Brexit

A Legal Discourse On Regional Trade and Brexit

By ALP Advocate
Charity Kwoshaba Dushime
on
June 19, 2019

The UK has promised to pass legislation that will protect and promote trade with developing countries. To do this however, the legislation has to be similar to the EU's Generalised Scheme of Preferences. Yet you only need to watch the highly partisan Brexit debates in the House of Commons to realize that such legislation will probably never see the light of day.

Social media collectively laughed in derision when the UK based _Independent_ Newspaper ran a story that France's European Union (EU) Minister, Ms Nathalie Loiseau named her cat 'Brexit' because "he meows loudly to be let out but won't go through the door." The comments were made as the UK Government was preparing to request the EU for more time to negotiate better terms for the exit from the Union. It is now almost three years after the 23rd June 2016 United Kingdom European Union Membership Referendum, wherein 51% of the voters elected to leave the EU and the decision has to be implemented by 29th March 2019, nine days from today.

But does "Ms Nathalie's cat" have any implications for the East African region, or those are matters which help the newspapers to fill up the spaces in the middle pages? Interestingly, given the now intertwined nature of the global economy, Brexit will have ripple effects on East Africa.

Under the current international trade agreements, developing countries are able to export various goods to the EU (which currently includes the UK) at low or zero custom duties.This is an arrangement made possible by the EU's Free Trade Agreements and the Generalised Scheme of Preferences. Currently, the UK has to accept the goods being brought into its borders, whether it's citizens detest the same, simply because they are part of the EU, which entered into the agreements. If the UK leaves without "a deal" on how such goods will thereafter be allowed into its markets, it means that the preferences given to East African nations will lapse, as the UK will no longer be bound by any EU agreements.

The lapse of the trade preferences will leave the countries with one or two options. The first, which is preferable, is that the East African Community negotiates directly with the UK for a deal that benefits the whole region. This is highly unlikely at the moment, if you consider the public bickering that is going on between Rwanda and Uganda with allegations from both sides of supporting espionage. The EAC is also teetering as Kenya accuses it's partner states of setting in place various Non Tariff Barriers which have, in effect frustrated the Movement of goods and services across the region (Uhuru Kenyatta's recent trip to Ethiopia was seen by commentators as the courting of Kenya's populous neighbors, since the EAC partner states have refused to open their borders). The failure to collectively negotiate would mean that the countries have to individually negotiate trade deals with the UK. You do not need a foreign consultant to tell you that this is a bad idea, for it means the individual countries will have weak bargaining power and will not be able to negotiate beneficial terms of trade.

Either way, this means the UK has the choice to decide whether to enter into new agreements. It is highly unlikely that it will enter into agreements that are placing the interests of developing countries over those of their citizens. Why? Because Brexit was the result of populism, partly instigated by the belief that the UK had lost its place as a global power because it was giving in to the demands of developing countries.

Should Britain agree to enter new trade agreements with EAC partner states, it will definitely impose higher tariffs. Higher tariffs would definitely push some exporters out of business as they will not be able to afford them. If the exporters can afford the tariffs, they will push them to the consumer, which ultimately means an increase in prices. But higher prices only work if you are a monopoly of either the service, or its quality. Where the UK consumer has a choice, he or she will go for the cheaper products, which will most likely be produced by blocs that have greater negotiating power and are bringing in their goods at a cheaper rate.

But perhaps all is not lost. The UK has promised to pass legislation that will protect and promote trade with developing countries. To do this however, the legislation has to be similar to the EU's Generalised Scheme of Preferences. Yet you only need to watch the highly partisan Brexit debates in the House of Commons to realize that such legislation will probably never see the light of day.

Maybe it is actually a good thing that Brexit will have such detrimental effects. For long, Africa has depended on aid and "preferential" trade agreements to trade with the West. But these have kept developing countries at the bottom of the chain, as producers of raw materials and consumers of finished goods. This system has also fueled corruption because it is usually benefiting to regime cronies. Yet it has flourished because it benefits Western businesses. If the UK does not grant the EAC preferential treatment, the countries will, hopefully, find mechanism to trade with each other.