Caribbean Trade Law and Development

Author: caribbeantradelaw

  • French Election 2017: What’s at stake for the world and the Caribbean?

    French Election 2017: What’s at stake for the world and the Caribbean?

    Photo source: Pixabay

    Alicia Nicholls

    The results of the first round of voting in the two-round French presidential elections are in! Pro-EU businessman Emmanuel Macron and far-right candidate Marine Le Pen are the two candidates who will face off in the second/final round of voting within a fortnight.

    French presidential elections do not normally attract this much fanfare internationally, but the results of the first round of the 2017 race are interesting for two main reasons. The first is that there is a 50% chance that there could be a Le Pen presidency which would add to a growing string of political upsets globally. The second is that neither candidate is from the mainstream political parties in France, a firm rejection by the French people of the entrenched political establishment, not unlike what occurred in the US with the election of Donald Trump.

    France has a two-ballot presidential election system which means that in the event of no one candidate winning over 50% of the votes in the first ballot, the two front-runners  have to face off against each other in a second ballot. As of the time of this article’s writing, Emmanuel Macron is estimated to have won this first run-off with  23.9% of the vote, while Ms. Le Pen came second with 21.4%, beating the other candidates.

    France at the moment is facing lacklustre GDP growth, high unemployment, high debt and an increase in high-profile and deadly terrorist attacks, which means the anti-establishment, anti-business as usual mood comes as no surprise. Incumbent President, Francois Hollande, currently faces low approval ratings and has decided not to seek a second term.

    The Two Candidates

    While Macron and Le Pen are ‘outsiders’ from the political mainstream, the two candidates represent two diammetrically opposed worldviews. Emmanuel Macron is a former investment banker who has never held elected office, but had worked for Mr. Francois Hollande during the 2012 Presidential Election campaign. He also subsequently served as Minister of Economy, Industry and Digital Affairs under then Prime Minister Manuel Valls in 2014 until August 2016. Mr. Macron founded his own party En Marche!  in April 2016 which currently has 253,907 members, according to the Party’s official website. The centrist Mr. Macron is pro- Europe, socially liberal and believes that France’s prosperity can be ensured through pursuing pro-trade and outward-looking policies and through continued membership in the EU.

    Marine Le Pen is a lawyer, a Member of the European Parliament since 2009 and the leader of the populist Front National, a far-right party which had been on the dark fringes of French politics until recently.  She is the daughter of Front National co-founder, Jean Marie Le Pen, a far-right ethno-nationalist.  She sought to distance herself from some of her father’s most extreme views as she sought to broaden the Party’s appeal, and succeeded in having him ousted from the party. Ms. Le Pen, however, has strongly anti-immigrant, anti-EU views and has expressed enthusiastic support of both Brexit in the UK and the election of Donald Trump in the US.

    The polarity in the views of the two candidates means that the election of either will have completely opposite global implications.

    What’s at stake with the French presidential election?

    Although polls are showing a Macron victory, Le Pen still has a chance of winning the final run-off on May 7. A Le Pen victory on May 7th would be the continuation of a nationalist, inward-looking turn in advanced western economies, with both economic and geopolitical implications. Domestically, she has indicated her intention to pursue protectionist economic policies and champion anti-immigration reforms. She is anti-globalisation and anti-free trade. She has vowed that she would pull France from the EU and the eurozone, and the North Atlantic Treaty Organisation (NATO). She has voiced her intention to strengthen relations with Russia and had forcefully condemned the EU decision to extend its sanctions on Russia until mid-2017.

    In their forecasts for the global economy and world trade respectively, both the International Monetary Fund (IMF) and the World Trade Organisation (WTO) have forecast higher growth rates but noted the vulnerability of the forecast growth to trade, monetary and other policies pursued by governments. IMF Managing Director, Christine Legarde (who is a former French Minister of Finance) has been reported as stating that a Le Pen presidency could lead to political and economic upheaval.

