The editorially independent publication of The Caribbean Council

Brexit decision causes concern across region

The decision by the UK electorate to vote to leave the European Union (EU) has caused Caribbean relations with Britain to enter into a period of uncertainty as governments and industries try to determine the future implications for trade, tourism, air services agreements, influence in Europe, and the future relationship between the UK Overseas Territories and the EU. It has also raised existential questions about the future of CARICOM and led to calls for greater regional unity and cohesion.

In an early statement, the Foreign Minister of Jamaica, Kamina Johnson Smith, said that the UK referendum vote to leave the EU will have significant implications for Jamaica-UK relations and possibly for Jamaica-EU relations. She said that the vote means that the UK will eventually cease to be part of the relevant arrangements that govern Jamaica-EU relations, including the ACP-EU Cotonou Partnership Agreement and the CARIFORUM-
EU Economic Partnership Agreement.

She however made clear that Jamaica hoped that efforts will be made to strengthen and expand the Jamaica-UK partnership in all areas, not least in relation to trade, investment and development cooperation. “We are certainly committed to working towards these goals,” she said.

Fear of Contagion

In a reflection of the fear of contagion and the break-up of an already weak CARICOM, the Vice Chancellor of the University of the West Indies (UWI), Sir Hilary Beckles said: “CARICOM should use this development in order to deepen and strengthen its internal operations and external relations to the wider world. It’s a moment for CARICOM to come closer together rather than drift apart. The region should not be seen as mirroring this mentality of cultural and political insularity, but should reaffirm the importance of regionalism within the global context for the future.”

Expressing similar concerns, the Governor of the Eastern Caribbean Central Bank (ECCB), Timothy Antoine, urged Caribbean nationals to appreciate the value of their own regional integration institutions. He also said that the decision had serious implications for the Eastern Caribbean Currency Union (ECCU).

“A lot of this creates a sense of uncertainty,” he said, noting that the International Monetary Fund (IMF) and other institutions have projected that the British economy, the world’s fifth largest, could go back into recession as early as next year. “Obviously, we are very concerned because the UK is an important source market for us in terms of tourism and that could affect us,” Mr Antoine said. He also expressed concern that a downturn in the UK economy could have a potential adverse impact on tourism, trade and remittances.

Making clear the concern of the Dominican Republic, its Ambassador to the UK, Federico Cuello, said that he expected bilateral trade to be negatively impacted. Observing that the UK had become the Dominican Republic’s main destination for its exports to the EU in 2015, he said that Britain’s decision was tragic for his country’s exporters.

“After investing so much time and resources to meet the strict British quality standards and fair trade, tens of thousands of small cocoa or banana producers in cooperatives would be left without access to their most important European market,” Ambassador Cuello told the Dominican media.

Uncertainty about implications

Elsewhere in the region responses were mixed, but all included expressions of concern which are likely to be considered when CARICOM Heads of Government meet in Guyana from July 4-6.

Dominica’s Prime Minister, Roosevelt Skerrit, told a local radio station, Kairi FM: “It’s a major shockwave, it’s a major shock that has hit the world and it has been felt in Dominica….”

“The decision to leave the EU is going to have major, major impact to developing economies like ours which rely heavily on development assistance from the EU,” he stated, adding that this is due to the fact that the priorities and the focus of the EU were going to change. It would be necessary, he said, for the Caribbean to see how Europe restructures without Britain and that this would mean that the focus now would have to be within the EU.
In an interview, Guyana’s Foreign Minister, Carl Greenidge, said that the outcome of the referendum threatened a degree of uncertainty, if not destabilisation in the trade and political relationships between the region and its European partners.

St Kitts’ Foreign Minister, however, appeared to be more sanguine.

“I think that trade will continue. We will not have to redefine and reassess how we do that trade, but I don’t see a catastrophic fallout. I think the bigger fallout for me is whether or not if Brexit means that the UK economy suffers, then what will that means for tourists coming from that very important source market,” Mr Brantley told local media outlets.

