These words form part of Dr Liam Fox, the UK Secretary of State for International Trade's speech in March 2017 at the first meeting of Commonwealth Trade Ministers. With the UK departure from the EU creeping ever closer to the scheduled date of 29 March2019, the Commonwealth Nations, including South Africa are looking on with interest to what their new trading relationship with the UK will look like. As the UK re-negotiates its trading relationships internationally for the post-Brexit era there are a number of sectors which are particularly optimistic about the opportunity to improve the terms of trade. For example, the citrus fruits sector in South Africa.

Trading troubles

The EU trade deals with South Africa in respect of agricultural products have contained some barriers to trade. There have been non-tariff barriers to trade in the market of citrus fruits, including oranges, mandarins, lemons and grapefruits, exported from South Africa to the EU with strict controls in relation to preventing the spread of the fungal infection citrus black spot ("CBS"). This has been seen as a controversial protectionist measure by South African citrus exporters, especially due to competition from Spanish citrus fruit producers. Often these kinds of barriers have aligned with the interests of some European countries, which the UK would no longer be restricted by outside the EU. The UK is one of the biggest importers of citrus fruits from South Africa, making up 36% of the export market for soft citrus fruits (e.g. mandarins) in 2016. Whilst the EU made up 41% of all South Africa's citrus exports in 2016, the UK was the second largest importer within the EU making up 27% of the EU market share. Therefore changes to the regulations surrounding CBS in particular in a future UK-South Africa trade deal, could have wide-ranging implications for the South African citrus fruits industry.

The detail

The South African citrus industry made up the largest proportion of agricultural exports in 2016, amounting to a gross income of R17 729million, surpassing even the wine industry. Estimates suggest that the industry supports the livelihood of five hundred thousand South Africans. EU measures to eradicate and monitor the spread of CBS disease mean that a sample of 600 of each fruit for every 30 metric tons marked for export, must be tested. This has resulted in huge costs of compliance for South Africa, with an investment of R1billion to manage the EU action on CBS. The Hogan Lovells Johannesburg office has been close to the practical implications of the EU regulations on the citrus fruits industry. For example on a recent trade finance deal we acted for the lenders on the export of citrus fruits to the UK.

In October 2017 the South African citrus industry suspended almost all citrus fruit exports to the EU with immediate effect. This was a risk management decision, due to detections of CBS, made to ensure that future exports to EU markets were protected. Therefore soft citrus, which is a lower risk type for the disease and exports from the Western Cape and Northern Cape, which are traditionally CBS free areas were not subject to the ban. The timing of the ban came at the tail end of the export season, meaning that the implications for exporters were not as extensive as they could have been at another point in the growing cycle. However, this decision comes at a time where there is a huge amount of scientific pushback with respect to evidence for any dangers posed by the disease.

CBS reduces the quantity and quality of crops and there is currently no cure for an infected plant, except removal and preventative measures such as fungicides. The EU is concerned that the disease could spread to Europe, although there has been extensive scientific research and publication which supports the fact that the European and Mediterranean climates are unsuitable for the establishment of the disease. In South Africa the Citrus Growers' Association's Citrus Black Spot Disaster Management Committee has been at the forefront of the on-going dispute between South Africa and the EU since 1992.

Scientific dispute

A paper published in 2009 in collaboration with academics from the University of Pretoria and the SA National Department of Agriculture was submitted to the Agricultural Commission of the European Commission. The report concluded that CBS infected fruit did not constitute a risk of expanding the geographical distribution of the organism. Infection was noted to occur "via pycnidiospore infection of leaves" which is dependent on specific environmental conditions that have never been established in regions with a Mediterranean climate. Further, despite the unrestricted movement of large quantities of citrus fruit from areas where CBS occurs into Mediterranean regions for many years, the disease has been largely restricted to sub-tropical climates with summer rainfall.

A 2018 article published by a Dutch academic, supported this reasoning by demonstrating that the pathogen which causes CBS is present in Portugal, Malta and Italy although the disease is not. Queries were raised by EU bodies over the methodology which examined only leaf litter and not live plants. Therefore, the scientific findings have not reduced the regulatory scrutiny which South African citrus fruit is subject to. 

Some progress has been made

There has been some progress regarding the level of citrus fruit regulation. The rules were relaxed in June 2016 for exported citrus intended for juicing; the fruit must still come from CBS treated areas but is only subject to visual inspection. The relaxation follows a European Food Safety Authority risk assessment, which determined a low risk of CBS transfer from citrus destined for processing into juice. Fruits for juicing make up 10% of the exported citrus from South Africa to the EU, meaning that the resulting improvement is small overall. The current EU regulations in this area are still causing a barrier to trade and increasing costs for South African producers, which can drive down profitability. 

Conclusions

It is unclear exactly what the UK-South Africa trading relationship will look like outside of EU and more specifically what stand the UK will take on the citrus black spot issue. There is still much scientific debate about the prospect of CBS spreading to Europe, although the EU's focus has been on the Mediterranean climates and in particular the Spanish citrus-growing industry. Since the UK no longer has to cater to these interests in its trading relationship with South Africa, it may well be that the regulations are reduced. Moving away from the EU stance on this issue could allow the citrus fruit industry in South Africa to be boosted. A reduction in red tape would drive down trade barriers and increase profit margins as the costs of regulatory compliance would be slashed. Whilst the UK is engaging in trade deal negotiations, the South African citrus fruits industry is following developments closely to gage the timing and extent of post-Brexit change.