News and Insights
28 September 2016
For many in Jersey and further afield last month’s vote by the United Kingdom electorate to leave the European Union is a source of frustration. Many hoped that Brexit would not happen at all but even Brexiteers have found it simply too hard to get any clear idea of what will happen next. Up to a point this is hardly surprising: the vote was unexpected, it has emerged that UK government departments were specifically instructed not to make Brexit contingency plans and the future inevitably involves an element of speculation.
Let’s try to draw aside the veil of uncertainty. What can we in Jersey expect the future to hold?
First of all Jersey has ancient charter rights to send its goods to the British market without having to pay UK customs duties. The Common Travel Area allows free movement of people around the British Isles and the Republic of Ireland. What will happen along the border between the north and the Republic remains to be seen but otherwise these arrangements are unlikely to change.
Jersey’s relations with the rest of Europe are governed by Protocol 3 to the Treaty of Accession to the European Community of 1973. This has suddenly become the focus of much attention. We have General de Gaulle to thank for the fact that it exists at all. When the UK first applied to join the EEC in the early 1960s it was assumed the Channel Islands would join on the same terms as the UK. Only after de Gaulle issued his famous “Non” to UK membership in January 1963 was Jersey presented with the opportunity to take a more nuanced view. The dilemma was a painful one. If Jersey joined the EEC tax harmonisation would deal a mortal blow to a tourism industry reliant on cheap alcohol and tobacco. If Jersey stayed out of the EEC its agricultural products would confront a tariff wall upon arrival in the UK, dealing a mortal blow to the farming industry.
One of the founders of Viberts, the late Senator Ralph Vibert, charged by the States of Jersey to lead the island’s negotiations with the UK government relates in his autobiography how eventually Jersey contrived to have its cake and eat it. Protocol 3 places Jersey inside the common external tariff wall but outside the EU for all other purposes. Both the tourism and the agricultural sectors were saved.
During the Brexit debate some local media commentators wrapped themselves in the Union Jack and extolled its virtues but Brexit was always going to be bad news for Jersey. It has cost the Crown Dependencies one of their USPs as English speaking European territories not part of the EU and it has sounded the death knell for Protocol 3 – a good deal which has served Jersey well for decades.
This is why the States’ key negotiating strategy is to secure a new Protocol 3, or something very like it. The question is not what we want but how best to get it. There are three possible options; listed below in order of how likely they are to happen;
1. Rely on Westminster
Currently the States seize on every crumb of comfort to fall from the Westminster table. When the Art 50 negotiations get under way in January 2017 Jersey will, we are assured, be “consulted” and “included”. Its “voice will be heard” and “it will be kept informed”. Of course many parents consult in some detail with their children about their bed time, but shoo them upstairs at the pre-determined hour none the less.
The problem is that Jersey’s former representative in Brussels has long warned local audiences that the UK generally did a very poor job – or no job at all – of looking after the island’s interests in EU negotiations, quite unlike France’s spirited promotion of its Départements and Térritoires d’outre mer.
David Davis, the UK Brexit Minister has called for a “brisk but measured” approach to the forthcoming negotiations. He has said he will consult with stakeholders, which presumably includes Jersey, but he insists none of them can have any sort of veto. Their concerns, he has written, can only be accommodated so long as they do not compromise the main aim. So why, when Mr Davis faces some very tough negotiations with the 27, who have no reason to make exiting the EU look easy, should we expect him to be detained for long by what Jersey needs?
2. Seek an entrustment
As a Crown Dependency Jersey does not have international personality, as would a sovereign state. However there is a track record of certain areas of international affairs of particular interest to us being sliced off the UK Foreign Office portfolio and “entrusted” to the island to negotiate for itself. An example is our network of Tax Information Exchange Agreements. We could ask an over-worked Brexit Minister for an entrustment allowing us to conduct our own negotiations.
But what will happen when Jersey’s negotiator, no doubt accompanied by his counterparts from Guernsey and the Isle of Man, emerges from his taxi outside the offices of the Commission? The danger is that the Channel Islands are on Brussels’ radar and many see our finance industry as a source of mischief. The French Economy Minister Emmanuel Macron twice during the Brexit campaign warned the UK that an out vote would leave it with the influence and status of Jersey or Guernsey – condemned to dabbling in financial arbitrage on the drizzly north Atlantic fringes of the Union. So to know us is not to love us and the EU prefers to deal with known quantities, sovereign states or dependent territories, not Crown Dependencies which are neither one nor the other.
3. Come to the negotiating table as a sovereign state
Liechtenstein, Andorra, Monaco, San Marino: these four sovereign micro-states have done their deals with Brussels because it feels compelled, out of respect for public international law, to negotiate with sovereign nations. Liechtenstein – pop 35,000 and just 160 km² to Jersey’s116 km² - is a member in its own right of the European Free Trade Association and the European Economic Area, providing for free movement of people, goods, services and capital among its 28 member states.
Should a Scottish vote for independence lead to a redesign of the political make up of the British Isles a sovereign Confederation of Crown Dependencies (the Canadian constitution offers a model for a suitably loose association) might not seem such an unthinkable development after all. The British monarch is already head of state in 16 Commonwealth countries, so two more won’t make much of a difference.
The authorities in Jersey have recently re-branded themselves as “The Government of Jersey”, casting aside centuries of tradition in favour of making it clearer to outsiders who they are and what they do. There can be little doubt that our government views these three options in descending order of desirability because it cherishes stability and above all wishes to avoid anything that might alarm the finance industry. Options 2 and 3 are correspondingly less likely to come about, but it would be a mistake to write them off until we have been shown what Mr Davis looks able to secure by way of a replacement for Protocol 3.
When that time comes the result, no matter how meagre, is certain to be presented wrapped in reassuring spin. If, in spite of that spin, the deal is exposed as genuinely unimpressive and if it is not already too late Brexit may in future be seen as the catalyst which compelled Jersey, after over 800 years of autonomy, finally to make a formal entrance upon the international stage.