    First, France is the 6th largest economy in the world. A founding member of the EU, it is also the eurozone’s second largest economy. A more isolationist France would impact on the global economy and have implications for western approaches to current global threats and a reshaping of global alliances. Moreover, a French withdrawal from the EU (termed ‘Frexit’), coming on the heels of the UK’s withdrawal from same, could plunge the EU into an existential crisis more so than Brexit would.

    Any implications of the French election for the Caribbean?

    Will there be any implications of a possible Le Pen presidency for the Caribbean? The specifics of Ms. Le Pen’s policies are still not fleshed out. However, a French withdrawal from the EU would reduce the amount of EU development assistance which the region currently receives under the European Development Fund (EDF).

    But what about trade? Thanks to the Economic Partnership Agreement (EPA) signed between the EU and CARIFORUM in 2008, the countries which make up CARIFORUM (CARICOM plus the Dominican Republic) currently enjoy preferential market access for their goods and services to the EU market, including to the French market (and to French Caribbean Outermost Regions, by extension).

    However, should France leave the EU, it would no longer be a party to the EPA. On its own, the lack of preferential access to the French market would be unlikely to have any significant economic impact on the anglophone Caribbean trade-wise as the volume of trade between English-speaking Caribbean countries and metropolitan France is limited.

    There are, however, small but growing trade links between some CARICOM countries) and the FCORs, which are Martinique, Guadeloupe and French Guiana. Martinique, for example, is one of the most important source markets for tourists to St. Lucia. While there are issues which have inhibited greater CARIFORUM trade with FCORs including the language barrier and the ‘octroi de mer’ (dock dues) charged on all imports into FCORs (despite the EPA), the FCORs are also seen as stepping stones for exporting to continental Europe using the EPA. A French withdrawal from the EU if Ms. Le Pen wins means the latter will not be possible.

    It is the democratic right of the French populace to choose which of the two candidates is in their country’s best interests. However, given France’s economic and geopolitical importance globally, and the political upsets of late, the results of the final round on May 7 will reverberate far beyond its borders.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • The Trump Presidency – Implications and Opportunities for Caribbean IFCs

    The Trump Presidency – Implications and Opportunities for Caribbean IFCs

    Alicia Nicholls

    On March 31, 2017 I was a panellist representing FRANHENDY ATTORNEYS at the Barbados International Business Association (BIBA) Barbados International Business Forum 2017 entitled “Is the Barbados International Business Sector Under Attack?” held at the Lloyd Erskine Sandiford Centre in Barbados.

    I was on the second panel which discussed the topic “The Trump Presidency – Implications and Opportunities for IFCs“. My esteemed fellow panellists were Jeremy Stephen, Economist and UWI Lecturer, Lisa Cummins, Executive Director of UWIConsulting and Cadian Dummond, Attorney at Law. The discussion was expertly moderated by Melanie Jones, Partner at Lex Caribbean Attorneys-At-Law.

    I spoke to the possible implications of the Trump Presidency in regards to de-risking, FATCA and visa restrictions.

    For those who missed the panel discussion and have expressed interest in my remarks, please find a copy of same in powerpoint form here. Enjoy!

    For more on past presentations I have done, please see news and announcements.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

     

     

  • PM May calls snap election: Pros and Cons

    PM May calls snap election: Pros and Cons

    Alicia Nicholls

    United Kingdom (UK) Prime Minister, Theresa May, has today ‘reluctantly’ announced that Britons could be going to the polls in a general election on June 8, 2017, three years shy of the due date of May 2020.

    The UK has a parliamentary system of government. Since 2011, parliamentary elections are fixed for every five years pursuant to the Fixed-Term Parliaments Act. However, early general parliamentary elections may be called before the five year period, inter alia, where two-thirds of the House of Commons (including vacant seats) vote in favour of same. In the UK parliamentary system (also known as the ‘Westminster System’) and in most British-inherited parliamentary systems like those in the Caribbean, the Prime Minister is not directly elected. In practice, though, it is the person who leads the party which wins the majority of seats in the House of Commons who becomes the Prime Minister.

