The Caribbean needs a full response to Brexit

Earlier this month CARICOM heads of government met inGeorgetown. Among the many issues they considered was Britain’s decision to leavethe European Union. Their focus was on a secretariat paper largely intended forinformation. While they recognised theBritish people’s decision represented a watershed in world affairs withfar-reaching and long-lasting geopolitical and geo-economic repercussions, theydecided that the best approach was to monitor developments as the processunfolds.

It is a position that contrasts with that of many othernations that have begun to strategise, focus on priorities, and initiate anexploratory dialogue with British ministers, and in particular with the newMinistry of International Trade which will undertake all third country tradenegotiations.

Brazil with Mercosur, the US, Australia and others havedecided to act now on so far informal suggestions that the UK intends having asignificant number of draft or outline trade agreements with third countries inplace by 2019, the most likely date when the UK will leave the EU. They haverecognised publicly that all third countries wanting some form of freer tradearrangement with the UK will have to negotiate new agreements.

Under EU law such discussions are technically impermissiblewhile the UK is still a member. However, it is now widely understood that theUK is likely to seek, when establishing with the EU27 the rules of engagementfor Brexit, some form of understanding or arrangement that will allow it thefreedom to negotiate in parallel international trade deals. The objective willbe to establish by 2019 what the Minister for Exiting the European Union, DavidDavis, has described as the basis for a huge new trade zone.

At the same time, it has also become clear is that theoptions for the UK’s future relationship with the EU are narrowing. Although noformal announcement on the approach is expected for some time yet – this isexpected to be contained in a white paper towards the year’s end – it isapparent from the language being used by key ministers that Britain is likelyto seek a unique trade agreement with Europe.

While the detail of this is not known, it seems likely theUK government’s ideal outcome would be some form of advanced association typeagreement with the EU27 that enables free trade in most goods and services, insome way accepts the UK will control the free movement of EU citizens, and maypossibly include financial arrangements in discrete areas, for instance ondevelopment or scientific co-operation.

Whether this or a similar approach will succeed, or as someanalysts believe, cause negotiations to breakdown; whether it is politicallysaleable in the UK, where factions among the leave voters and politicians havewildly differing views on what Brexit means; or whether the process will end inthe UK deciding on a WTO arrangement with the objective of becoming a Singaporetype low-tax offshore centre located between the US and the EU27, all remain tobe seen.

Irrespective, these are all developments that suggest thatit would be wise for Caribbean Governments and the region’s private sector tobe addressing now a number of key questions.

The most obvious among these are does the UK matter as atrade partner; is it is as a nation still of long term political and strategicimportance to the region; are the Caribbean and the UK’s shared history,cultural ties and values still of significance; and are there areas ofcooperation, such as climate change and security, that make the relationshipspecial?

Assuming the answer is a qualified yes, and there is abroad based acceptance that the relationship matters more for some countriesthan for others, the most pressing question that then needs addressing is whatconfiguration might offer the region the best future basis on which to engageprofitably with the UK?

Put another way, should CARICOM seek to achieve with the UKsomething similar to the existing trade relationship it has under the EU-CARIFORUM Economic Partnership Agreement, or should it try to establishsomething wholly new that is more skewed to key sectors, services andregulatory issues? Alternatively, should it work with others, for exampleCentral America or Cuba, or should it consider for example re-engaging with theUK through the ACP.

The issue of configuration is far from academic havingalready become a matter of private discussion, brainstorming and seminars inthe Commonwealth, in parts of the ACP, in Central America, in Mercosur, as wellas in some Cariforum member states and in the UK’s Overseas Territories.

Of particular note in this respect is a debate underwaywithin the Dominican Republic. Expertsthere make clear that while the UK is of limited economic significance in termsof the country’s overall exports, visitor arrivals and investment, its bananamarket in the UK is significant. So much so that it accounts for around 77 percent of the Dominican Republic’s overall exports of US$171m to the UK.

As a consequence, high level consideration is being givento whether the country should, in seeking a new trade arrangement with the UK,join with Central America or perhaps some other Latin American configuration; aposition that stems from the now deeply held belief in Santo Domingo that thecountry will continue to be ostracised by CARICOM.

This is of some importance as it may affect how CARICOMeventually negotiates. The value of the UK export market for CARIFORUMessentially has three components: CARICOM (minus Trinidad & Tobago) whichlargely exports agricultural products, manufactured goods and some services;Trinidad which largely exports oil and gas and related products; and theDominican Republic which largely exports agricultural produce, manufactureditems such as garments, and rum.

Disaggregate this and it is immediately apparent thatCARICOM would be in a weak negotiating position.

This suggests that unless the region can obtain earlyassurances from the UK about continuing market access, there is the realpossibility that the UK will accept what is offered by larger pro-activegroupings like Mercosur or Central America, while agreeing a new domesticagricultural regime that together will leave no space for Caribbean exports.

In all of this it is now much harder than in the past toguess how the UK will weigh its historic relationship with the region as thereis now a strong interest in many parts of the UK Government in the much largerand more dynamic Latin American Market.

David Jessop is a consultant to the Caribbean Council andcan be contacted at david.jessop@caribbean-council.org