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The C'bean and Brexit: Choppy seas?

BY Elizabeth Morgan

Thursday, September 20, 2018

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I have seen an article describing Caribbean concerns about Brexit in the aftermath of the 2016 referendum as much ado about nothing. This could not be further from the truth. Brexit is a 'bread and butter' issue about jobs and growth as are all other trade issues for small, open economies.

Brexit matters as the European Union (EU) is responsible for 15 per cent of world merchandise trade and the UK/Britain for three per cent. Total Caribbean/EU goods trade was valued at about US$9 billion in 2017, with the EU being the region's second-largest trading partner. The EU is also the world's largest trader of services, with the UK being the world's second-largest exporter of services. Tourist arrivals into the Caribbean from the EU (Germany and UK) have remained strong, continuing to register growth in 2017.

Within the EU, for the Caribbean, Britain has been a principal trading partner for goods and services and an access point into other EU members for trade and investment. There is a large Caribbean Diaspora in Britain. In addition, the EU is a strong development partner accounting for the bulk of grant funding to the region. Britain gives some funding at the bilateral level but the major funding has been channelled through the EU, from the European Development Fund (EDF), even assistance through the Commonwealth.

Reshaping the EU/UK trade landscape will have a significant impact on global trade at a time of great uncertainty. There is no doubt that the Caribbean will be affected.

Post-Brexit world

Britain is marching on towards its date with destiny, March 29, 2019, shrouded in doubt and division. As a historic trade and development partner and continuing colonial presence, policymakers in the Caribbean ought to be monitoring closely Brexit developments and strategising on the region's future relationship with both Britain and the EU27. I would like to see civil society in Jamaica and the rest of the Caribbean joining in the discussion and analysis before it is too late.

Status of UK/EU negotiations

The UK and EU are accelerating Brexit negotiations. In fact, an agreement should be reached by October in time for the EU Summit, October 18-19. Some reports are now speculating that the agreement may be postponed to November when an extraordinary EU Summit would be convened. The EU lead negotiator has said that an agreement could be possible in six weeks with some compromises.

The fact is, by January 2019, the EU and UK parliaments should have an agreement to consider for adoption to meet the set leave date. Britain, from its July White Paper, based on the Chequers Plan, is seeking a pragmatic agreement with the EU that will safeguard its access to the single market and protect its economy and territorial unity. Within Britain, views are split in several directions with calls for a second referendum to enable the British people to have a final say on the agreement hammered out. The discord continues in the prime minister's own Conservative Party.

This is a critical period in the Brexit negotiations as the Conservative Party conference will be held in Birmingham, from September 30 to October 3. This conference could give a clear signal whether Prime Minister Theresa May will be able to move forward with her proposals. The Opposition Labour Party would have had its conference in Liverpool, September 23-26. The Opposition has been critical of the handling of the negotiations and is concerned that there could be no deal with the EU. This, in their view, would be a very bad deal for Britain and anyone doing business with it. May is adamant that she is negotiating the best deal for Britain and seems of the view that no deal, resorting to World Trade Organization most favoured nation would not be the end of the world. She is determined that Britain will leave the EU as scheduled and there will be no second referendum.

The Brexit developments, in fact, are of interest and being monitored in the Caribbean on two fronts in the British dependent territories and in the Caribbean Forum of Africa, the Caribbean, and the Pacific (ACP) States (CARIFORUM).

Concern in the British Caribbean dependent territories

The British dependent territories in the Caribbean, — Anguilla, British Virgin Islands, Bermuda, Cayman Islands, Montserrat, and Turks and Caicos Islands, could not vote in the 2016 referendum. With a vote, they would most likely have been in the remain camp. In the wake of hurricanes Irma and Maria in 2017 it is reported that these territories are increasingly concerned about their relationship with the EU post-Brexit.

They are currently EU members and some receive EU development support. They have a close relationship with other EU territories, such as St Martin, Guadeloupe and Martinique. In financial services, there is also concern about their status, whether they can remain off the EU tax havens blacklist. While the territories have had consultations with London, it does appear that, at this point, they are feeling isolated from and neglected by the metropole. Independence was mentioned in one territory.

Some of these territories are associate members of Caricom and the Organization of Eastern Caribbean States (OECS) and have interests in CARIFORUM. Montserrat is actually a member of Caricom.

Whither CARIFORUM's Relationship with theUK and EU27

Immediately after the referendum, CARIFORUM (Caricom member states and the Dominican Republic) initiated consultations with the UK on trade relations post-Brexit. Since 2017, British and CARIFORUM senior officials have been engaged in discussions to roll over the provisions of the comprehensive CARIFORUM/EU Economic Partnership Agreement (EPA). This is to ensure that once Britain leaves the EU trade between Britain and CARIFORUM member states will continue on preferential terms.

This August, Prime Minister May visited ACP/Commonwealth African countries (South Africa, Kenya and Nigeria) to discuss trade, investment and other issues. It is reported that she offered a rollover of EPA provisions, where they exist, with these African countries. An issue which arose during this visit was whether Britain would retain tariffs on various commodities, including sugar, or whether tariffs would be removed for all countries. Were Britain to do the latter it would remove any little advantage which CARIFORUM countries still have in the export of sugar to the UK under EPA. In CARIFORUM's favour would be the position of British beet sugar farmers who would not want to see the British sugar market fully liberalised.

In addition, the UK could be facing the pressure of rolling over about 35 more trade agreements to which it is a party due to its EU membership. This could have further implications for CARIFORUM, although a rollover should not see significant changes to existing agreements as these should not be full-blown trade negotiations.

Outside of meetings which took place this April at the London Commonwealth Heads of Government Meeting, under the Windrush cloud, it is possible that British and Caribbean ministers could meet briefly, as customary, in the margins of the UN General Assembly high level debate this month. It is not expected, however, that British and Caribbean ministers will meet for substantive discussions until the UK/Caribbean Forum to be held possibly in 2019 in London. That could be after Britain has formally left the EU, either in a hard or soft Brexit. It certainly is not expected that PM May will visit the Caribbean any time soon to discuss trade, investments and other issues as she did in Africa.

CARIFORUM is also having to contemplate not only what its future relationship with Britain will be in trade and other areas, but also how it restructures its relationship with the EU27. Historically, the bulk of CARIFORUM's trade has been with the UK, where it has a strong diaspora and diplomatic presence. CARIFORUM must be looking at how it forges a stronger trading relationship with EU members, such as Germany, France, Ireland, Malta, Sweden, Spain, Netherlands, and Poland, among others. Most CARIFORUM countries have diplomatic representation in Brussels, but not in many of the EU member states. As Antigua's Ronald Sanders reminded in a recent article, diplomatic presence is still important.

It is also noted that African countries seem intent on renegotiating their EPAs with the EU as part of the ACP/EU post-Cotonou negotiations. This could result in Africa having a far better deal than CARIFORUM in its comprehensive EPA signed in 2008. CARIFORUM should thus be also seeking to renegotiate.

While Brexit has been on the agenda in Caricom and CARIFORUM meetings in the countdown to March 2019 it would be useful to have a Caribbean-wide discussions on the implications of Brexit involving civil society. Such a forum could be convened by CARIFORUM, with Caribbean Export, and The University of the West Indies, with the hope that its focus would not become entirely on Windrush and reparations.

Elizabeth Morgan is a specialist in international trade and politics. Send comments to the Observer or elizabethmorganstliz@gmail.com.

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