The Guernsey reaction to Brexit – plotting the direction of travel

AT THE Institute of Directors, we have watched with confusion and occasionally dismay as the UK government has attempted to manage the complexities of the Brexit negotiations, with their stance compromised by the lack of internal agreement on a clear preferred outcome.

Business groups such as the IOD have provided constant feedback from their members, reiterating that they need more certainty on the likely Brexit outcomes and help to plan and prepare.

Consequently, the institute issued its members with a comprehensive analysis and planning tool.

Only last week the UK government followed suit and published its own online guide and planning tool.

Unfortunately, contrary to the hopes and expectations of business, this has emphasised a possible ‘no deal’ scenario whereby the government fails to agree acceptable terms to stay within the EU trading zone and has to move to impose trade tariffs and customs borders.

You may ask, what does this mean for the Channel Islands?

Our trade negotiations and access to markets have been inextricably linked to the UK.

As Crown Dependencies, we do not enjoy the full status of a ‘country’ and so only have connections to certain trade groups and international agreements through reference to the UK.

Our status and association with Europe are defined by Protocol 3 of the UK’s 1972 Accession Treaty to the EU, which adds in the Channel Islands and enables them to function within the EU customs union for trade in goods, yet be outside acting as a third party for all other aspects.

So, if the UK leaves, we also are cut from the EU agreements and if the UK has not fully instituted substitute agreements, then there is limited scope for us to independently negotiate trade access internationally.

However, there is a ray of hope. After the Second World War, it was recognised that trade was the best way to advance economic improvement and recovery.

In 1947 the General Agreement for Tariffs and Trade was born to provide universal rules for world trade.

In 1995, this was improved and the World Trade Organisation was created. This extended the scope of GATT to services and intellectual property.

The WTO has noble aims of reducing world poverty and promoting trade and economic growth fairly. It promotes good governance of trade by members and settles disputes.

Interestingly, the UK is no longer an individual member. It is possible to join the WTO as a single state or nation, or it can be joined as a block or trading body.

The EU is a member, and the US agreements with Canada and Mexico under the North American Free Trade Agreement are recognised by the WTO. Smaller nations such as Liechtenstein have achieved membership and the Bahamas is currently going through negotiations to join in respect of bilateral agreements on goods traded.

So, the WTO could be joined by the Channel Islands, either in association with the UK, together as islands, or even singly.

Is this the future direction of travel? It certainly looks a favourable option in the event of a no deal. The UK has recognised this and has begun contingency preparations.

However, as stated on the WTO website, joining arrangements are complex and members are required to prove their compliance with certain legal, tax and governance standards to achieve membership.

This takes time and the standards change.

Membership involves both rights and obligations. The Channel Islands would be just starting this process, though fortunately its financial services and intellectual property regimes already comply with most of the international standards

My father was a naval man and believed that every voyage started with an agreed destination and adequate planning to get there. It seems we must also now quickly decide our direction of travel and begin preparatory work if we are to enjoy the possible benefits of WTO membership in a world which could be without adequate trade rules post March 2019.

Let’s hope for a fair following wind and some speedy legislative changes to prepare for progress.