Category Archives: Commonwealth

Post-Brexit UK-Caribbean Trading Relations: What are the options?

Alicia Nicholls

With the United Kingdom’s Prime Minister Theresa May due to formally begin the Brexit process by making the Article 50 notification this Wednesday (March 29), it is worth considering what are the possible options for future Caribbean trading relations with post-Brexit “Global Britain”. Moreover, should one of the options be participation in a Commonwealth-wide free trade agreement (FTA)?

UK-CARICOM Trading Relations

The UK and the Commonwealth Caribbean have a shared and close relationship which goes beyond historical, cultural and diplomatic ties. While Commonwealth Caribbean countries’ trade with the United States dwarfs trade with the UK, the latter remains the region’s largest trading partner within Europe. Caribbean Community (CARICOM) Member States, as part of the CARIFORUM (CARICOM plus the Dominican Republic), enjoy preferential access to the UK market under the CARIFORUM-EU Economic Partnership Agreement (EPA) signed in October 2008.

As the EU agreements to which the UK is currently part will cease to apply to the UK once it has completely withdrawn from the EU, here is what CARICOM/CARIFORUM will losing preferential access to (a) the world’s fifth largest economy (or sixth largest according to some reports), (b) a market of over 64 million people which includes a Caribbean diaspora population whose potential demand for Caribbean goods and services and as a source of diaspora investment still remains largely under-exploited, and (c) a trading partner with a shared language, shared culture and shared values and a common law legal system which brings a level of assurance and certainty for cross-border commerce.

Merchandise trade aside, the UK is an important source of tourist arrivals for many Caribbean countries, while in Barbados, for example, British high net worth individuals (HNWIs) are the largest buyers of luxury real estate on the island, making the UK the largest source of real estate foreign direct investment (FDI) into the island.

Whilst the UK cannot formally commence negotiations with third States until it has left the EU, the May Government has reportedly already begun preliminary informal trade talks with some States. Indeed, several countries around the world, including Commonwealth states like Australia, Canada and India have lined up in hopes of being among the first negotiate post-Brexit trade agreements with the UK. Here in the Caribbean, the Dominican Republic has also signalled its interest in a post-Brexit UK-DR FTA as the UK is apparently the Dominican Republic’s fastest growing market for Dominican exports according to the statement made by the DR’s Ambassador to the UK.

To this point, it is heartening to note that Prime Minister May has bucked the protectionist trend and intends to expand the UK’s trading relations around the world under her “Global Britain” banner. Indeed, Mrs. May argued that one of the compelling reasons for Brexit was so Britain would be free to expand its trade with the rest of the world on its own terms. The door is clearly open to the region for dialogue.

Possible Options for post-Brexit UK-CARICOM/CARIFORUM Relations

As I see it, the possible options for post-Brexit UK-CARICOM/CARIFORUM trading relations are as follows:

  1. Interim Arrangement which preserves EPA-level concessions before an FTA can be negotiated
  2. Negotiation of a UK-CARICOM or UK-CARIFORUM FTA
  3. Commonwealth FTA
  4. Most Favoured Nation (trading under WTO rules)

The Commonwealth Advantage?

This discussion is even more interesting in light of what is clearly a Commonwealth pivot by the UK government as it seeks to map its future trade policy and relations. Most CARICOM countries are member states of the 52-member Commonwealth of Nations, an intergovernmental organisation which consists primarily of former British colonies and current dependencies spanning Africa, Asia, the Americas, Europe and the Pacific.

The Commonwealth is not a trade bloc. However, despite the absence of a Commonwealth FTA, intra-Commonwealth trade and investment flows are substantial and growing. According to a 2015 report released by the Commonwealth, not only is “trade between Commonwealth members on average 20 per cent higher and trade costs are 19 per cent lower compared with in trading between other partners”, but intra-Commonwealth trade is expected to reach 1 trillion by 2020. The Secretariat’s International Trade Policy section also publishes very timely  and insightful research on trade matters. A good example is this brief which was part of the Meeting documents.

However, despite this, Commonwealth Trade Ministers have not met frequently. This is why the Inaugural Commonwealth Trade Ministers Meeting two weeks ago was such a momentous event.  From all reports the meeting was not only well-attended but the ministers discussed prospects for deepening intra-Commonwealth trade and investment ties using the “Commonwealth Advantage”. Inter alia, Ministers directed the Secretariat to “develop pragmatic and practical options to increase Commonwealth trade and investment”, to regularise and institutionalise Trade Minister meetings, and to cooperate on the implementation of the WTO’s Trade Facilitation Agreement.

