EPA, Brexit and the sta­tus quo

Jamaica Gleaner - - BUSINESS - David Jessop

Prime Min­is­ter An­drew Hol­ness ad­dresses the open­ing cer­e­mony of the 37th reg­u­lar meet­ing of CARICOM Heads of Gov­ern­ment held in Ge­orge­town, Guyana, July 4-6, 2016. The heads con­sid­ered a seven-page pa­per that high­lighted the need for the bloc to be proac­tive in as­sess­ing the ef­fects of Brexit on trad­ing re­la­tions.

the EU un­der the Eco­nomic Part­ner­ship Agree­ment (EPA)?

Fol­low­ing the June 23 de­ci­sion by the UK elec­torate to leave the EU, CARICOM heads of gov­ern­ment con­sid­ered a seven-page pa­per and tech­ni­cal at­tach­ment at their July 4-6 sum­mit in Ge­orge­town.

It made clear that the Caribbean Com­mu­nity will need to be proac­tive in eval­u­at­ing and ad­dress­ing the myr­iad implications that will emerge over time as the UK’s plans for Brexit un­fold.

Apart from con­tain­ing some in­ci­sive analysis as to the po­lit­i­cal and diplo­matic implications, sources sug­gest the doc­u­ment made clear that CARICOM can ill af­ford to lose its trad­ing op­por­tu­nity or be sub­ject to dis­ad­van­ta­geous mar­ket-ac­cess con­di­tions in any of its mar­kets. It also urged a struc­tured ap­proach and com­mon mes­sage; an early and con­tin­u­ing eval­u­a­tion of the likely ar­eas of im­pact; a strength­ened di­a­logue with var­i­ous coun­tries 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 ex­ist­ing pref­er­en­tial trade re­la­tion­ship through EPA equiv­a­lence.

Un­for­tu­nately, the ad­vice was sim­ply taken note of, and since then, there ap­pears to have been lit­tle move­ment to flesh out a po­si­tion that might pro­vide UK Min­is­ters, par­lia­men­tar­i­ans, and of­fi­cials with con­crete ideas on the re­gion’s think­ing about fu­ture trade ties, or on how the spe­cial re­la­tion­ship might be pre­served.

While the UK mar­ket, in terms of Caribbean ex­ports, may be di­min­ish­ing – fig­ures for 2014 sug­gest the UK ac­counted for 21.6 per cent of the Caribbean’s EU ex­port mar­ket, but only 2.5 per cent of its world trade in­clud­ing oil and gas - it clearly con­tin­ues to mat­ter more to some coun­tries than oth­ers.

For ex­am­ple, an early analysis by the Com­mon­wealth Sec­re­tariat in re­la­tion to Brexit makes clear that most Caribbean coun­tries would see in­creased costs of en­try for their prod­ucts into the UK mar­ket if the present pref­er­en­tial tar­iff regime pro­vided by the EPA were to re­vert to the MFN tar­iffs that ap­ply when there is no spe­cial trad­ing re­la­tion­ship.

Put in sim­ple terms, this would mean that with­out EPA equiv­a­lence, or some other near iden­ti­cal pref­er­en­tial ar­range­ment, the coun­tries that would suf­fer most in CARICOM, when it comes to trade in goods with the UK, would be Ja­maica, Guyana, and sur­pris­ingly Gre­nada and The Ba­hamas, as would the Do­mini­can Repub­lic in a Car­i­fo­rum con­text. The prod­ucts most at risk would be su­gar, ba­nanas, rice, rum, and nut­meg, plus some man­u­fac­tured items.

Just as daunt­ing is the po­ten­tial im­pact of Brexit in re­la­tion

to the sup­ply of Caribbean ser­vices. At present, the sup­ply of cul­tural and en­ter­tain­ment ser­vices and a whole range of pro­fes­sional ac­tiv­i­ties are com­pre­hen­sively cov­ered by the Car­i­fo­rum EPA, but some ex­perts sug­gest that such an ar­range­ment is un­likely to be within the scope of any other trade regime.

