The South African exports of fruit, wine and other agricultural commodities to the EU are a significant contributor to the economy, both in relation to GDP produced and employment provided, and the trade relationships between South Africa and the European Union as a regional bloc are both longstanding and extensive. South Africa now faces uncertainty due to the recent exit of the United Kingdom from the European Union, as well as from the implications of the new European environmental legislation referred to as “the EU Green Deal”. This short review aims to provide a bird’s eye view of what the EU Green Deal is, what the implications could be, and identify the legislation now applicable. Furthermore, it will briefly look at the impacts of the change of leadership in the United States on the South African agricultural sector. The purpose of this paper is to provide relevant, concise and useful information to the South African agribusinesses and farms engaged in international business and trade relationships.
THE EU GREEN DEAL
What is it about and what does it mean for imports?
The European Green Deal is a policy action plan to make Europe the first “climate-neutral” continent by 2050. The goals of the Deal, which includes investment needs and financing proposals, are threefold:
- Achieve carbon neutrality (no net emissions of greenhouse gases (GHGs) by 2050;
- Decouple economic growth from resource use; and
- Do so in a just and inclusive manner for society.
The Deal covers a number of policy areas to achieve its goals, namely:
- From Farm to Fork;
- Sustainable agriculture;
- Clean energy;
- Sustainable industry;
- Building and renovating;
- Sustainable mobility;
- Eliminating pollution; and
- Climate action
The Farm to Fork strategy outlines the internal transition relevant to farmers and fishermen within the EU and involves a large shift to farming organically, increasing and incentivizing the use of sustainable practices, as well as rewarding farmers for eco “performance”.
The Farm to Fork strategy commits the EU to cooperating with all its partners to develop Green Alliances on sustainable food systems and will align its trade policies and international relations to the goals set out in the Green Deal. To achieve coherence with the Green Deal, the Farm to Fork strategy outlines the following, which may be relevant to South African farmers and agribusinesses looking to export to the EU:
- In 2021, the Commission will present a legislative proposal to avoid or minimize placing products related to deforestation or forest degradation on the EU market.
- The EU will apply zero tolerance for illegal, unreported and unregulated fishing
- Imported food that does not comply with the relevant EU environmental standards is not allowed on the EU markets.
- The EU will require increasingly sustainable practices by their trading partners, particularly in relation to plant protection products and pesticide use, and will engage actively with their partners to avoid disruptions in trade.
- The EU will promote schemes to improve consumer food information, including an EU sustainable food labelling framework and environmental footprint calculation methods
Takeaway: Improving sustainability is becoming an increasingly essential aspect of all businesses. Not meeting the minimum standards with respect to the environmental impact of your products may inhibit, or at worst, prohibit, you from importing into the EU. It is in your best interest not just to meet the requirements and standards, but rather to get ahead of the curve and champion them.
Some useful resources:
- The European Commission’s official communication on the EU Green Deal: https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1576150542719&uri=COM%3A2019%3A640%3AFIN).
What are the implications for South African exports?
The relationship between South Africa (and certain members of the South African Development Community) and the European Union has been governed by an economic partnership agreement (EPA): the EU-SADC EPA since 2016. Given the departure of the United Kingdom from the EU, these terms of trade no longer govern the relationship between the UK and South Africa. A new bilateral deal between the South African Customs Union, plus Mozambique and the UK, is now the governing framework for South African-UK trade: the SACUM-UK EPA. This came into effect on 1 January 2021.
In short, the new agreement included duty- and quota-free imports into the UK, except for South Africa, as certain agricultural, fish and aluminium exports have less favourable treatment. The transitional arrangements include both a current safeguard on imports of poultry, as well an agreement that agricultural trade will continue to match the safety and health regulations of the EU. The UK will continue to accept EU-standard health certificates and plant protection certificates for 12 months into Brexit.
