Saint Lu­cia and the BREXIT fall­out: Chal­lenges and Op­por­tu­ni­ties

The Star (St. Lucia) - - COMMENT - Stephen Fevrier and Jan Yves Remy By Stephen Fevrier LL.M, LL.B, BA (Hons.) is an In­ter­na­tional Trade Pol­icy Ex­pert. Jan Yves Remy PhD is an In­ter­na­tional Trade Lawyer in the law firm, Si­d­ley Austin, Washington DC/Geneva.

The de­ci­sion by the Bri­tish elec­torate to sever the long­stand­ing re­la­tion­ship be­tween the United King­dom and the Euro­pean Union will un­doubt­edly pose chal­lenges to Saint Lu­cia. In­deed, Brexit will dis­rupt not only the re­la­tion­ship be­tween the UK and the EU, but also their re­la­tion­ships with third par­ties. None­the­less, the new par­a­digm might well bring with it new op­por­tu­ni­ties to re­shape and re-pri­or­i­tize our re­la­tion­ship with the UK, by far our most im­por­tant trad­ing part­ner and donor within Europe.

The de­par­ture of the UK will un­doubt­edly cast a shadow of un­cer­tainty over what was gen­er­ally con­sid­ered to be a pre­dictable and sta­ble eco­nomic re­la­tion­ship be­tween the EU and the coun­tries of CARIFORUM (com­pris­ing CARICOM coun­tries and the Do­mini­can Repub­lic). In the im­me­di­ate term, Brexit is al­most cer­tain to have neg­a­tive eco­nomic im­pacts, in­clud­ing lower vis­i­tor ar­rivals and in­vest­ment from the UK. The medium to longer-term im­pacts on Saint Lu­cia will likely de­pend on the terms of any new trade, in­vest­ment and eco­nomic ar­range­ments be­tween our re­gion and the UK fol­low­ing Brexit.

Saint Lu­cia and other mem­bers of CARIFORUM are cur­rently en­gaged in trad­ing re­la­tion­ships with the UK and EU through mem­ber­ship in the World Trade Or­ga­ni­za­tion (WTO) as well as bi­lat­er­ally through the CARIFORUM - EU Eco­nomic Part­ner­ship Agree­ment (CF - EPA). How­ever, much of the trade and eco­nomic ex­change be­tween the UK and Saint Lu­cia is gov­erned by CF - EPA - an agree­ment that re­flects the ma­tur­ing of a 30-yearold trade and de­vel­op­ment part­ner­ship be­tween the EU and the for­mer colonies of some of its Mem­bers. Un­der the CF - EPA, Saint Lu­cia and CARIFORUM coun­tries ben­e­fit from pref­er­en­tial ac­cess to the EU mar­ket, ac­cess that need not be ex­tended to other mem­bers of the WTO. A unique fea­ture of the CF - EPA is a de­vel­op­ment di­men­sion which pro­vides re­sources to sup­port the im­ple­men­ta­tion of that agree­ment, as well as eco­nomic and so­cial trans­for­ma­tion of ben­e­fi­ciary coun­tries. In ex­change for th­ese ben­e­fits, CARIFORUM mem­bers, in­clud­ing Saint Lu­cia, have agreed to open our mar­kets to the EU, al­beit in a phased and struc­tured man­ner, over a 30year time­frame.

