Economy

EU vs UK

The effects of Brexit on the Caribbean

Brexit offers Jamaica a chance to renegotiate better terms for an old trade agreement with the EU, while also pursuing a new path with the UK and Commonwealth of Nations.

Tourists view a plaque dedicated to Bob Marley outside the Bob Marley Museum in Kingston. Tourism could be adversely affected by Brexit outcomes. REUTERS/Gilbert Bellamy

The Caribbean initially panicked when Brexit was passed in the UK referendum.

But the real economic impact—related to remittances and tourism—has been minimal thus far, according to the Inter-American Development Bank (IDB).

Unemployment proves to be of much greater concern to Jamaicans than Brexit.

However, with Brexit negotiations further underway, economic and trade agreements are seeing renewed attention.

Of greatest interest to Jamaica is the economic partnership agreement (EPA) between CARIFORUM (Caribbean Community plus the Dominican Republic) and the EU. Without a transitional, and eventually finalized, trade agreement with the UK, Jamaica and other Caribbean nations lose a major trade partner when the UK officially leaves the EU.

This situation leaves Jamaica and CARIFORUM in flux in terms of such partnerships, and both London and Brussels are vying for the attention of Latin American and Caribbean markets.

Meetings to discuss the future of trade between the UK, the EU, and Latin America and the Caribbean are taking place all over the region.

Trinidad and Tobago, in 4Q2017, hosted the third meeting of the CARIFORUM-EU EPA Joint Parliamentary Committee “to chart a new way forward for CARIFORUM-EU priorities.”

Unsurprisingly, the EU urged those who have to ratify the agreement to do so as quickly as possible. Jamaica’s Hon. Kamina Johnson Smith, Minister of Foreign Affairs and Foreign Trade, explained the country’s efforts to ratify it while also underscoring CARIFORUM’s interests in securing further trade and investment opportunities, particularly in the services sector.

Indeed, whether Jamaica pursues more trade with the EU or the new “Global Britain” largely comes down to which trade partner will offer the best terms for the small island country.

The UK has been quick to emphasize the importance of the UK for Jamaican exports and the benefits of the Commonwealth of Nations, often known as simply the Commonwealth.

According to a briefing paper on trade competitiveness regarding the CARIFORUM-EU EPA published by the Commonwealth, the UK is Jamaica’s fourth top export destination, behind the US, Canada, and the Netherlands, and trade with the UK far outweighs trade with most EU countries individually in terms of volume.

Nevertheless, trade figures for the EU not including UK trade in 2015 still exceeded trade with the UK alone in that year.

Also in the briefing paper, the Commonwealth postulates that, “a CARIFORUM-UK EPA covering both goods and services is a possible way forward.” A new EPA with the UK would eliminate Jamaica’s problem with penetrating the EU market, according to the Commonwealth, citing EU difficulties in implementing measures to support the CARIFORUM states in terms of productive capacity.

Under the CARIFORUM-EU EPA, Jamaica enjoys duty-free, quota-free (DFQF) access to EU markets, but full export potential has largely gone unrealized, as stressed by Minister Johnson Smith at the Joint Council meeting.

The UK wants to capitalize on this opportunity to win favor with Jamaica and other Caribbean Commonwealth states as part of its expanding trade outlook. In fact, a major reason for Brexit was the desire for a more liberal, less bureaucratic avenue for pursuing trade agreements.

The future of Jamaica’s trade agreements are of paramount importance amidst uncertain relations with the island’s biggest trade partner: the US.

Trump’s protectionist policies and potential US budget cuts resulting in a huge loss of aid would strike a blow to the Jamaican economy, making penetration of other markets to increase revenue all the more important.

For now, Jamaican and UK ministers have reached a transitional agreement applying the terms of the current CARIFORUM-EU EPA to CARIFORUM-UK relations following the official Brexit in the hopes of maintaining continuity until the UK is permitted to make further trade deals.