The prospect of a Commonwealth-wide FTA has been floated informally, although it does not yet appear to be a firm policy proposal. The arguments for a Commonwealth FTA include a ready market of over 2.4 billion people yoked by a shared language and history, common principles and values, respect for the rule of law, the common law legal system, all of which form part of the “Commonwealth Advantage”. Additionally, it is argued by proponents of a pan-Commonwealth FTA that the potential for even greater intra-Commonwealth trade and investment should be harnessed as a buttress against rising protectionism and slowing global trade which are potentially harmful for Commonwealth developing States.

To be sure, the Commonwealth brings important value for the Caribbean. It has, for example, developed a strong small states agenda, which is not surprising given that thirty-one of its member States are small States. As an illustration, the Commonwealth launched the Commonwealth Small States Trade Finance Facility in 2015. Moreover, the fact that the current Secretary-General, Dame Patricia Scotland QC, is a daughter of the soil is also an advantage for the region.

There is also, of course, merit to fomenting closer commercial and political ties with fellow Commonwealth countries as some of the more developed Commonwealth countries are part of influential fora like the Group of 20 (G20), Organisation for Economic Cooperation and Development (OECD) and the Financial Action Taskforce (FATF) where Commonwealth Caribbean countries are not represented.  This is doubly important in light of the on-going slowdown in global trade flows, an apparent retreat from multilateralism and rising protectionism. Moreover, Commonwealth Caribbean countries have been seeking to diversify their trading partners, including source markets for tourism, foreign investment and international business and deepening ties with the rest of the Commonwealth could be useful.

Nonetheless, while I have not done any econometric analysis on what would be the possible economic and welfare benefits of any Commonwealth FTA for CARICOM/CARIFORUM, given the length of time it may take to negotiate a Commonwealth FTA, the varying levels of development, the differences in economic profile, and the diverse offensive and defensive interests of the various Commonwealth Member States which will need to be managed, the negotiation of a Commonwealth-wide FTA will not be an easy task. Therefore, I submit that the Caribbean region’s interests will, at least in the short to medium term, be better served by either negotiating an interim arrangement  with the UK which preserves EPA-level concessions until an FTA can be negotiated or negotiating an FTA with the UK straight off the bat.

So what should a possible UK-CARICOM/CARIFORUM take into account?

CARICOM countries have limited experience in negotiating FTAs with developed countries. So far the EPA is the region’s only completed FTA with a developed partner, as the Canada-CARICOM negotiations are currently in abeyance. Perhaps, fortuitously, the UK has even less experience with negotiating trade agreements, as trade negotiations have hitherto been handled exclusively by the European Commission, pursuant to the EU’s common commercial policy. So both parties, despite the power asymmetry, will be on a learning curve.

Commitments made under any prospective UK-CARICOM/CARIFORUM free trade agreement should take into account the sustainable development and economic growth needs and interests of both parties in a mutually beneficial way, while also taking into account differential levels of development among CARICOM/CARIFORUM countries.

CARICOM/CARIFORUM countries will also want at least the same level of concessions for their service suppliers, particularly in Mode 4 (Presence of Natural Persons) which has been the mode of supply which is the least liberalised. Additionally, as capital-importing States, CARICOM/CARIFORUM countries will likely wish to negotiate an investment chapter which protects, promotes and liberalises investment between CARICOM/CARIFORUM and the UK for the mutual development of both parties.

Of course, stakeholder consultations with not just the private sector but also civil society and citizens at large should continue to inform the region’s negotiating positions, including whether there is actually the need for an UK-CARICOM FTA and what are the region’s offensive and defensive interests.

FTA negotiations can take several years. The EPA negotiations, for instance, had been launched in April 2004 and the Agreement was not signed until October 2008. Therefore, unless a WTO-compatible interim arrangement could be negotiated whereby the UK agrees to continue EPA-type concessions to the region until a UK-CARICOM/CARIFORUM FTA is negotiated, it is possible that UK-CARICOM/CARIFORUM trade relations may revert to MFN conditions. Even so, while the UK is also a WTO member in its own right, its schedules are part of the EU’s which means the country will have to work out its own tariff schedules under the WTO post-Brexit. Additionally, WTO MFN conditions will not afford CARIFORUM countries the level of market access, especially for their service suppliers in the UK market, that they currently enjoy under the EPA.