Hence, the abil­ity of our farm­ers, man­u­fac­tur­ers and ser­vice sup­pli­ers to gain spe­cial ac­cess to the UK has been gov­erned by an agree­ment that is ad­min­is­tered not by the UK, but by the EU in Brus­sels. This will change af­ter the UK ex­its the EU, as the UK will as­sume full re­spon­si­bil­ity for its own trade and in­vest­ment pol­icy. While it is un­clear what agree­ment will re­place the ex­ist­ing re­la­tion­ship be­tween the EU and the UK, changes to that regime will likely re­quire the UK to ne­go­ti­ate new ar­range­ments with its trad­ing part­ners, in­clud­ing with Caribbean coun­tries. Against the back­drop of a UK out­side of the EU, our re­gion will likely not be a top pri­or­ity for a UK in search of con­ti­nu­ity in its trade and eco­nomic re­la­tions with its ma­jor trad­ing part­ners. This means that the long-stand­ing and pre­dictable re­la­tion­ship that we now en­joy with the UK may not be reg­u­larised for a num­ber of years to come, cre­at­ing un­cer­tainty in the trade and in­vest­ment re­la­tion­ship be­tween the UK and Saint Lu­cia and fur­ther com­pli­cat­ing pri­vate sec­tor and in­vest­ment de­ci­sion­mak­ing.

Be­yond the trade and in­vest­ment spheres, Brexit will likely af­fect in­flows of de­vel­op­ment as­sis­tance and sup­port from the EU. A sig­nif­i­cant quan­tum of UK de­vel­op­ment as­sis­tance to Saint Lu­cia is chan­neled through Na­tional and Re­gional In­dica­tive Pro­grammes fi­nanced by the Euro­pean De­vel­op­ment Fund (EDF). For ex­am­ple, un­der the 10th EDF (2008 - 2013), 165 mil­lion was al­lo­cated to CARIFORUM un­der the Re­gional In­dica­tive Pro­gramme to sup­port re­gional in­te­gra­tion and the im­ple­men­ta­tion of the EPA, while a fur­ther 736 mil­lion was ear­marked for na­tional pro­grammes un­der the Na­tional In­dica­tive Pro­gramme. Un­der the 11th EDF, 30 bil­lion has been al­lo­cated for the pe­riod 2014 - 2020 for all ACP coun­tries, of which the UK has agreed to con­trib­ute 14.68 per­cent or 4.478.

EU sup­port through the EDF has helped fund mul­ti­ple ini­tia­tives in a va­ri­ety of sec­tors in Saint Lu­cia, from: pri­mary healthcare, (in­clud­ing the new Owen King – EU Na­tional Hos­pi­tal) to ru­ral de­vel­op­ment and sup­port for the re­vi­tal­i­sa­tion of the agri­cul­tural sec­tor (in­clud­ing 10.4 mil­lion to the ba­nana sec­tor).

It re­mains un­clear whether ex­ist­ing UK com­mit­ments un­der the cur­rent 11th EDF will be ful­filled and, more im­por­tantly, what im­pact any break in UK sup­port to the Fund would have on cur­rent or fu­ture com­mit­ments to the re­gion. While Brexit may well al­low the UK to cre­ate more di­rect chan­nels to de­liver de­vel­op­ment as­sis­tance to Saint Lu­cia, any such fa­cil­ity is likely to take a con­sid­er­able length of time to im­ple­ment.

Saint Lu­cia, and the rest of CARIFORUM, must also be­gin to set the ground­work for ne­go­ti­a­tions with a Euro­pean Union that ex­cludes the UK. The UK has long been a strate­gic ally of Saint Lu­cia and CARICOM within the EU and has al­lowed our re­gion to ex­ert some in­flu­ence on EU de­ci­sions rel­e­vant to the re­gion. It was the UK that was our clos­est ally in ne­go­ti­a­tions with the EU Com­mis­sion and other third par­ties dur­ing the bananas saga at the WTO. In this con­text, it was the UK that pushed the EU Com­mis­sion not to agree to re­duce tar­iffs on Latin Amer­i­can bananas in a man­ner that would fur­ther harm ba­nana ex­ports from African Caribbean and Pa­cific (ACP) coun­tries, in­clud­ing Saint Lu­cia. With­out this sup­port from the UK, Latin Amer­i­can ba­nana sup­pli­ers may have re­ceived duty free ac­cess to the EU mar­ket, which would have com­pletely de­stroyed any hope of ACP coun­tries con­tin­u­ing to ex­port into the EU. The UK also as­sisted the re­gion in ne­go­ti­at­ing a set­tle­ment on bananas, in­clud­ing through its sup­port for the Ba­nana Ad­just­ment Mea­sures (BAM) from which ACP ba­nana pro­duc­ers are ben­e­fit­ing. With the im­pend­ing de­par­ture of the re­gion’s most sig­nif­i­cant ally within the EU, it is un­cer­tain whether the re­gion, and by ex­ten­sion Saint Lu­cia, will re­main a high pri­or­ity for the re­main­ing 27 EU mem­bers.

