Tara Leevy
INTRODUCTION
Businesses will benefit from a series of trade continuity agreements signed between the UK and CARICOM countries, which trade continuity agreements will maintain current arrangements with countries in the Caribbean post Brexit.[1]
The benefit of those trade continuity agreements is that they eliminate tariffs on all goods imported from CARIFORUM states into the UK, whilst Caribbean states will gradually continue to cut import tariffs on most of the region’s imports from the UK. [2]
Trade agreements with Britain are of the utmost importance for CARICOM states. Based on current trade flows, exporters of bananas and other fruits and nuts could save over £14 million a year in tariff charges that would apply if the post Brexit agreements were not in place, while exporters of sugarcane and other sugar products could save more than £20 million.[3]
The post Brexit agreements also cover the services sector, including tourism, which will benefit Britons who spend £900 million a year during some 900,000 visits to the Caribbean.[4]
This paper looks at the competence of the UK to conclude trade agreements pre- and post-Brexit and speaks to the future of UK-CARICOM trade agreements post-Brexit.
PRE-BREXIT ERA
In the pre-Brexit era, many aspects of the UK’s external relations were conducted partly or wholly through the European Union (EU). As a result, the UK could not decide the level of tariffs to levy on imports as these were set at a uniform level for the EU as a whole under the EU’s customs union.[5]
The respective legal powers of the European Community (EC) (as it then was) and the Member States were ruled upon by the European Court of Justice in Opinion 1/94 Re the Uruguay Round Agreements [1994] ECR 1-5267. The Court rejected a contention by the European Commission that the EC had across-the board competence to conclude the WTO Agreements in its own.[6]
The court held that although the core provisions of the WTO Agreements relating to trade in goods fell within the EC’s exclusive competence under the common commercial policy, other areas covered by the WTO Agreements relating to services (parts of the General Agreement on Trade in Services (GATS)) and the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) were outside the EC”s competence or were areas where the EC’s competence was shared with the Member States.[7]
In the above-mentioned case, as regards the General Agreement on Trade in Goods (GATT), the Court said:
“…. the Community has sole competence pursuant to Article 113 of the EC Treaty to conclude an external agreement of a general nature, that is to say, encompassing all types of goods, even where those goods include[ the European Coal and Steel Community ] (ECSC) products.”
As regards the General Agreement on Trade in Services (GATS), the court found that the Commission did not have exclusive power to conclude GATS Agreements. The court said:
“……the modes of supply of services referred to by GATS as “consumption abroad”, “commercial presence” and the “presence of natural persons” are not covered by the common commercial policy.”
With respect to the Agreement on the Trade Related Aspects of Intellectual Property Rights (TRIPS), the Court found that TRIPS did not fall within the scope of the EU’s commercial policy and therefore was not within the scope of competence of the EU.
The European Commission tried to argue that it had exclusive competence as regards TRIPS, because intellectual property was closely linked to international trade. The Court found that even though there was a link between intellectual property and international trade, intellectual property did not relate specifically to international trade and was therefore not covered under the EU’s common commercial policy.
The upshot of his “mixed competence” scenario was that vis-à-vis other parties, the EC/EU was responsible for compliance with and entitled to the benefit of certain aspects of the WTO Agreements while the UK individually remain responsible for and entitled to the benefit of the remaining aspects.[8]
However, the boundary between EC/EU and Member State competences did not remain stationary.
A further shifting took place under the Lisbon Treaty. The ratification of the Treaty of Lisbon had several important implications for decision-making in EU external trade and investment policy. Despite the above-discussed Opinion 1/94 Re the Uruguay Round Agreements [1994] ECR 1-5267, for many years there had been a debate about whether all trade in services and trade related aspects of intellectual property rights should come under exclusive EC competence.
Article 207 of the Treaty of the Functioning of the EU (TFEU), did away with many years of debate on the subject and brought services, TRIPS and foreign direct investment into exclusive EU competence.[9] This was carried over into the Treaty of Lisbon.
Exclusive competence meant that the legal basis for the adoption of agreements would be a qualified majority vote in the General Affairs and External Relations Council not unanimity.[10] It also meant that the consent of the European Parliament by a simple majority of Members of the European Parliament would replace ratification by national parliaments for these policy areas.[11]
BREXIT ERA
The UK left the European Union on 31 January 2020, after which time it has entered a transition period which will last until at least 31 December 2020.
