The EU and Peru (along with Colombia and later Ecuador) signed a trade agreement in the summer of 2012, which came into effect in March 2013. With Britain then an EU member, its bilateral trade with Peru was governed by the rules of this agreement. As a result of the deal, tariffs for 99.3% of agricultural and 100% of industrial products have preferential access to the EU.
As a result of Britain’s future departure from the European Union and its single market, the UK and Peru signed a continuity trade agreement in 2019 to effectively replace the current one with the EU. The agreement, which will take effect from the 1st of January 2021, covers trade in goods and services, including provisions on rules of original, preferential tariffs, technology transfer, intellectual property, geographical indications and government procurements. In addition to these key elements, it facilitates political dialogue and other forms of cooperation on issues such as human rights, labour laws and environmental protection.
The UK Government has stated that there will be no additional tariffs or barriers on top of what currently exist under the EU trade deal. The two notable changes will be an increase in Tariff Rate Quotas (see below), and the implementation of greater Agricultural Safeguards for Peru.
In general, most sectors will remain tariff free (at least under certain quantities) as they currently are under the EU deal. The new UK trade agreement also introduces a set of new Tariff Rate Quotas (TRQs) that will gradually increase the quantity of various products allowed to enter the UK market at a zero or reduced tariff rate. Compared to the preceding EU deal, this new agreement will increase the volume of agricultural goods that can be imported from Peru without facing a tariff. However, the goods that have been granted increases in their TRQ, such as dairy products and cane sugar, are not Peru’s main competitive agricultural exports. As a continuation from the prior EU trade agreement, Peruvian exporters will face no tariffs in almost all areas of its specialized sectors such as agriculture, mining, and textiles.
The trade balance between the countries is considered favourable to Peru, which has tended to run a surplus with the UK since 2009. Despite long run growth in exports to the United Kingdom, from 2018-2019 Peruvian exports decreased from US$703 million to US$458 million, due to traditional gold exports going to the United States instead. But much of the general increase in exports from 2012 to 2019 (a year before the EU deal was signed) has been driven by rapid growth in the non-traditional sectors, which increased from US$178 million to US$393 million, an increase of 121% driven mainly by the agribusiness sector. This now means that as of 2019, 86% of exports to the UK consist of non-traditional or value added products. The top non-traditional goods from Peru include agricultural goods such as avocados, grapes, blueberries, coffee, tangerines and other citrus fruits.
In the opposite direction, there has been a slow decrease in Peru’s imports from Britain, with a current total of US$229 million compared to the US$304 million in 2012. This can be explained by a decrease in demand for heavy machinery. Most of Britain’s exports to Peru tend to be heavy machinery, cars and medicine.