Tag Archives: CARIFORUM

‘No Deal’ Brexit Scenario Increasingly Likely: What does this mean for CARIFORUM-UK Trade?

Alicia Nicholls

The countdown is on. With 100 days to go before the United Kingdom’s (UK) scheduled withdrawal from the European Union (EU), and the ratification of the Draft Withdrawal Agreement less likely, both sides have this week announced contingency plans for a ‘No-Deal Brexit’. What do these recent developments mean for CARIFORUM-UK trade, not just at the policy level, but at the firm level as well?

It has been a busy week in Brexit news. After delaying the House of Commons vote on the Draft Withdrawal Agreement which was scheduled for December 11th, UK Prime Minister Theresa May this week announced that the promised vote will be held the week of January 14, 2019. In the interim, Mrs. May will be seeking to obtain additional legal assurances from the EU-27 that the deal’s ‘backstop’ provision would not keep the UK in a customs union with the EU indefinitely.

UK and EU Brexit Contingency Plans Underway

However, in recognition of an increasingly likely ‘no deal’ scenario, the May Government also announced plans to, inter alia, put 3,500 troops on standby, allocate monies from a contingency fund to key government departments, and outlined a post-Brexit immigration plan.

The EU, for its part, has sought to safeguard the interests of its own EU-27 citizens and businesses by implementing a contingency plan comprising 14 legislative measures and targeting key Brexit-vulnerable sectors. Specifically on trade, the EU noted, inter alia, that “all relevant EU legislation on the importation and exportation of goods will apply to goods moving between the EU and the UK”. In a clear signal to the May Government, the EU was quick to point out that its contingency plan is meant to safeguard EU citizens foremost, that the measures do not replicate the benefits of EU membership, and that these will not mitigate all the risks of a ‘no deal Brexit’.

Why is a ‘no deal’ more likely now?

In an article I recently co-authored with Dr. Jan Yves Remy last week, we highlighted at least four scenarios for future UK-EU relations and analysed what each scenario may mean in turn for CARIFORUM-UK relations. Brexit represents the most epochal and seismic shift in UK trade and political policy in recent history. Brexit developments remain quite fluid, but recent developments evince the increasing likelihood of the ‘no deal’ scenario.

EU leaders have repeatedly ruled out a return to the negotiating table. A renegotiated withdrawal agreement, therefore, now appears highly unlikely. Despite calls for a second referendum, including from former British Prime Minister, Tony Blair, this option has been fervently dismissed by the May Administration, which remains committed to her slogan of ‘Brexit means Brexit’, although she had been part of the ‘remain’ camp before the referendum.

Labour leader, Jeremy Corbyn, has tabled a no confidence motion against Prime Minister May which, if successful, could change the current Brexit trajectory. However, despite her current unpopularity, there is no guarantee Mrs. May would be defeated or that her successor would abandon the Brexit plans. As alluring as it sounds, a ‘No Brexit at all’, scenario, therefore, at this stage still appears unlikely.

Possible Implications of ‘no deal’ for CARIFORUM-UK trade

Due to former colonial ties, the UK is currently most CARIFORUM (CARICOM plus the Dominican Republic) countries’ main trading partner within the EU and is also one of the main source markets for tourist arrivals and foreign direct investment to CARIFORUM countries. Given these historic and economic ties, CARIFORUM and the UK are currently in the advance stages of negotiating a roll-over of the concessions under the CARIFORUM-EU Economic Partnership Agreement which currently define CARIFORUM-UK trading relations until the UK leaves the EU. While details about the roll-over negotiations have been sparse, this agreement has reportedly taken into account the possibility of a ‘no deal’ Brexit. It is in the ‘no deal’ scenario that this roll-over arrangement has its most utility as it at least assures CARIFORUM traders of continued preferential market access to the UK if the latter leaves the EU without a transition deal in place.

However, while the EPA ‘roll-over’ preserves the market access status quo, it does not mitigate all the risks of a ‘no deal Brexit’. Without a transition agreement in place, UK goods (and imported goods entering through UK ports of entry) will immediately after March 29, 2019 no longer have free circulation within the EU single market and will revert to World Trade Organisation Most Favoured Nation (MFN) levels – that is, they will be subject to EU import duties and non-preferential rules of origin. This, therefore, takes away the incentive for CARIFORUM firms which, due to a shared language and customs, would have used the UK as a ‘springboard’ for entering the wider EU market by establishing a commercial presence in the UK.

Moreover, because many CARIFORUM countries’ air and sea links to continental Europe are still mainly through the UK, CARIFORUM firms will have to consider what impact these new ‘no deal’ arrangements (such as reimposed customs duties and customs checks) may have on their trade with both UK and EU partners and on their supply chains. New arrangements for aviation and haulage between the EU and UK will also add delays and increased freighting costs. These higher costs will have to be borne in mind in business planning, pricing and other decisions.