Within the UK, a recent Agricultural Bill was passed outlining a new system that promotes environmental protection, animal welfare and sustainable agriculture. Throughout 2020, there was uncertainty around the food standard of imports, as well as reports of the UK government potentially loosening restrictions. This was met with significant public backlash and a commitment from top retailers across the UK to maintain the UK’s internal high food standards. These include Sainsbury’s, Waitrose & Partners, Co-op, Aldi UK and Marks & Spencer, among others. However, the UK Trade and Agricultural Association is pushing for tough import standards and wanting to hold trade partners to the same standard as UK farmers – specifically around pesticide and antibiotic use.
Takeaway: Make sure you are up to date on any new duties or quotas applicable to South African agriculture and fish. Sustainability, environmental impact and food health are becoming central to mainstream negotiations and opinions. Even in the face of weak legislation around import standards, large retailers, fueled by their own commitments to becoming more “green”, as well as the vocal demands of their customers, will still be holding imports to high standards. The legislation around food standards is bound to catch up to changing consumer and societal demands and because it is in their interest to prevent the higher standard local produce being outcompeted by cheaper imports.
Some useful resources:
- The SACUM-UK Economic Partnership Agreement: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/844509/MS_34.2019_v1_pt1_UK_SACU_Mozambique_EPA.pdf
- A Financial Times article on UK Imported Food Standards: https://www.ft.com/content/62b1e447-c328-4026-b791-4e8306643f5a
- The Conversation commentary on UK, EU and SA trade relations post-Brexit: https://theconversation.com/heres-why-south-africa-and-its-neighbours-are-anxious-about-eu-and-uk-post-brexit-trade-talks-146414
- The EU-SADC Economic Partnership Agreement: https://www.tralac.org/documents/resources/faqs/2049-sadc-eu-epa-faqs-july-2018/file.html
What are the rules around carbon emissions?
Under the Paris Agreement, the UK has committed to achieving net-zero carbon emissions by 2050 and this was brought into law in by Parliament in 2019. Imported emissions make up almost half of the UK’s carbon footprint. Following Brexit, international enforceable climate change obligations are still under question, but increasing attention is being paid to carbon emissions across the UK supply chain and a recent report makes the case for a new carbon tax on imported goods. While South Africa is not the main source of these imported emissions, regulations around import carbon emissions – whether that be in the form of carbon standards or taxes – in line with the UK’s net zero commitment will impact South African exports.
Takeaway: The trend suggest that the UK is moving towards stricter decarbonization standards across its supply chain. As a South African producer, tracking, understanding and reducing your carbon emissions will place you in a strategic position for the changes that are to come.
- A Carbon Net Zero Report for th Carbon Climate Committee, UK: https://www.theccc.org.uk/wp-content/uploads/2020/12/Energy-Systems-Catapult-Industrial-Decarbonisation-and-Mitigating-Carbon-Leakage.pdf
- The UK’s Net Zero Target overview by the Official National Statistics, UK: https://www.ons.gov.uk/economy/environmentalaccounts/articles/netzeroandthedifferentofficialmeasuresoftheuksgreenhousegasemissions/2019-07-24
- The Guardian commentary on the level of UK imports’ carbon emissions: https://www.theguardian.com/environment/2020/apr/16/britain-climate-efforts-undermined-failure-imports-carbon
UNITED STATES AND SUSTAINABILITY
The United States, following the instatement of Joe Biden as President, has recommitted to the Paris Agreement and reversing Trump’s withdrawal from it. The US’s own ‘net zero carbon emissions by 2050’ policy is said to be in the works. The Paris Agreement is a legally binding international treaty on climate change. This will bring a renewed focus on emissions and clean energy, and may have an impact similar to that of the EU Green Deal. The US’s re-joining of the Paris Agreement will add much needed impetus to the “green” agenda globally.
- A brief look at the Paris Agreement: https://bluenorth.co.za/a-quick-look-at-the-historic-paris-climate-deal-that-will-enter-into-force-on-the-4th-of-november-2016/
- Biden Returns US to Paris Agreement: https://www.theguardian.com/environment/2021/jan/20/paris-climate-accord-joe-biden-returns-us