Wednesday, October 21, 2020

EU Ambassador advises Botswana to ‘observe and analyse’ Brexit negotiations

The uncharitable view to take about the Botswana’s attitude to Brexit is that the country was nonchalant about the whole thing. The charitable one is that there was really nothing that it could do before the June 23 referendum and nothing it can now.

“It is difficult to prepare for a situation that is largely speculative,” says Ambassador Alexander Baum, the Head of the European Union to Botswana and the Southern African Development Community.

What is speculative is how Britain’s exit (Brexit) from the EU will affect Botswana. With 52 percent of Britons having voted to leave the Union, farther down the road there will be need for countries around the world to reconfigure their external relations to a Britain-less EU. However, as Baum describes the situation, Britain has a “huge chunk of work” that it has to do before it is well and truly out of the EU. The work begins with the country invoking Article 50 of the Treaty of Lisbon which is a formal mechanism for leaving the EU. Such invocation would mark the start of negotiations to formally excise Britain from the politico-economic union.

“I think that Botswana ÔÇô like any other trading partner of the EU, should of course follow the negotiations very closely once they start. I assume that at some point, the UK will take the initiative to start negotiations with external trading partners,” Baum says.

Such view notwithstanding, the ambassador’s appreciation of the whole situation is that it is still so fluid that he cannot make a definite pronouncement on whether Botswana should start preparing for the day when UK invokes Article 50.

“I think it’s largely a matter of hard core economics. The country needs to know what’s going on and if there are implications for external trade, then there is enough time to prepare for that because at the end of the day, this thing will not fall from the sky,” says Baum, referring by “thing” to Brexit. “You will see that the situation will take two to three years and in that period, I would recommend observing the negotiations and analysing them in terms of their implications for Botswana.”

What he sees as the “most significant issue” is the beef that Botswana exports to the EU. The beef is largely marketed through the United Kingdom.

“The issue is, Where does the beef end? What is being consumed in the UK and other countries on the continent? The information should be available now so that people can draw their own conclusions,” Baum says.

Through the Economic Partnership Agreement between the European Union and SADC that was signed on June 10 this year, the former helps Botswana exploit market opportunities that exist in its bloc.

“That includes what I would call low-hanging fruits and in my opinion, beef exports are relatively low-hanging fruits because at the moment, the absorption capacity of the EU market for Botswana beef doesn’t really have any limits,” says Baum adding that beef exports could increase significantly and not just end up in the UK but in other European countries. “This may be an opportunity to identify new markets and decide on the best ways to develop those markets.”

Progress has indeed been made in that regard. Through the Brussels-based Centre for the Development of Enterprise, some 11 new markets (three in Europe) have been identified through a value chain analysis of Botswana’s beef industry. The action plan arising from such analysis recommends that the Botswana Meat Commission should explore the potential of Italy, Switzerland and Sweden as markets for its beef exports.

“The Brexit debate may force people to think outside the box but in principle, the development of the beef market in the EU is totally independent of Brexit. However, given the fact that beef is marketed through the UK, this may be an opportunity to think outside the box and say, Where do we see the biggest market? Is it just in the UK or is it also on the continent? and What is the best way to develop that market in the medium to long term?”

While a wait-and-see attitude seems the best course of action for now, it is evident that the UK will have to renegotiate international agreements that it was party to on account of its EU membership. As Baum points out, such agreements will continue to exist and for the UK to leave international agreements to which EU is party to, it will have to renegotiate its own agreements. Following the outcome of the Brexit referendum, a finance lecturer at the University of Botswana, Ishmael Radikoko, told Sunday Standard that beef and diamond exports to the UK will decline in value and quantity on account of a weaker pound sterling. Baum disagrees with this analysis, asserting in his own that it is impossible to say at this stage whether exports to the country will be less or more expensive.

“It all depends on how the UK will deal with those agreements and it has many options,” says the ambassador citing as one example the adoption of existing agreements as blueprints. “It would be highly speculative at this stage to say what the impact would be because there is a huge chunk of work coming to the UK in terms of determining its own relations with the rest of the world where those relations were part of legal agreements to which the UK was part of.”

Part of that huge chunk of work will be in the form of negotiating major international trade deals but as experts (and the ambassador himself) are been keen to stress, the UK may not have the ability to do so because it hasn’t negotiated such deals since 1973.

“The UK has a lot of work to do once it enters into negotiations and this explains why it is taking its time to invoke Article 50. There is an awful lot of preparation required and UK may not have the capacity at this stage to renegotiate all those agreements to which the EU was part of and so it has to build capacity in the meantime. In the end, the effect is not clear and will depend on how the UK is negotiating with third parties as well as on its relationship with the EU after exit because trade between the EU and the UK will continue. Goods that enter the UK may end up outside the country. They may enter the UK and go farther into the Union and how that will work is largely dependent on the agreement that the UK will negotiate with the EU.”

When Brexit actually happens is the UK’s prerogative and after the country invokes Article 50, the exit negotiations will have to be concluded within two years. The fact that the country has not invoked Article 50 is causing a lot of discomfort among EU member states because they can’t plan ahead.

“This period of uncertainty shouldn’t stretch too long because the worst thing in economic terms is uncertainty. Economic actors ÔÇô companies, CEOs and shareholders, need firm parameters for decision-making and by maintaining this uncertainty, the risk of decisions being delayed or wrong decisions being taken becomes big,” Baum says.

Anxious to avoid making important decisions under such conditions, some European leaders ÔÇô including German Chancellor, Angela Merkel, have called on the UK to invoke Article 50 and open the exit talks that Baum says Botswana should follow closely. While the ambassador understands the need for the UK to invoke Article 50 at a point where it feels ready to do so, he hastens to add that the more the uncertainty lasts, the more problematic the situation will be for all parties involved. 

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