For the last two years, Brexit has been dominating the headlines. But what will the UK’s leaving the EU mean for the creole speaking islands of Mauritius, Dominica, Seychelles and St Lucia? Will it cause problems; maybe offer them new trading opportunities or instead make no difference?

The press has been focusing very much on the politics; migration, jobs, whether the UK should go for a hard or a soft Brexit; etc. This is not surprising; after all the British voted to leave the European Union (EU) on the basis of what they wanted for their country. But their decision will have economic consequences way beyond Britain’s shores.

To understand why and how Brexit will affect these far away creole speaking countries; the “creolophones”, we need first to understand how
it will change the way that trade is conducted.

The value of that new power will depend on the new deals that the UK secures providing it with greater trade and economic benefit than it now receives as an EU member.

Products such as bananas are hugely dependant on the UK market.

Making sense of Brexit

The 2016 referendum was fought over “taking back control” with the focus on migration. But restoring the UK’s ability to make and manage its own external trade policy has been a key political aim.

As a member of the EU, the UK is not free to set customs duties and negotiate on its own in the WTO (World Trade Organisation) etc. Instead it works within a single EU framework and is bound by and applies the same international trade agreements and treaties as the other member states. They collectively draw up the common trade policy which is overseen by the EU’s institutions; in particular the Commission.

Upon Brexit, the UK will no longer be party to EU treaties, whose rights and obligations will automatically cease to apply to it, or be applied by it; unless all sides agree otherwise.

The economic “rationale” for Brexit is that the UK will be able to independently devise and operate its international commercial policy and directly negotiate and conclude trade agreements to advance its own rather than common EU wide interests. This it cannot do whilst it is still in the EU.

The value of that new power will depend on the new deals that the UK secures providing it with greater trade and economic benefit than it now receives as an EU member.

But that is not a question for this article. Instead the concern is whether the changes could jeopardise the exports of the small creolophone islands.

Brexit

Importance of the UK market

Ever since colonial times the UK has been these islands major export market. Of the four, St Lucia is relatively the most dependent on the UK market with 77.8% of exports to the EU shipped there. The largest exporter is Mauritius, which in 2015 exported €243 million to the UK, or 26.8% of its total €904 million sales to the EU. For the Seychelles the equivalent percentage was 34.3% and Dominica, 28.8%.

These figures underline the importance of their trade with the UK. But when one looks at particular products, like sugar, bananas, tuna and rum we find that dependence on the UK market is even higher.

These exports are only possible because, under Economic Partnership Agreements (EPAs) with the EU, the islands can export-duty free to the UK, whilst their lower cost competitors have to pay high duties.

Brexit’s headache and the threat to trade

Without the EPA or similar preferential treatment, the islands’ exporters would also pay full duties.

But it costs them much more to produce and get their goods to overseas markets than their low-cost competitors. This is because they face economic constraints due to their small size and other geographic impediments that are beyond their control.

The Brexit headache for these islands is that once the UK ceases to apply the EPAs after 29th March 2019, the default position is that they will have to pay full duties. Therefore, unless a solution can be found, their exports will be priced out of the market and they will not be able to trade.

Of course, the UK can replace the EPA with its own trade arrangement to provide adequate preferences; but whilst it is still an EU member, it cannot negotiate and conclude separate trading deals. It has to wait until it leaves next year for formal negotiations to begin. And at that time, it doubtlessly will be fully taken up with trying to secure trade deals with major partners like the EU, the USA, China, Canada, India and others. Small countries won’t be at the front of the queue!

The last thing these islands need is a disruption in their duty-free arrangements which could result in an interruption to their trade. Even if the exemption from duty is ultimately reinstated, some exporters who lose their presence on the UK market might not be able to re-enter and re-establish themselves. Others could well have been forced out of business altogether.

Local tuna businesses are likely to be disrupted by Brexit.

What needs to be done?

A study by a team of experts, released by Rila Publications last year, urged that any hiatus in trade must be avoided. It proposed that the UK safeguards the trading positions of those countries that currently rely on the EPA by confirming that it will continue to grant their exports duty-free entry whilst leaving unchanged the tariffs faced by their competitors. Essentially the study proposed that the UK continues to offer them the benefits of the EPA.

The UK Government’s Plans

On the 9th October 2017, the Government put out a White Paper for public consultation. Ever since, the UK’s Department for International Trade, headed by the Rt. Hon. Liam Fox, with responsibility for this subject, has been consulting with various institutions and experts.

The White Paper recognised the importance of trade preferences in helping the weakest developing countries export; grow their economies; and reduce poverty. It envisages maintaining current duties for developing countries and replicating existing EPAs.

Following the White Paper and the consultations, the Government published on the 21st November 2017, a Bill entitled Taxation (Cross-border Trade). The Bill, which is currently with Parliament, aims among other things, to empower government after Brexit, to establish its standalone customs regime and independent international trade policy.

St Lucia is relatively the most dependent on the UK market with 77.8% of exports to the EU shipped there.

St Lucia is dependant on the UK market and its shipping exports.

Conclusion

Since the economies of the creole speaking islands are so entwined with that of the UK, which itself has for close to half a century been part of the EU (1), Brexit’s consequences for the islands will be far-reaching.

This article considered trade concerns, but Brexit will also affect development aid and various other elements of relations with the UK. How precisely though cannot be predicted at this stage, since that will depend on the outcome of negotiations and the political decisions taken.

The four islands will need to ensure, that the development assistance they receive from the EU and the UK is not diminished following Brexit. They cannot be complacent, but must by fully engaged in monitoring the negotiations and developments to inform and help them adapt their positions and strategy.

Brexit’s consequences for these islands can be positive or negative. Their challenge will be to work with the UK to ensure that they benefit from it rather than becoming its unintended victims. Together they should make the UK’s departure an historic opportunity for building a modern, constructive and beneficial relationship that safeguards and advances their trade and development interests.

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1 On 1st January 1973, the UK joined the European Economic Community (EEC). Its authority was strengthened, and name changed to the European Union, when the Maastricht Treaty took effect on the 1st November 1993.