As regards the status of the CARIFORUM-UK Economic Partnership Agreement (EPA), the UK has decided to “roll over” this agreement. This “rolled over” EPA will take effect after the end of the transition period.[12] The basis for the roll over is the UK Trade Bill, introduced in November 2017, which provides for continuity in UK Trade Agreement. As priority, the government is seeking to secure the continuity of the effects of existing EU free trade agreements and other preferential trading arrangements.[13]
The Trade Bill will enable arrangements with third countries that the UK is currently party to as an EU Member state to be replicated in UK-third country agreements when the UK leaves the European Union.
In the transition period, the UK will be able to take steps to prepare and establish new international arrangements of its own. However, such agreements can only enter into force or start applying during the transition period if explicitly authorized by the EU.[14]
After the transition period, the EU will cease to have any competence in respect of the UK’s trade or other external relations and the UK will assume all rights and responsibilities under WTO Agreements. In accordance with WTO rules, the UK will now be able to decide what tariffs to levy on products from non-UK countries.
The Belize Government has said that trade with the United Kingdom will continue to be governed by the EPA that was signed between the CARIFORUM counties and the European Union in 2008 allowing for the two regions to invest in and trade with each other as well as provide predictable EU market access for these countries.[15]
“During the transition period, Belize’s trade with the UK, which is the largest market for Belize’s export of sugar and bananas, will continue to be governed by the Cariforum-EU Economic Partnership Agreement” the Government stated.[16]
The Saint Lucia Government said:
“The Cariforum-UK EPA is designed to ensure that these exports will continue to receive preferential treatment in the British market, post Brexit. It also replicates commitments on development co-operation to support implementation and use of the agreement”.[17]
The Government stated further that during the transition period, St Lucia, together with the rest of the signatory Cariforum States would continue to undertake the required work that will address issues relating to institutional, administrative and business practices which may have implications for Cariforum-UK trade once the Cariforum-UK EPA is in operation from January 2021.[18]
In conclusion, the signing of the Brexit Treaty has placed Caribbean countries on no worse a footing, as regards trade relations with the UK. In “The EPA, BREXIT and defending the status quo”[19] the author argues that “it is hard to see how the [Caribbean] region could obtain in the immediate future anything more comprehensive than equivalence to the [existing] EPA.” Although in theory, the UK may seek, post Brexit, to conclude new agreements with Caribbean countries that impose tariffs on Caribbean goods, it is anticipated that the Brexit Treaty will strengthen the long-standing relationship between the Caribbean region and the United Kingdom.[20]
Tara Leevy, LLB (Hons), LEC, LLM, LLM is a Commonwealth Caribbean attorney, currently based in the United Kingdom.
[1] UK signs trade continuity agreement with Caribbean Countries, https://www.gov.uk/government/news/uk-signs-trade-continuity-agreement-with-caribbean-countries
[2] Supra at note one.
[3] Supra at note one.
[4] Supra at note one
[5] Brexit and International Trade-Lawyers for Britain-https://lawyersforbritain.org/brexit-legal-guide/wto-and-international-trade/brexit-and-international-trade
[6] Supra at note 5.
[7] Supra at note 5.
[8] Supra at note 5.
[9] Intereconomics/Volumes/2010/Number 1/EU Trade and Investment Policymaking After the Lisbon Treaty
[10] Supra at note 9
[11] Supra at note 9
[12] Supra at note 1
[13] Trade Bill factsheet: providing continuity and maintaining standards in UK Trade Agreements
[14] Questions and Answers on the United Kingdom’s Withdrawal from the European Union on 31 January 2020, European Commission
[15] Caricom countries react to UK leaving EU, Monday, February 03, 2020-www.jamaicaobserver.com/news/caricom-countries-react-to-uk-leaving-eu_186183?profile=1470
[16] Supra at note 15
[17] Supra at note 15
[18] Supra at note 15
[19] https://www.caribbean-council.org/epa-brexit-defending-status-quo/
[20] Supra at note 15