Brexit has been a big story for Britain. This is seen every day in headlines. Beyond the implications for London, there have also been ongoing conversations about what it means globally for Britons living in the EU (and Europeans living in Britain). Also about Scottish independence: whether independence in Scotland could see a flow on to Wales, and even the Irish border. All of these are valid and legitimate questions. For all these debates abroad about what may happen, one thing is certain: the Caribbean will be significantly impacted when the UK officially leaves the European Union in March 2019. Though this is discussed outside our region, and of course within it, uncertainty about what Brexit ultimately means can be common.
1973 VS 2018
However you view it, the world looks very different now, in 2018, than it did in 1973 when the UK first joined the European Economic Community. The same is true of the Caribbean. Many former British domiciles have shifted decisively from being governed out of London to independence. While historical ties can endure, regional nations with UK links have a clearer sense of their own identity, and also more options economically in the world of global trade.
This is only set to grow in the future. While 1973 saw most of the world’s biggest economies located in the north-west, in years ahead they will continue to emerge in the south-east. Alongside Japan and China, the nations of Brazil, India, Indonesia and South Korea are all slated for robust growth.
Changes notwithstanding, many Caribbean nations trace their existing trade agreements within the UK back to before 1973. Once the UK joined the EU, those arrangements became deals between Caribbean nations and the EU. They do not revert upon the UK leaving the EU, meaning the implications of a no-deal ‘hard Brexit’ in March of next year could be substantial, potentially leaving regional nations and London back at square one when it comes to negotiating favourable trade treaties.
Negotiation could also prove to be a big issue for the Caribbean beyond economics alone. Recent months and years have seen considerable debate surrounding how to act on the revelations found in the Panama Papers and Paradise Papers leaks. While there are differing views across the English Channel, broadly speaking, Brussels seeks action whereas London is resistant.
While countries like Saint Lucia and the Bahamas are sovereign nations, the British Virgin Islands and the Cayman Islands are British Overseas Territories. In an era when there is the largest rich-poor gap since the early 1900s, many European leaders are conscious that being seen to let Britain ‘off the hook’ could be risky for their own fortunes politically. With the Brexit negotiations, Brussels has a considerable pressure point to really push London for action.
This notwithstanding, it would be a mistake to read the EU as a champion of fairness, especially for the people of the Caribbean. While many Caribbean people hold concerns surrounding tax minimisation – for while it’s legal, it is still unpalatable – the EU’s recent decision to name a ‘blacklist’ of nations it considered party to tax evasion was critiqued as it “smacks of imperialism”.
Saint Lucia garnered a mention, St Kitts and Nevis also, and so too the Bahamas, Antigua and Barbuda, and a number of other regional nations. Notably absent were larger and more powerful nations known to engage in tax minimisation practices, namely the UK itself. This has left many people of the Caribbean conflicted between a desire for action, and disdain for a declaration from a far-flung European capital, that harkens back to the old days of foreign rule.
‘BUT MY NATION HAS NO BRITISH LINKS’
Brexit is a global issue, but it is one of many. It is easy to recognise, then, why the people of many nations in the Caribbean – especially those without any historical ties to the UK – may well ask, ‘What does this really have to do with me?’ British Overseas Territories, and the nations facing the EU/UK divide, will be far more impacted by Brexit than others in the region.
Nonetheless, there are two areas where the effects of Brexit could still be felt significantly: tourism and small business. In 2015 the Caribbean had 28.7 million visitors. When the population of the region is estimated at around 39 million, it’s easy to see how a change could have huge flow-on effects, when annual visitors to the region are over two thirds of the total population.
Any decline in the British pound sterling could have significant implications for the region, given that many tourists will happily ‘island hop’ throughout the Caribbean, just as they go from state to state in the US, or nation to nation in Europe.
It’s true that the impending break of Britain from the EU increases the chance that more Britons will look elsewhere to holiday. But while Britons may lose the right to work and travel freely in the EU for a long duration, the Eurostar route from London to Paris will still be busy. And, at just US $60 for a one-way ticket, will remain far more affordable than a London to Castries flight that will cost around US $1,000.
This is particularly concerning on the retail level. While multi millionaires and billionaires will continue to holiday wherever they please, with little concern for the state of local currency, hotels and other tourism outlets that rely on incentivising travellers with added value and extras could be hit hard by a decline in the pound.
At present the pound is performing better than it did in the early period after the Brexit decision, trading at around US $1.35 versus $1.20. But it is still way down on highs in recent years, with $1.71 seen in 2014, just two years before the Brexit vote. Ultimately, the performance of the pound will depend upon the performance of the British economy which, in turn, will depend heavily on a Brexit deal, and the success of the transition.
SO WHAT IS LIKELY TO HAPPEN?
Ultimately, a hard Brexit remains unlikely. So, too, a ‘rough landing’ – as the UK and EU look to a transition period. At time of writing, the prospect of the UK landing a trade deal with the EU similar to that of Japan, South Korea and Canada is considerable. It is surely not the ideal in the minds of many, but better than a hard exit that could deliver another round of turbulence to the UK in years ahead.
This is particularly true as it could hurt niche sectors, but ones with rapidly growing business. Any local businesses that have ongoing links with Britain and Europe could also be impacted by VAT. While British goods are often highly regarded around the world, they could also be more highly priced, as extra customs duties come into play.
Initially, this may not seem like a huge consideration but, in the day and age of eCommerce, the potential for higher prices somewhere along the supply chain – if not simply at the start or the end – is considerable. Thereafter, the prospect of many British traders, suddenly without the free-flowing access to the EU, having to raise prices or change modes of distribution, is also a factor.
The Brexit vote mandates that some renegotiation of the British relationship with the EU will be necessary, especially as the central tension between London and Brussels has been that of ongoing access to the common market. Britain wants to keep it but Brussels won’t entertain it unless it also comes with freedom of movement. This is an aspect that many lead proponents of Brexit have refused to accept, promising an EU-free Britain that would have greater control over its immigration policy.
As a region, the Caribbean has shifted from a one-time reliance upon exports like bananas to now being a global leader in tourism and finance. The heavy emphasis upon these two sectors in the economy is not without its vulnerabilities but is certainly an illustration of the growth and dynamism of regional nations, and the many professionals who’ve built great businesses.
What a post-Brexit Britain can offer the world remains to be seen. What the region of the Caribbean can offer is considerable. Just as people of our region will watch with interest the negotiations out of London before they conclude in 2019, so too should they keep a keen eye on what happens closer to home. The year ahead promises to be an immensely exciting one around the Caribbean.