One of the biggest threats of a ‘no deal’ Brexit is the volatility of sterling which has seen large drops in value whenever unfavourable news hits the market. If not already done, currency risks will have to be taken into account by CARIFORUM firms when negotiating commercial terms with UK trading partners and in their own risk assessments.

With regard to tourism, the reduced spending power of UK visitors to the region, or any downturn in the UK economy due to fall-out from a ‘no deal’ Brexit’, would adversely impact those CARIFORUM countries where UK tourists account for a sizable market share or where UK purchasers account for sizable real estate purchases. Changes in UK-EU aviation arrangements may also make the cost of travel to the region more expensive for those continental European travellers which have to transit through the UK to reach the Caribbean (those which do not have the benefit of direct flights). As such, it would be beneficial for CARIFORUM countries to expand their direct air and sea links with continental Europe.

In spite of the above, it is not all doom and gloom. There is the opportunity for CARIFORUM to redefine CARIFORUM-UK trading relations by going beyond the mere EPA roll-over and negotiating a new free trade agreement in the future with the new ‘Global Britain’ the May Administration seeks to advocate. It also gives CARIFORUM countries an additional nudge to expand their trading relations with the EU-27 themselves by making better use of the EPA, which is currently underutilised. This is also an opportune time as CARIFORUM, as part of the African, Caribbean and Pacific (ACP) grouping, is in the process of renegotiating a post-Cotonou arrangement with the EU.

The takeaway is that the uncertainty continues! With all the news about Brexit, it is not surprising that some firms or persons may experience ‘Brexit fatigue’. It is, however, incumbent on regional firms which currently do business with, or are seeking to conduct business with those in the UK to keep abreast of these developments and to make the necessary contingency plans to ensure minimal disruption to their trading.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international 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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The Draft Brexit Withdrawal Agreement: What implications for future CARIFORUM-UK Trading Relations?

Alicia Nicholls

After nearly two years of negotiations between the European Union (EU-27) and the United Kingdom (UK), European leaders endorsed the “The Draft Agreement on the Withdrawal of the United Kingdom from the European Union and the European Atomic Energy Community”and the “Political Declaration Setting out the Framework for the Future Relationship between the European Union and the United Kingdom” at a special meeting of the European Council on November 25, 2018.

This process is taking place pursuant to Article 50 of the Treaty on European Union (TEU), which sets out the terms and timelines for the withdrawal of any Member State from the EU. The text of the UK’s draft Withdrawal agreement, which was released on November 14, 2018, delineates the terms of the UK’s withdrawal from the EU, while the Political Declaration outlines broad aspirations for the constitutive elements of the two parties’ future trading relationship.

This article takes a brief look at what possible implications the draft Brexit Withdrawal Agreement may have for future CARIFORUM-UK trading relations, which are currently under negotiation and are reportedly close to being finalised.

Essential Elements of the Withdrawal Agreement

The UK ceases to be an EU Member State on March 29, 2019. During the transition period (March 29, 2019 to December 31, 2020), and subject to certain limited exceptions, EU law and the EU institutions and agencies will continue to be applicable to the UK, although it will no longer be an EU Member State. The UK will, however, be ineligible to be represented on, or participate in the decision-making processes of these institutions. This arrangement was deemed necessary to ensure a ‘smooth’ transition and provide for some certainty for traders while the parties hammer out the details of their future trading relationship. The Joint Committee may extend the transition period only once and this must be exercised before July 1, 2020.

The Protocol on Ireland and Northern Ireland includes the controversial “backstop” option, whereby in the event that the EU and UK fail to negotiate an agreement which prevents a ‘hard border’ between Northern Ireland (a country of the UK) and the Republic of Ireland (an EU Member State) within the transition period, the UK will be part of a single UK-EU customs territory until such an agreement is made. However, both the EU and UK have expressly stated their intention to conclude such an agreement by July 1, 2020.

Both the EU and UK Government have openly stated that they consider the negotiations on the two agreements closed, and have argued that the deal was the best that could be achieved in the circumstances. Although EU leaders endorsed both agreements, approval and ratification by the UK parliament is also needed under the EU (Withdrawal) Act 2018. UK House of Commons support appears questionable at this stage given the fervent opposition by both Remain and Leave MPs to the current Withdrawal Agreement. The House of Commons will debate the deal on December 11, 2018.

Implications for CARIFORUM-UK Trading Relations

Traders from CARIFORUM currently have preferential access to the UK market under the CARIFORUM-EU Economic Partnership Agreement (CARIFORUM-EU EPA). While CARIFORUM-EU trading relations will remain unchanged once the UK leaves the EU, the same cannot be said for CARIFORUM-UK relations.