    The announcement of an early poll is surprising for two main reasons (1) it comes after months of denials by Mrs. May that she would be calling an early election, and (2) it also comes less than a month after the May Government made the UK’s notification under Article 50 of the Treaty on European Union (Lisbon Treaty) of its intention to withdraw from the EU.

    Pros

    So what are the upsides? Firstly, it is likely that in light of the disarray of the Jeremy Corbyn-led Labour Party, the Prime Minister is anticipating a stronger Conservative working majority in Parliament, reducing the likelihood of the final Brexit deal being voted against.

    The Tories currently have a 17-seat working government majority in the House of Commons following the 2015 poll, which is a slim majority when one considers that there is a total of 650 seats in the House of Commons. After all, what Prime Minister would not want a more comfortable majority at home when facing difficult negotiations with the EU for the next (at least) two years? Prime Minister May said as much in her statement when she noted that “Division in Westminster will risk our ability to make a success of Brexit and it will cause damaging uncertainty and instability to the country”, and warned that “If we do not hold a general election now, [Opposition Party] political game-playing will continue.”

    Polls already show a Tory sweep, but let us also remember polls had predicted a “No” win in the Brexit referendum.

    Secondly, it should be recalled that Mrs. May became Prime Minister in July 2016 not through leading the party in a general election, but after then Prime Minister David Cameron resigned following his Brexit defeat.  If Mrs May leads the Conservative Party to victory in the June 8, 2017 poll, she would have:

    (i) won a ‘direct mandate’ from the British people to pursue her own domestic agenda, which frees her from pursuing some of the policies promised by the then Cameron-led government.

    (ii) This mandate, she would hope, would help quell the dissenting factions in her own party who disagree with her handling of Brexit thus far.

    (ii) She would not be legally required to call another general election until June 2022, by which time the messiness of Brexit would be largely past (hopefully). Recall that Brexit negotiations could be extended up to 4 years, at which time the May Government would not wish to negotiating a final deal with the EU-27 while having to worry about an election at home which could be lost due to an unpopular final deal.

    A third pro is likely economic. Although predictions of a British recession following the Brexit vote have not come to past, there is no telling what would happen to the British economy once the Brexit negotiations are underway. It makes more sense for Mrs. May to seek an election now than wait until things take a turn for the negative.

    Cons

    Firstly, on the flipside, calling a snap election after having made the Brexit notification and ahead of the negotiations with the Europeans risks adding even more uncertainty to an already uncertain political climate.

    Secondly, although polls favour a Tory win, what happens if the polls are wrong and the Tories lose to an anti-Brexit Labour?  Or what if Labour and the Liberal Democrats expand their number of seats, further reducing the already slim Tory majority?

    Thirdly, she risks dealing with ‘voter fatigue’.

    Calling the election at this time is a risky move but one, which like all high risks, could have big rewards if the May-led Tories win and expand their mandate. In anticipation of a Tory win, markets took the news of the snap election quite enthusiastically. Sterling appreciated  against the US dollar to 1.26. However, it is also potentially a big gamble and the decision to hold the poll after triggering Article 50 is curious. It will be up to British voters to decide whether to reward or reject the gamble.

    What is next?

    When the House of Commons meets, they will need to deliberate and vote (as required under the Fixed-Term Parliaments Act) on whether they are in favour of an early election. A two-thirds majority will be needed. For his part, Labour leader Mr. Corbyn has supported the decision to go to the polls in his statement released on his official Facebook page following the Prime Minister’s announcement.

    For Prime Minister May’s full statement, please see here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • IMF raises global GDP growth forecast but protectionist policies a threat

    IMF raises global GDP growth forecast but protectionist policies a threat

    Alicia Nicholls

    “The sharp downtown in global trade in recent years is both a symptom of and a contributor to low growth“. – Making Trade an Engine of Growth for All (IMF, WTO, World Bank Report of April 2017)

    Protectionism leading to trade warfare is a ‘salient threat’ to global economic growth, warned the International Monetary Fund (IMF) economists, not for the first time, in their recently released World Economic Outlook for April 2017.

