The EPA, Brexit and defending the status quo
How should the Anglophone Caribbean respondto Brexit? Should it, based on the expert advice it has received from theCARICOM Secretariat and its own trade negotiators, now be actively exploringwith the UK an approach that secures an equivalent trade relationship to that whichit has with the EU under the Economic Partnership Agreement (EPA)?
Following the June 23 decision by the UKelectorate to leave the EU, CARICOM Heads of Government considered a seven-pagepaper and technical attachment at their July 4-6 summit in Georgetown. It madeclear that the Caribbean Community will need to be proactive in evaluating andaddressing the myriad implications that will emerge over time as the UK’s plansfor Brexit unfold.
Apart from containing some incisive analysisas to the political and diplomatic implications, sources suggest the document madeclear that CARICOM can ill afford to lose its trading opportunity or be subjectto disadvantageous market access conditions in any of its markets. It alsourged a structured approach and common message; an early and continuingevaluation of the likely areas of impact; a strengthened dialogue with variouscountries and groups in the remaining EU 27; and made clear the need to‘immediately engage’ in a dialogue with the UK with respect to maintaining the existingpreferential trade relationship through EPA equivalence.
Unfortunately, the advice was simply takennote of, and since then there appears to have been little movement to flesh outa position that might provide UK Ministers, parliamentarians and officials withconcrete ideas on the region’s thinking about future trade ties, or on how the specialrelationship might be preserved.
While the UK market in terms of Caribbeanexports may be diminishing – figures for 2014 suggest the UK accounted for21.6% of the Caribbean’s EU export market, but only 2.5% of its world tradeincluding oil and gas – it clearly continues to matter more to some countriesthan others.
For example, an early analysis by theCommonwealth Secretariat in relation to Brexit makes clear that most Caribbeancountries would see increased costs of entry for their products into the UKmarket if the present preferential tariff regime provided by the EPA were torevert to the MFN tariffs that apply when there is no special tradingrelationship.
Put in simple terms, this would mean thatwithout EPA equivalence, or some other near identical preferential arrangement,the countries that would suffer most in CARICOM, when it comes to trade ingoods with the UK, would be Jamaica, Guyana, and surprisingly Grenada and theBahamas, as would the Dominican Republic in a CARIFORUM context. The productsmost at risk would be sugar, bananas, rice, rum and nutmeg plus somemanufactured items.
Just as daunting is the potential impact ofBrexit in relation to the supply of Caribbean services. At present, the supplyof cultural and entertainment services and a whole range of professional activitiesare comprehensively covered by the Cariforum EPA, but some experts suggest thatsuch an arrangement is unlikely to be within the scope of any other traderegime.
Moreover, although the sector is potentiallyone of the most important areas for future Caribbean economic growth, the absenceof any reliable statistics to indicate the value of the Caribbean’s existing orpotential services market in the UK suggests that making a development caseunder any alternative trade arrangement could be difficult.
For the region to have a coherent Brexittrade position it will also require it to address a number of other issues.
For example, in order to have a strongpolitical, technical and development oriented case that ensures existing levelsof market access, Governments will need to systematically engage the at-riskparts of the private sector.
They will also need to consider theimplications of Brexit on tourism, remittances, financial services andinvestment. While the fall in the value of sterling has already had an obvious effect,it remains uncertain the likely impact on regulation, standards and a wholehost of other technical issues that may arise when the UK is outside the EU.
Thought also needs to be given to theprobability that some UK and international interests may seek increasedadvantage for one or another economic activity that the Caribbean is currentlyinvolved in; to developing a supportive dialogue with the UK industries that dobusiness with or are invested in the region; and to ensuing that the Caribbean’slarge Diaspora in the UK are onside.
The United Kingdom has not yet said when itwill trigger article 50 of the European Convention, the step that starts itsnegotiation to leave the EU; nor has it said how it is intending to address itsmutually incompatible positions of wanting to continue to have a free traderelationship with Europe while ending the free movement of EU citizens into theUK.
Some suggest that the British PrimeMinister is waiting to see how key elections and referenda in continentalEurope play out, possibly reshaping the EU and making a softer Brexit possible.Irrespective, the sense in London now is that the UK government is heading forwhat has become known as a hard Brexit, which in part would involve the UK leavingthe European Customs Union.
If under such circumstances EPA equivalenceis what the Caribbean requires of the UK, it will need precise knowledge of andcontact with those who will be making and influencing Britain’s decisions. Itwill also need to begin a high level political dialogue in order to make clearthe region’s wish to maintain existing levels of preferential access for goodsand services backed by a robust political and technical case. It may also requirethe development of a position that is seen to help the UK and avoids newcomplexities, as without this it is unlikely that the region will be at the forefrontof the British government’s thinking.
Such an approach would likely require theregion encouraging not just the UK but also the EU27, perhaps in the context ofthe Article 50 negotiations, to agree to an early WTO waiver for a UK-CariforumEPA equivalent; in effect taking Cariforum off the UK trade negotiating table.
There are of course other future UK trade scenariosbeing promoted for developing countries, but it hard to see how the regioncould obtain in the immediate future anything more comprehensive thanequivalence to the EPA.
David Jessop is aconsultant to the Caribbean Council and can be contacted at [email protected]
Previous columns befound at www.caribbean-council.org