UWI says decision far reaching for region

In other comments, the UWI Vice Chancellor, Sir Hilary Beckles expressed concern about the wider impact of the UK decision on all aspects of Caribbean life. “The predictable, highly individualistic action poses both a short-term as well as a long-term threat to the performance of CARICOM economies, and should trigger immediate strategic regional reactions…. Every aspect of Caribbean life will be adversely affected by this development; from trade relations to immigration, tourism to financial relations, and cultural engagements to foreign policy. There will be a significant redefinition and reshaping of CARICOM-UK engagements. The region’s fragile economic recovery is threatened,” he said.

Regional business starts its own analysis

The Private Sector Organisation of Jamaica and other regional private sector bodies said that they had begun an assessment of the Brexit implications for local businesses, many of which have markets in the UK and throughout the rest of Europe.

In a statement, the Caribbean Hotel and Tourism Association and the Caribbean Tourism Organisation expressed concern about the immediate and longer-term impact on tourism. Noting the severity and longevity of exchange rate fluctuations was an immediate concern. They advised Caribbean tourism industry stakeholders to monitor the situation given its potential impact on travel and travel package agreements.

They also said that concerns have been raised about the impact on visas and the time it may take to address, the broader implications on travel demand and tour operator arrangements, airline traffic and movement, trade, and UK and EU financial and technical support to the region, and the possible impact on the UK’s overseas territories.

The Overseas Territories impacted

Reports in the Cayman Islands suggested that the decision could impact on the ability of its citizens and those residing in other UK Overseas Territories to live, study, work and travel freely within the EU and on the financial services industry.

In a speech to the Legislative Assembly the day after the UK vote, the Cayman Islands Premier, Alden McLaughlin, predicted the prospect of new governments in the UK and the US would mean a period of “great uncertainty” for world politics, including for Cayman. He noted however that the growing strength of the islands’ economy made it an excellent option for businesses and investors looking for a safe haven at a time of political and economic turmoil.

Prior to the UK referendum, the UK Overseas Territories recently published a report making clear their concern about any decision by the UK electorate to leave the EU (Caribbean Insight June 17, 2016).

However, James Duddridge, the Minister in the UK Foreign and Commonwealth Office responsible for relations with the Caribbean who supported the vote leave campaign, expressed a different view.

He told the Cayman News Service before the vote: “An independent Britain can spend more time developing our historic ties rather than be shackled by the regulation and political infrastructure that is a federal union. OTs value the relationship with the UK more than the EU. The EU is sucking the life out of the UK as an independent nation state,” he said.

CARICOM has so far issued no formal statement on the issue and is believed to be waiting until CARICOM Heads of Government meet.

The EU is CARICOM and the Dominican Republic’s (CARIFORUM) second-largest trading partner after the United States. Trade between the two regions is estimated at about US$1.1tr (€99bn). In a statement released in the Caribbean, the EU said it “is, and will continue to be, a strong actor and a reliable partner to our friends all around the world.”

Process of change likely to be slow

Despite Caribbean concerns, experts however point out that the process of change in the Caribbean’s relationship with the UK will be gradual and much will depend on the thinking of whoever is selected to become the leader of the British Conservative Party and Prime Minister in September 2016 in succession to David Cameron. They also note that Caribbean relations with the remaining EU member states will be unchanged but will probably require greater and more consistent political and diplomatic engagement on the part of the region with Brussels and with other EU
states with a presence in the region: France and the Netherlands.

They observe that only when there is a first indication of the new type of trade relationship that the UK will seek with an EU of 27 member states will it be possible to see how the region might best respond. They also suggest that to fully understand the UK’s future development and foreign policy and security stance, the Caribbean will have to wait until notice is formally given to the EU that the UK wishes to leave, and that even then clarity may only begin to emerge after what are expected to be extremely difficult negotiations lasting two or more years.

This is an extract from the Caribbean Council’s leading weekly editorially independent publication, Caribbean Insight, which provides in depth information on current economic, political and commercial developments in the Caribbean and news on events in Europe and the US that affect the region. Business people, academics, and those with a general interest in the Caribbean find it an invaluable tool for developing and maintaining knowledge and providing an insight into political, economic and commercial events in the region.

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