Brexit’s many imponderables

Many months have passed since this column last addressed the issue of Brexit and what it may mean for the Caribbean and its long-standing relationship with the United Kingdom. This is because the shape of Britain’s future relationship with the EU27 and other international trade partners including the Caribbean remains ill-defined, lacking in vision, and the subject of much wishful thinking on the part of some British politicians.

Paradoxically, Brexit is taking place at a time when international economic and political relationships are in flux, a trade war is possible, rules-based systems are breaking down, and the UK needs a close relationship with the EU.

In a rational world one might reasonably expect that in the one year and nine months which have elapsed since the British people took their seismic decision to leave the EU, the British government and opposition might have been able to provide detail and direction.

Instead, all that can be said, given the continuing uncertainty about the precise nature of Britain’s post-Brexit relationship with the EU 27, is that the UK will formally leave the EU on March 29, 2019, and will thereafter have up to December 31, 2020 to resolve the legal and practical aspects of the UK’s global trade relationships.

There remain huge imponderables along the way. For the UK these include resolving to the satisfaction of the Irish Republic the sensitive issue of maintaining a ‘virtual’ border with Northern Ireland; the still to be agreed role of the British Parliament in a final decision on Brexit; and hard to guess political outcomes arising out of the deep fault lines within the Labour and Conservative parties on trade, migration and other aspects of the future relationship with the EU27.

None of this helps remove the continuing uncertainty for the Caribbean about the possible shape of its future trade and development relationship with the UK.

As matters stand such relations are governed by the EU-Cariforum Economic Partnership Agreement (EPA). This will remain in force with the UK until the end of 2020. However, at some point possibly early next year, if the UK and EU 27 can agree what most believe will be a bespoke future trade relationship, Britain and Cariforum (Caricom plus the Dominican Republic) are likely to discuss formally their post-2020 trade relationship.

In this context, several high-level exchanges have already taken place between Caribbean and British Ministers and officials. These point to a general commitment by London that the nations of Cariforum will be no worse off in a new trade and development relationship with Britain.

In the face of the complexity of what Britain is trying to achieve with the EU27 and globally this would seem to mean that the most likely and probably best shortterm outcome for the Caribbean, given its relative economic insignificance to the UK, would be to agree to something close to EPA trade equivalence.

Although the region is thinking in terms of a rollover of existing arrangements, and at a later date enhancement, much less clear is whether the existing hybrid EPA text which includes language on development support and political objectives, will be the precise route that the UK wishes to take. This is in part because its approach to development policy is changing.

Rather, it may be that in the case of largely uncontentious trade commitments of the kind that exist with Cariforum, some type of grandfather clause will be agreed ensuring that previously EU-negotiated trade commitments such as those contained in the EPA, become in the short to medium term a part of UK legislation.

Assuming that EPA trade equivalence can be delivered, other more practical issues will then arise.

This is because during the finite transition period out of the EU, the UK will have to come to address the new administrative burden of becoming a stand-alone state and determine how its pared down

Tbureaucracy will cope with new administrative decisions in real time.

To put this in a practical context it means that Caribbean exporters of goods and services are unlikely to know for some time yet about matters as basic as documentation requirements, how goods currently shipped onwards from the UK into continental Europe will be treated, and at what point additional tariffs or fees may have to be paid.

It is also far from clear what more general changes might occur in relation to labelling, shipping routes, air services agreements, standards, administrative law, the free movement of goods, and the movement of capital, let alone to the cost of doing business with or through the UK.

To some extent whatever comes to be finally agreed may be academic as the export of Caribbean goods to the UK and to the EU27 continues to decline, despite the EPA. Moreover, the sparse information that is available suggests that the Caribbean has taken little advantage of the UK’s or the less significant EU 27 EPA offers of services market access.

To complicate matters further, all this will be taking place as the Caribbean and its partners in Africa and the Pacific (the ACP) will be negotiating with the EU27 a very different form of more general postCotonou, post-2020, political and development agreement with Europe. In this context, Cariforum countries recently made clear that any such successor agreement must consider the ‘inherent and exogenous vulnerabilities’ of Cariforum states when it comes to the EU27’s development priorities with the ACP: an approach it may also wish to take with the UK.

For decades now, Britain has been engaged in a process of withdrawal from the region and the reformulation of its engagement. Today, this involves encouraging economic development through the private sector to support regional stability; security co-operation; support for the maintenance of common values such as parliamentary democracy and human rights; work on common concerns including climate change; and where possible mutual support in multilateral institutions including the UN. his suggests that in the medium term at least the special relationship with the UK will endure post Brexit. What is still missing, however, is any indication about how the region intends improving relations with other European nations that might in future play a role on its behalf within the EU 27.

Previous columns can be found at https://www.caribbean-council.org/ research-analysis/