That said, there are op­por­tu­ni­ties that the re­gion can ex­plore in the con­text of a UK out­side of the EU. The exit of the UK from the EU al­lows us an op­por­tu­nity to fo­cus minds and re­sources on our trade with the UK, which is by far our most im­por­tant mar­ket in Europe. Avail­able data in­di­cates that over 90 per­cent of Saint Lu­cia’s ex­ports to the UK are com­posed of food (in­clud­ing bananas and other fruit) and al­co­holic bev­er­ages. For Saint Lu­cia, the UK is a sig­nif­i­cant ex­port mar­ket ab­sorb­ing ap­prox­i­mately 15 per­cent of to­tal ex­ports. An­other tan­ta­liz­ing pos­si­bil­ity that may yet emerge from Brexit is to gain bet­ter mar­ket ac­cess for our agri­cul­tural prod­ucts. The EU Com­mon Agri­cul­ture Pol­icy (CAP) has long been a source of con­cern for many ACP ex­porters. The high level of sub­si­dies his­tor­i­cally as­so­ci­ated with the CAP has made it chal­leng­ing for ACP agri­cul­tural sup­pli­ers to ac­cess the EU mar­ket on com­mer­cially vi­able terms. In­deed, the UK has long been a pro­po­nent of greater lib­er­al­iza­tion in the agri­cul­tural sec­tor but those ef­forts have been frus­trated par­tic­u­larly by France which re­mains a sig­nif­i­cant pro­po­nent of the CAP and its at­ten­dant sub­si­dies. Brexit may pro­vide an­other op­por­tu­nity for Saint Lu­cia to gain di­rect ac­cess to the UK mar­ket for our farm­ers, this time on more vi­able com­mer­cial terms.

Be­yond agri­cul­ture, there are op­por­tu­ni­ties for Saint Lu­cia to ne­go­ti­ate more di­rectly with the UK to im­prove trade in spe­cific ser­vice sec­tors such as: busi­ness ser­vices (in­clud­ing back-of­fice ser­vices), en­ter­tain­ment, mar­itime and tourism, ar­eas al­ready iden­ti­fied as cru­cial to Saint Lu­cia’s eco­nomic de­vel­op­ment.

Thus, de­spite the chal­lenges, there may well be a sil­ver lin­ing to the Brexit cloud that hov­ers. Many within CARICOM have com­plained that both the trade and de­vel­op­ment di­men­sion of the EPA have not yielded the ex­pected out­comes. In­deed, the trade per­for­mance of CARICOM eight years af­ter the sign­ing of the EPA re­mains ane­mic at best. Brexit presents an op­por­tu­nity for pol­icy mak­ers within the new ad­min­is­tra­tion, along with the busi­ness com­mu­nity and civil so­ci­ety, to con­sider how a fu­ture trade and de­vel­op­ment frame­work with the UK can bet­ter sup­port the de­vel­op­ment goals of our peo­ple. Saint Lu­cian au­thor­i­ties, as well as the re­gional gov­ern­ments, must be­gin the process of re­flect­ing on our pri­or­i­ties and iden­ti­fy­ing ar­eas that can be built upon dur­ing the next phase of our re­la­tion­ship with the EU, and a sep­a­rate UK.

Head of the Euro­pean Union (EU) Del­e­ga­tion to Bar­ba­dos and the Eastern Caribbean Am­bas­sador Mikael Bar­fod says there was no need for alarm fol­low­ing Brexit.

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