

Kenya's trade split between the UK and the rest of the EU is almost 50-50.  “The country will have to strike a good deal with both the UK and the EU because it depends on both markets to sell its tea, fresh produce and other agricultural products," says economist Tony Watima.

Kenya supplies more roses to the European Union than any other country and is the world's third largest exporter of cut flowers.

With direct flights from Nairobi to New York beginning in October, the country may be looking to tap into the larger US market for its goods.  President Uhuru Kenyatta will meet Mrs May in Nairobi on Thursday just three days after discussing trade with US President Donald Trump at the White House.

Nigeria is Britain's second largest trading partner in Africa.  A leading Nigerian economist based is quoted as saying that “Nigeria should concentrate more on its relationship with the EU” as the diversity of demand of the EU market makes it more attractive.  Britain remains a viable trade partner: “it just doesn't hold the same value to Africa as China"

South Africa is UK’s largest trading partner on the continent.  Mrs May will meet President Cyril Ramaphosa.

Again the investment in African infrastructure by China is evident in his statement: “We welcome both Mrs May and the Chinese, and like any other developing economy we'll do the business that suits us best."

Mrs May’s trip comes just a week before the huge Forum on China-Africa Cooperation that will be held in Beijing.  Dozens of African heads of state are expected to attend and China may offer new trade and finance deals.  This summit comes after Chinese President Xi Jinping's second tour of Africa when he visited Senegal, Rwanda, Mauritius and South Africa.

The BBC commented that ‘Mrs May's trip seems rather low key in comparison’.

 
John ShuttleworthComment