More­over, al­though the sec­tor is po­ten­tially one of the most im­por­tant ar­eas for fu­ture Caribbean eco­nomic growth, the ab­sence of any re­li­able statis­tics to in­di­cate the value of the Caribbean’s ex­ist­ing or po­ten­tial ser­vices mar­ket in the UK sug­gests that mak­ing a de­vel­op­ment case un­der any al­ter­na­tive trade ar­range­ment could be dif­fi­cult.

For the re­gion to have a co­her­ent Brexit trade po­si­tion it will also re­quire it to ad­dress a num­ber of other is­sues. For ex­am­ple, in or­der to have a strong po­lit­i­cal, tech­ni­cal, and de­vel­op­ment-ori­ented case that en­sures ex­ist­ing lev­els of mar­ket ac­cess, gov­ern­ments will need to sys­tem­at­i­cally en­gage the at-risk parts of the pri­vate sec­tor.

THE IMPLICATIONS

They will also need to con­sider the implications of Brexit on tourism, re­mit­tances, fi­nan­cial ser­vices and in­vest­ment. 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 whole host of other tech­ni­cal is­sues that may arise when the UK is out­side the EU.

Thought also needs to be given to the prob­a­bil­ity that some UK and in­ter­na­tional in­ter­ests may seek in­creased ad­van­tage for one or an­other eco­nomic ac­tiv­ity that the Caribbean is cur­rently in­volved in; to de­vel­op­ing a sup­port­ive di­a­logue with the UK in­dus­tries that do busi­ness with or are in­vested in the re­gion; and to en­su­ing that the Caribbean’s large di­as­pora in the UK is on­side.

The United King­dom has not yet said when it

will trig­ger Ar­ti­cle 50 of the Euro­pean Con­ven­tion, the step that starts its ne­go­ti­a­tion to leave the EU. Nor has it said how it is in­tend­ing to ad­dress its mu­tu­ally in­com­pat­i­ble po­si­tions of want­ing to con­tinue to have a free trade re­la­tion­ship with Europe while end­ing the free move­ment of EU ci­ti­zens into the UK.

Some sug­gest that the Bri­tish prime min­is­ter is wait­ing to see how key elec­tions and ref­er­enda in con­ti­nen­tal Europe 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 for what has be­come known as a hard Brexit, which, in part, would in­volve the UK leav­ing the Euro­pean Cus­toms Union.

PRE­CISE KNOWL­EDGE NEEDED

If un­der such cir­cum­stances EPA equiv­a­lence is what the Caribbean re­quires of the UK, it will need pre­cise knowl­edge of and con­tact with those who will be mak­ing and in­flu­enc­ing Bri­tain’s de­ci­sions. It will also need to be­gin a high-level po­lit­i­cal di­a­logue in or­der to make clear the re­gion’s wish to main­tain ex­ist­ing lev­els of pref­er­en­tial ac­cess for goods and ser­vices backed by a ro­bust po­lit­i­cal and tech­ni­cal case. It may also re­quire the de­vel­op­ment of a po­si­tion that is seen to help the UK and avoids new com­plex­i­ties, as with­out this it is un­likely that the re­gion will be at the fore­front of the Bri­tish gov­ern­ment’s think­ing.

Such an ap­proach would likely re­quire the re­gion en­cour­ag­ing not just the UK but also the EU27, per­haps in the con­text of the Ar­ti­cle 50 ne­go­ti­a­tions, to agree to an early WTO waiver for a UK-Car­i­fo­rum EPA equiv­a­lent – in ef­fect tak­ing Car­i­fo­rum off the UK trade ne­go­ti­at­ing ta­ble.

There are, of course, other fu­ture UK trade sce­nar­ios be­ing pro­moted for de­vel­op­ing coun­tries, but it is hard to see how the re­gion could ob­tain in the im­me­di­ate fu­ture any­thing more com­pre­hen­sive than equiv­a­lence to the EPA.

I

IN­CREASED COSTS

THE VIEW FROM EUROPE

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