Fri | Sep 22, 2017

David Jessop | Uncertain future for British territories

Published:Sunday | July 10, 2016 | 7:00 AM
‘Remain’ supporters demonstrate in Parliament Square, London, to show their support for the European Union in the wake of the referendum decision for Britain to leave the EU, known as ‘Brexit’, on Saturday, July 2, 2016. The UK’s vote to leave the EU creates uncertainty for its territories.
A dog stands under the banner of ‘Remain’ supporters during a protest march on Parliament Square in London on July 2, 2016.
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Although an eerie calm may have settled on Europe now that the immediacy of the decision by the United Kingdom to leave the European Union has sunk in, it should not lull the Caribbean into a sense of false security or inaction.

It has arisen because much is now on hold until a new British prime minister is formally appointed in September; a future approach to the UK's relationship with the EU27 is agreed; the relevant article of Europe's Lisbon Treaty is invoked to leave; and Britain embarks, first, on a two-year process of negotiation to leave, and then agrees some as yet uncertain new form of relationship.

Although few are prepared to say so, it is also likely that the process will be slow because both the EU27 and the United Kingdom will have to factor in the views of whoever is elected in November in the US presidential race as the two likely candidates have radically different visions of a future relationship with Europe.

Among the pressing and uniquely difficult Caribbean issues that require early resolution is how Brexit will modify the largely beneficial relationship that the UK's five Dependent Territories in the Caribbean Anguilla, Montserrat, The Turks and Caicos Islands, The Cayman Islands, and The British Virgin Islands have with both Britain and the EU.

 

SERIOUS RISK

 

Their concern was made clear a few weeks before the UK referendum in a special study titled The United Kingdom Overseas Territories and the European Union: Benefits and Prospects and commissioned by all 14 of the UK's overseas territories around the world. It said many of the benefits they receive from their relationship "will be placed at serious risk" if the UK decided to leave the EU.

The report observed that while historically, the most important relationship they have is with Britain, their ties with the EU have grown over the last 15 years. This has not only enabled institutional links with the European Commission and other EU overseas territories, but also has provided direct access to EU policymakers and enabled greater political visibility.

The study also made clear the value of the support the territories receive from the EU, including development assistance of at least €80 million (US$89.5million) between 2014 and 2020, which is used to address a wide range of economic, environmental, and other issues; free trade access to the EU market for goods and services; and time-limited free movement across the EU, enabling business and educational opportunities for their citizens.

However, as Dr Peter Clegg, a senior lecturer of politics at the University of the West of England, Bristol, who was the report's author and who has previously written widely on Overseas Territories issues points out, this special relationship has been cast into doubt by the UK's vote to leave the EU.

 

INFORMAL DISCUSSIONS

 

"The situation is now very uncertain ... none of the parties involved in the Brexit negotiations know how or over what time frame they will happen or what the outcome will be. As a result, it makes it very difficult for the UK territories to plan their response," he told me.

As a first response to the UK vote, Overseas Territories representatives have already undertaken informal discussions with the European Commission, and it is likely that a summit of Overseas Territories leaders may take place very soon. A second part of Dr Clegg's report is expected shortly.

Notwithstanding, the range of issues that the region's micro states will have to address are complex.

Since the UK funds about 15 per cent of the European Development Fund (EDF), a first and urgent requirement will be to ensure that what has been agreed on funding for the territories up to 2020 is secure and will continue to flow.

Before the vote, James Duddridge, the minister in the UK Foreign and Commonwealth Office responsible for relations with the Caribbean, who supported leaving the EU, told the Cayman News Service that "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", and that the territories' "value the relationship with the UK more than the EU".

Despite this, it is far from clear how much bilateral funding will eventually be available for the Overseas Territories. This is because they are largely regarded in London as being too wealthy to merit such support.

Second, all of the UK's Caribbean territories will have to address the constitutional, legal, and structural uncertainties that will arise, overcoming their often limited analytic and technical negotiating capacity.

Among the complex questions they will need to address is how in future they are to relate to the EU.

The logical vehicle would be through the existing intermediary body, the Overseas Countries and Territories Association, and while the UK may be willing to continue to cede sovereignty in this way, it is not certain that the French, Dutch, or Danish, whose territories are also in the group, would agree.

Clarity will also be required on how the model the UK chooses for its future relationship with the EU will legally incorporate the UK territories.

If the UK were to go for an EFTA plus or minus arrangement, similar to that between Norway or Switzerland and the EU, the territories might be able find a way to piggyback on such an arrangement. Every other option would require the territories to be involved in any negotiation between the UK and EU.

Fourth, there is the view in some Overseas Territories that a changed UK relationship with Europe may offer an opportunity for the territories to further develop their offshore financial services.

The suggestion is that this could enable a less regulated relationship with the City of London and the UK, enabling the territories to encourage greater inward investment into the UK and the territories becoming more integrated with the UK. Others, however, observe that with the UK out of the EU, it will now become impossible for the UK to block damaging financial services legislation.

The challenge now, as Dr Clegg observes, is for the UK overseas Territories to act swiftly.

He believes that the absence of negotiating capacity in the UK offers an opening if the territories are proactive, remain unified, and work to influence the debate, not only in London and Brussels, but also in other European capitals.

"If the Territories can promote a positive and realistic agenda ,then they will have a good chance of securing some of their interests in the longer term, affirming their link with the EU, which they value highly," he says.

- David Jessop is a consultant to the Caribbean Council.

david.jessop@caribbean-council.org