Think Brexit won’t affect you? Think again

Brits who wanted out of the European Union celebrated 'Brexit Day' on 31 Jan., but the terms of Britain's departure from the EU must still be negotiated, with numerous potential implications for the British Overseas Territories.

The UK formalised its fractious divorce from the European Union at the end of January. The two parties now have until the end of the year to negotiate a new trade deal. The message to Cayman Islands residents has been a very British, ‘keep calm and carry on’.

And while citizens of the British Overseas Territories can take some comfort from the words of Governor Martyn Roper and OT Minister Lord Tariq Ahmad, there are some significant ways Cayman and other territories that fall under the British umbrella will be impacted.

Laura Panades, European Union law lecturer at the Truman Bodden Law School, talked us through some of the main issues surrounding Brexit for the 14 territories that the UK will have to consider when negotiating its future relationship with the EU. She emphasised that the expressed opinions are her own and not those of government.

Cayman will lose a seat at the table in the EU

British Overseas Territories have benefited from direct political dialogue with the European Union. Cayman and other territories are associate members through their relationship with the UK.

This has facilitated political dialogue in the form of annual meetings at the EU Overseas Countries and Territories Forum, meetings with the European Commission and the member states, and several others.

Laura Panades

Panades highlights the loss of direct dialogue with the commission, which drafts the EU’s legislation, as a potential headache for Cayman and its sister territories.

“What we have now is a very direct way of keeping the lines of communication open,” she said.

“Post Brexit, if the territories want dialogue, it will have to be from the outside. Instead of having a seat at the table, we will have to lobby our way in.”

We could lose preferential treatment on trade

Cayman and the other territories currently enjoy unique preferential trade status within the European Union. Any produce imported to the trading block is duty free and there are no restrictions on quantity.

If there were a sudden interest in rum cakes, for example, Cayman entrepreneurs would be able to supply the European market without restrictions.

Though there is not a huge current export market for produce in Cayman, this could impact current and future business growth.

During the next 10 months, that partnership, which allows Cayman to participate in the trading block without following its laws, will have to be reevaluated.

“The territories will have to negotiate directly with the EU, perhaps via the UK, to try to get the same terms,” Panades said.

British passport holders will lose the right to live and work in Europe

Freedom of travel for British Overseas Territories citizens won’t be impacted. Lord Ahmad has said that BOT passport holders will still get 90-day, visa-free access to the Schengen Area, which covers most of Europe. Caymanians who hold British passports will be impacted, however, in the same way as all British citizens.

Unless an unlikely deal is struck to retain freedom of movement (one of the key issues that drove the ‘out’ campaign in the Brexit referendum) then UK passport holders will lose the right to live, work, study and retire in the various EU member states.

“Before, those people were able to move freely and search for jobs, for education and other life opportunities across the European Union,” Panades said.

We will lose EU grant aid

The EU has funded several projects across the overseas territories. Some of those relate to biodiversity and some relate to natural-disaster protection and recovery.

After Hurricane Ivan, for example, Cayman received €7 million from an EU fund. While such contributions remain plausible in the face of another disaster, the EU may not be so committed to helping Cayman and other territories in future.

“It would be out of charity rather than partnership,” Panades said.

“The moral obligation is a lot lower if we are no longer neighbours.”

Cayman and other territories have also received substantial funding for environmental research and protection through the EU – including an estimated €1 million annually through the BEST programme.

The National Trust’s Blue Iguana Recovery Programme and the Central Caribbean Marine Institute’s lionfish research have both received support from the EU.

“Losing EU funding for projects that will impact the whole region is a major loss for all of us, especially in the marine realm,” CCMI director Carrie Manfrino told the Cayman Compass last year.

Panades said it is possible that UK funds like the Darwin Initiative could be expanded to fill the gap. Conversely, Cayman’s access to funds could be diluted, if that programme’s resources are diverted to cover other territories that had depended on EU money.

Banking sector could lose a layer of protection

When it comes to grey lists and blacklists, the EU has always had Cayman in its sights. In fact, media reports earlier this week point to the EU placing Cayman back on its blacklist. A European Council meeting of the EU ministers of finance is expected to include Cayman in the list of EU non-cooperative jurisdictions for tax purposes as early as next week.

The consequences might be starting to roll in.

Like a handful of other territories including the British Virgin Islands and Bermuda, financial services are a critical element of Cayman’s economy.

Though the UK has not always been as steadfast as some would have liked in standing up for the territories when it comes to regulation and reputation management, it was, at least, a voice at the table.

Panades said, “Via the UK membership of the EU, we could defend the quality of these industries and demonstrate to them that the overseas territories comply strictly with the law. This safeguard is not going to be there anymore.”

Some territories could lose development funding

This is not an issue for Caymanians to worry about. The islands’ strong economy puts it well beyond the threshold for development funding.

Sister territories, including Tristan Da Cunha, Montserrat and particularly Anguilla, will likely feel this the hardest.

According to Panades, Anguilla has received €14 million in EU development funding since 2014. It is not yet clear how that shortfall is going to be covered.

The Anguilla channel, a five-mile stretch of ocean that separates the British Overseas Territory of Anguilla from the French territory of St. Martin, will be a ‘Brexit’ border in the Caribbean.

A Brexit border in the Caribbean

While issues over the Irish border have dominated Brexit talks, the other hard border between the UK and the European Union will be at the southern tip of Spain and Gibraltar. Unless a special deal can be negotiated, a ‘hard border’ will be put in place between the territory and its European neighbour, putting jobs and trade at risk.

Even further out of the limelight is the ‘border’ between Anguilla and St. Martin.

A five-mile stretch of ocean separates the British territory from the neighbouring Dutch- and French-controlled island. A ferry service runs people and produce between the two islands on a daily basis. Most visitors to Anguilla come through the larger airport in St. Martin.

“We can’t survive without the French and the Dutch,” Blondel Cluff, Anguilla’s representative in London, told The Economist in 2018.

It is probable that the current open-border arrangement between the two countries will be retained, but this is by no means guaranteed until negotiations are complete.

“For Anguilla, over 95% of its services and visitors come from the Dutch and French St. Martin,” Panades said.

“That is going to be a tough one to negotiate.”