    The good news is that the Fund’s April outlook was much more upbeat than its January 2017 outlook. According to the Fund, the global economy is projected to expand by 3.5 percent in 2017, a modest increase from its 3.4 percent projection in its January 2017 outlook but greater than the 3.1 percent growth in 2016. The Fund has maintained its outlook for 2018 at 3.6 percent.

    The not so good news, as already noted, is that the tenuous economic recovery remains vulnerable to several downside risks, including protectionism. Bear in mind as well that the global economy expanded on average 4.2 percent between 1999-2008, so the projected rate of growth is still below the pre-crisis rates of growth.

    The Fund’s most recent WEO report comes on the heels of the release by the World Trade Organisation (WTO) of its trade growth forecast which projected some recovery in global trade growth to 2.4 percent in 2017. Most readers would remember that 2016 saw the slowest rate of global trade growth since the global economic and financial crisis which coincided with the slowest rate of global economic growth in 2016 since 2009.

    As noted by the WTO in its press release, “the volume of world merchandise trade has tended to grow about 1.5 times faster than world output, although in the 1990s it grew more than twice as fast.” However, dampened trade volumes have been linked to a subdued global economy and global trade grew less than global economic growth in 2016. Although, the WTO’s projected rate of growth for 2017 signals a cautious recovery, the rate of merchandise trade growth is still much lower than pre-crisis merchandise trade growth and the forecast risk is higher due to both economic and policy uncertainty.

    The IMF’s most recent WEO also follows a joint report released by that institution, the WTO and the World Bank entitled “Making Trade an Engine of Growth for All: The Case for Trade and for Policies to Facilitate Adjustment” in which it was stated, inter alia, that the role of trade in the global economy is ‘at a critical juncture’, and arguing that further trade integration was important for stimulating global growth.

    At the same time, the IMF warned that protectionism could lead to trade warfare, citing several factors in mainly advanced economies which have seen greater political support for nationalist and protectionist policies. There is good reason for this concern, stemming from protectionist turns and mercantilist rhetoric emanating from political quarters in advanced economies, namely the US and Europe. Moreover, the communique from the March 2017 G-20 Finance Ministers’ Meeting in Germany  saw, for the first time, the exclusion of the pledge to “resist protectionism”. On the multilateral front, although the WTO’s Trade Facilitation Agreement has come into effect, there has been little progress otherwise on multilateral trade negotiations.

    Trade is an important driver of global growth, and helped to propel global growth in the latter half of the 20th century. Trade has also played an important role in boosting competition, productivity and improving living standards and productivity. However, there has been dislocation as a result of free trade. In the case of developing countries, there has been the negative impact of competition from cheaper subsidised (particularly agricultural) imports from advanced countries on domestic industries which have higher production costs due to lack of economies of scale and lower technology use. An Oxfam report noted the  negative impact on Mexico’s corn industry following the introduction of the North American Free Trade Agreement (NAFTA).

    While the cheaper imports benefit consumers through lower prices, they, however, can negatively impact domestic industries and jobs, and with implications for countries’ balance of trade, and in the case of the agricultural sector, food security. This is an issue which has been noted by developing countries and development economists for years but only seemed to gain mainstream discussion once the effects became more palpable in advanced economies, such as the US and Europe.

    However, this is not to suggest that trade is undesirable or that the negatives outweigh the positives. Trade, as the IMF has rightly noted, is an important driver of the global economy. It does, suggest, however, that there needs to be greater consideration of the “social impact” of trade policies and of the need to make trade policies much more inclusive by ensuring that the most vulnerable to the negative fall-outs of trade, such as women and the poor, are protected through supporting policies and mechanisms. As such, domestic policies to assist with, and mitigate, these trade-related adjustments are important, a point made in the joint report by the IMF, WTO and World Bank.

    Besides protectionism, the IMF also noted faster than expected interest rate hikes in the US, aggressive financial deregulation, financial tightening in emerging market economies, geopolitical tensions, inter alia, as among the inter-connected downside risks to global growth. Furthermore, the IMF emphasised the importance that countries’ policy choices will have on the global economic outlook and on reducing risks to this outlook.

    To read the full IMF WEO April 2017 report, please visit here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.