For most Anglophone CARIFORUM countries, the UK is their main trading partner within the EU, as well as a major source market for tourism and investment. It has been reported that UK-CARIFORUM bilateral trade totaled £2.1 billion in 2016.

Under the Withdrawal Agreement, the UK remains bound to all EU international agreements, including trade agreements such as the CARIFORUM-EU EPA, to which it is party by virtue of being an EU Member State. However, during the transition period, the UK must not engage in actions deemed “likely prejudicial to EU interests” and its representatives will be barred from participating in the work of any bodies established pursuant to such agreements, unless it does so in its own right or upon invitation by the EU. This would include any bodies, such as the Joint CARIFORUM-EU Council, established pursuant to the CARIFORUM-EU EPA.

The Withdrawal Agreement does not preclude the UK from negotiating, signing and ratifying its own trade agreements with third States or groupings, such as CARIFORUM, during the transition period. But the entry into force and application of said agreements during the transition period would be subject to EU authorization. With respect to CARIFORUM, the grouping is currently negotiating a roll-over of the EPA concessions with the UK to minimize any disruption to CARIFORUM-UK trade. Such a CARIFORUM-UK trade agreement, therefore, would be subject to EU authorization if it is to enter into force during the transition period. In any case, as noted above, the UK will remain a party to the EPA and bound to apply EPA concessions to CARIFORUM traders during the transition period.

But what about the UK’s future trading relations with the EU? A ‘no deal Brexit’ is still a possibility as the draft Withdrawal Agreement needs ratification by each of the EU 27 countries. There is also still that pesky question of the negotiation of the future UK-EU trading relationship. The Political Declaration envisions a UK-EU free trade agreement, the terms of which remain to be negotiated.

A ‘no deal Brexit’ would make it difficult for CARIFORUM firms looking to use the UK as a stepping stone to EU markets, which means a climate of uncertainty will continue to prevail for Caribbean firms seeking to use the UK as a conduit for accessing the EU market until the full details of future UK-EU terms of trade are agreed.  It was recently reported that the agreement between the UK and CARIFORUM was close to being reached and has taken into account the possibility of a ‘no deal Brexit’.

The climate of uncertainty may also impact CARIFORUM-UK trade and investment from the UK side. Although some UK businesses have by now conducted risk assessments and built in Brexit contingency plans, the continued political and economic uncertainty and volatility of sterling will continue to weigh on their export, hiring and investment decisions.

The Withdrawal Agreement takes us one step closer to some idea of what the future UK-EU relations will be, but a climate of political and economic uncertainty will remain for some time, which may have an impact on CARIFORUM-UK trading relations.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international 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.

Golding Report on CARICOM-Jamaica Relations Tabled in Jamaican Parliament

Alicia Nicholls

The long-awaited report of the CARICOM Review Commission chaired by former Jamaican Prime Minister, Bruce Golding, has been tabled in the Jamaica Parliament by Prime Minister, the Most Excellent Andrew Holness, O.N. The CARICOM Review Commission, which was commissioned by Mr. Holness in July 2016 to review Jamaica’s relations within the Caribbean Community (CARICOM) and CARIFORUM (CARICOM plus the Dominican Republic) frameworks,  submitted its report in April 2017.

For those who may have feared that the Review was intended to pave the way towards a Jamxit (Jamaica exit from CARICOM), these have been allayed to some extent. In giving its support for regional integration, the Golding Commission noted that “the value of regional integration…is as relevant and useful and perhaps, even more urgent today than it was at [CARICOM’s] inception”. However, it lamented the limited progress on many of the commitments signed on to by CARICOM Member States.

In this vein, the Commission made thirty-three timely, pertinent and wide-ranging proposals aimed at addressing the structural and organisational deficiencies in CARICOM. Many of the Commission’s recommendations include things which most CARICOM Member States have already committed to under the CARICOM Single Market and Economy but have yet to be fully realised, while others are reminiscent of those made by the Ramphal Commission in its A Time For Action Report in 1992.  Other recommendations were more novel and include instituting sanctions for wilful non-compliance with commitments made, as well as the establishment of a Central Dispute Settlement Body similar to that of the World Trade Organisation (WTO) which would offer non-judicial options for settlement of disputes.

The Commission also recommended that Jamaica establish closer ties with Northern Caribbean countries, namely the Dominican Republic and Cuba, including in the negotiation of trade agreements with third States.

To address CARICOM’s implementation deficit, the Golding Commission has called for time-bound commitments and public progress reports on  Member States’ advancement towards meeting the various commitments. It also called for greater engagement of the private sector and the people of CARICOM.

Failing commitment by Member States to make the commitments outlined in the report, the Commission recommended that Jamaica should withdraw from the CSME, but remain a member of CARICOM.

The full report may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international 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.

 

 

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.

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.