Although the argument is often rightly made that the Caribbean region will be at the low rung of the negotiation priority ladder, I believe that the region cannot sit idly by as the clock begins ticking come Wednesday. While other major countries have begun to erect barriers, the May Government’s “Global Britain” outlook is a welcomed open door for the region. We should at least signal to the May government our interest in beginning talks on cementing a mutually beneficial UK-CARICOM/CARIFORUM trading arrangement post-Brexit, and take steps to do the ground work for such an eventuality.

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.

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24th Commonwealth Heads of Government Meeting Concludes in Malta

Alicia Nicholls

Heads of Government of the Commonwealth Caribbean joined other leaders of the 53-state Commonwealth Group of Nations for the 24th Commonwealth Heads of Government Meeting in Malta on November 27-29. The meeting was held under the theme “The Commonwealth: Adding Global Value” and comes in the aftermath of the terrorist attacks in Paris and immediately precedes the 2015 United Nations Climate Change Conference (COP21).

The agenda focused on the following themes: peace and security, human rights and good governance, migration, sustainable development, small states, climate change, trade, youth, gender quality and women’s empowerment, public health, current situations, movement of Commonwealth citizens, Commonwealth collaboration and the election of the new Secretary General.

Outcomes

Baroness Patricia Scotland was elected the 6th and first female Secretary General of the Commonwealth. It was agreed that Guyana would be one of the member governments to serve on the Commonwealth Ministerial Action Group (CMAG) for the next two years.

The final communiqué released by the leaders includes several noteworthy points of specific importance to the Commonwealth Caribbean, and other small island developing states. The leaders also released a separate statement on climate change.

Climate Change

  • Developed Commonwealth countries committed to assisting in mobilizing US$100 billion per year by 2020 to address the adaptation and mitigation needs of developing countries.
  • A Commonwealth Climate Finance Access Hub has been established to build the capacity of Commonwealth small and other climate vulnerable states to access climate finance with regional support.

Trade & Freedom of Movement

  • A voluntary Commonwealth Trade Finance Facility was launched to increase trade and investment finance, in particular for small and other developing economies with limited access to trade finance.
  • Leaders acknowledged a proposal for a “Commonwealth Advantage” under which Commonwealth governments will consider measures to enhance access to each others’ countries more easily and for longer in keeping with their national legislation and international obligations regulating visa policies. A working group has already been working on this.

Peace & Security

  • Commonwealth leaders recognized the growing trend of recruitment of youth persons by extremist groups as fighters, including from some Commonwealth countries.
  • Leaders renewed their commitment to implement and support national strategies to counter these threats, including the need to address recruitment and radicalization of youth via the internet and Commonwealth programmes to raise awareness and prevent young people from falling victim to radicalization and terrorism.
  • They called upon all member governments to implement their obligations under the UN Security Council Resolution 2178(2014) on foreign terrorist fighters in full and to join or fully implement the Arms Trade Treaty.

Border Disputes in Guyana and Belize

  • The leaders endorsed the outcome statement of the Commonwealth Ministerial Group on Guyana following its meeting in September 2015, and reaffirmed their “unequivocal support for the maintenance and safeguarding of Guyana’s sovereignty and territorial integrity”.
  • They also welcomed the signing of thirteen cooperation agreements between Belize and Guatemala and reiterated their full support for the sovereignty and territorial integrity of Belize.

Small States

  • A Commonwealth and Maltese government-funded Small States Centre of Excellence will promote the interests of small states and provide targeted capacity building programmes and other support.

The full statements may be accessed here:

Commonwealth Leaders’ Statement on Climate Change 

Final Communique 

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. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Dominica-born Baroness Scotland elected first female Commonwealth Secretary General

Alicia Nicholls

Another Caribbean national has made international history! Today Dominica-born Patricia Scotland QC, Baroness Scotland of Asthal was elected by Commonwealth leaders during the Heads of Government conference in Malta as the first female Secretary General of the Commonwealth of Nations.

Today’s electoral victory for Baroness Scotland was the culmination of a long drawn out candidacy race which saw her vying against another distinguished Caribbean son of the soil, Sir Ronald Sanders. Baroness Scotland was nominated by Dominica, the land of her birth, and her nomination was supported by Barbados and Belize. Renowned diplomat, Sir Ronald Sanders, Antigua & Barbuda’s ambassador to the United States, was nominated by Antigua & Barbuda and enjoyed most CARICOM countries’ support. The third distinguished candidate in the race was Botswana’s Ms. Mmasekgoa Masire-Mwambe, former Deputy General of the Commonwealth.

Baroness Scotland was born in Dominica in 1955 and moved to the UK with her family when she was only three years old. She  has had a long and distinguished legal career as a barrister and jurist. At only 35 years of age she became the first black and youngest female Queens counsel in 1991. She was created a peer in 1997.

She has held several ministerial posts in the UK including becoming the first female Attorney General of England, Wales and Northern Ireland in 2007 (later Advocate General of Northern Ireland). During her tenure several reforms of the British criminal system were undertaken including the introduction of the Domestic Violence, Crime and Victims Act.

She was appointed by Prime Minister David Cameron as Prime Ministerial Trade envoy to South Africa in November 2012. She is the founding patron of the Corporate Alliance Against Domestic Violence.It is therefore not surprising that in 2008 she was named by the Guardian newspaper as the most powerful black female Briton. Baroness Scotland is married and is the mother of two sons.

Baroness Scotland will be the second Caribbean national to have held the post of Secretary. The first was Sir Shridath Ramphal of Guyana. The Secretary General of the Commonwealth is the head of the Commonwealth Secretariat. The Secretary General is elected in a closed meeting by the Commonwealth Heads of Government and is allowed to serve a maximum of two four year terms.She will officially take office on April 2016, succeeding incumbent Secretary General Kamalesh Sharma.

Baroness Scotland’s bid for CARICOM support of her candidacy was not without controversy. Many commentators interpreted the inability of CARICOM states to reach a consensus on a single regional candidate as yet another sign of increasing fragmentation within the region. Though Baroness Scotland holds dual Dominican and British citizenship, some commentators in the region were of the view that Baroness Scotland’s almost exclusive British upbringing  and career meant she was not a “true” Caribbean candidate but a UK candidate, which may compromise her loyalty to the region.

The other candidate Sir Ronald Sanders had enjoyed the majority of CARICOM states’ support. He has had a long history of service to the region in a variety of capacities, including serving on the Commonwealth Eminent Person Group and was seen by many in region as the ideal choice  as someone with his hand on the pulse of the issues facing the region. There were concerns about whether Baroness Scotland had done enough in her career to represent Caribbean interests and whether, as someone who has spent almost her entire life in the UK, could be the advocate the Caribbean needs to represent its interests and those of small states.

In spite of these concerns, there is no doubt that  Baroness Scotland has had a long and distinguished career as an attorney and in public service and will bring a considerable breadth of knowledge and experience to the post at a time when there are concerns about the declining prominence of the Commonwealth on the world stage and questions about its geopolitical relevance and role today. The Commonwealth is not a trade bloc or an organisation per se but a voluntary association of 53 states, most of which were former British colonies. Together the Commonwealth comprises 33% of the world’s population and 27% of the world’s countries united by shared values, historical links and a common language. A recent Commonwealth report also reveals the growing importance of intra-Commonwealth trade.

A Commonwealth Eminent Persons Group was re-established in 2009 to ‘undertake an examination of options for reform in order to bring the Commonwealth’s many institutions into a stronger and more effective framework of co-operation and partnership’. Pursuant to this mandate, the Group formulated the “A Commonwealth of the People: Time for Urgent Reform” in 2011 which put forward several recommendations for reform. The Commonwealth Charter, the first recommendation of the EPG, was inaugurated in 2013.

Small states, such as those in the Commonwealth Caribbean, comprise more than two-thirds of the Commonwealth’s membership. They face many unique challenges, including growing marginalisation of their economies, trade preference erosion, high indebtedness, vulnerability to natural disasters, and the impacts of climate change.  The Commonwealth has played an important role over the years as a collective voice advocating in various multilateral fora for recognition of issues which are particular concern to small states.

Of specific  interest to Caribbean states and small states in general are the recommendations in the EPG Report which speak to promoting development,  empowering small states by strengthening their capacity and resilience, dealing with their high levels of indebtedness and action on climate change and existential threats. Each of these recommendations has emphasised the key advocacy role to be played by the Secretary General.  For instance, the recommendation was made for the Secretary General to establish High-Level Advocacy Missions to engage in dialogue with the International Monetary Fund (IMF), the World Trade Organization (WTO) and the World Bank in order to make progress on several issues.

As the incoming Secretary General Baroness Scotland is poised to play a key part in reforming and redefining the Commonwealth’s role in the twenty-first century, including furthering and enhancing its work as a forum for cooperation on issues of development, human rights and democracy and as a mechanism through which small states can have their voices heard.

It would be remiss of me if I did not conclude by expressing how excited I am as a young Caribbean woman about Baroness Scotland’s election, just like I am whenever I see examples of Caribbean women both at home and in the diaspora making their imprint on the world stage. I congratulate Baroness Scotland on her election and wish her a successful tenure!

Further information on Baroness Scotland may be found 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. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

 

 

 

 

Intra-Commonwealth trade projected to increase to $1 trillion by 2020

This week the Commonwealth of Nations released its Commonwealth Trade Review 2015 entitled “The Commonwealth in the Unfolding Global Trade Landscape: Prospects Priorities Perspectives”. The report which was released ahead of the Commonwealth Heads of Government meeting in Malta this week details the trade performance and trends in the 53-state voluntary grouping and discusses prospects for future intra-Commonwealth trade. The Commonwealth comprises a diverse set of countries, most of which are former British colonies. It includes developing and developed countries, as well as small states and land locked states.

Though not a trading bloc, trade amongst Commonwealth states is already substantial and growing. Intra-Commonwealth trade has grown almost 10% annually since 1995 and was estimated at $592 billion in 2013. It is projected to reach over 1 trillion in 2020.The report emphasises that there is scope for more intra- Commonwealth trade due to the historical ties, shared values, long established trade, familiar administrative and legal systems, use of the English language mostly and strong diasporic communities.

Commonwealth Trade

Some key points from the report:

  • Total combined Commonwealth exports of goods and services were $3.41 trillion in 2013 and accounted for 14.6% of global exports in that year.
  • Developing Commonwealth states increased their share of Commonwealth exports from 36% in 2000 to over 50% in 2013. This expanded share was attributed mainly to Asian countries which comprise 4/5 of total Commonwealth developing country exports in 2013.
  • Merchandise exports comprised 76% of all Commonwealth exports while the remaining 24% is services exports

Commonwealth Caribbean Trade

Caribbean states, along with Pacific states, comprise the majority of small states in the Commonwealth. The report reveals that:

  • Total Commonwealth Caribbean exports in 2013 comprised only 1.14% of total Commonwealth exports of goods and services and 2.25% of total Commonwealth developing country exports of goods and services.
  • Commonwealth Caribbean exports have grown from 14 billion in 2000 to 39.1 billion in 2013 and are forecasted to reach 41.2 billion in 2015.
  • Trinidad & Tobago accounted for 60% of all Commonwealth Caribbean goods and services exports in 2013, with its total exports of goods and services reaching 24.7 billion in 2013. The other top Commonwealth Caribbean exporters were Jamaica, the Bahamas and Barbados.
  • Intra-Caribbean exports account for 55 per cent of Caribbean members’ intra-Commonwealth exports, while developed countries accounted for 40% and developing countries was 25% in 2013.
  • Services accounted for 60% of Commonwealth Caribbean countries’ exports in 2013 and were dominated mainly travel trade, followed by transport and other business services.

Other major points made in the report:

  • Commonwealth small states’ share in world trade has declined from over 0.7% in 1980 to just 0.46% in 2011, with loss of preferences being a major factor. Small states are also faced with declining export orientation of their economies; export GDP ratio of small states has fallen while it has risen globally. This is compounded by the numerous competitiveness challenges small states face, including their small domestic markets, unfavourable geographical location.
  • China has grown as a major trading partner in the Commonwealth, with Commonwealth States exports to China increasing from 19 billion in 2000 to 268 trillion in 2013, while Commonwealth states’ imports from China have grown from $16 billion in 2000 to $359 in 2013.
  • The report also mentions the many opportunities which exist within the Commonwealth for enhancing trade and suggests ways in which developing countries can improve their trade performance. These include through the use of trade preferences, aid for trade, addressing the implementation gap, promoting the role of private sector and the global trade support architecture.

The full report is available on the official website of the Commonwealth here.