What the Brexit deal means for the Overseas Territories

It is far too early to dissect the full implications of the Brexit agreements for the Overseas Territories. The Gibraltar deal will take months to sort out, and the trade issues facing the Falklands present the biggest challenge for the islands in nearly 40 years. Although less affected by Brexit, the aid-dependent OTs are facing recession-related budget cuts as well as the ending of EU funding. These are uncertain times but, fortunately, some things are clear.

The critical point to note is that the overseas territories were explicitly included in the Withdrawal Agreement and were therefore covered by the transitional arrangements. The territories are, however, excluded from the new Trade and Cooperation Agreement, which has created issues for which separate solutions need to be found.

Settled a year ago was the issue of British passports. British Overseas Territory Citizens will continue to be able to visit and work in the UK without any visa or other restrictions. They can still apply for an ESTA to visit the US and can have 90-day visa-free access to the Schengen area in any 180 days. This includes the EU outermost territories. This is except in the case of Gibraltar, which is to become a member of Schengen in its own right.

The deferred issues were more complicated. In the withdrawal agreement, the UK agreed to continue to participate in Erasmus+ to the extent that existing placements would be funded. The scheme covers all the EU’s global territories, not just those formally within the EU. When questioned about subsequent plans, Boris Johnson announced in parliament that in the long term there would be “no threat to the Erasmus scheme. We will continue to participate. UK Students will continue to enjoy the benefits of exchanges with our friends and partners.”

But he changed his mind. The UK has now pulled out, and an alternative will be developed. It’s not a massive issue for the Overseas Territories. Take-up was not particularly high in the European territories, and was lower in the British ones. Other than for Gibraltar, proximity to Europe is not the same issue as it is for UK students. There is also a chance, possibly a remote one, of reshaping the new UK-only Turing scheme to work better for the OTs. If they can be engaged in the debate.

The EDF, the EU’s aid programme, was treated the same way as Erasmus, with a commitment to fund existing programmes. There never was any suggestion of that continuing beyond the current EDF11, and the UK will look for other partners for its bilateral aid, probably the development banks. However, given that the UK economy is contracting, and the overall aid budget has been cut, there is a strong possibility that EDF funding for the OTs will not be replaced. The recession will also reduce future EU aid, so the possible value of future EDF programmes can only be guessed at the moment. In a statement on the 30th December, Wendy Morton, the FCDO Minister for the European Neighbourhood said: “we will take into account any shortfalls that arose from the end of EU funding, as we plan future UK spending in the OTs”.

UK territories also have three land borders with the EU. One in Ireland, one with Spain, and one (arguably two) in Cyprus. This meant that Spain, Ireland and Cyprus were the only countries involved separate bilateral discussions during the Brexit negotiations. The negotiations with Cyprus over the Sovereign Base Areas of Akrotiri and Dhekeli, were designed in part to ensure that the bases could still operate effectively in the event of a no deal Brexit. The areas were never in the EU but are home to 15,000 EU citizens. It has been agreed that the border will remain open and the base areas will remain in the customs Union for VAT, agriculture and fisheries.

Gibraltar was a member of the EU, and needed its own Brexit deal. 15,000 EU citizens enter the rock for work purposes every day, so an agreement of some sort had to be reached. In the end, it wasn’t until New Year’s Eve that an agreement in principle was announced. Gibraltar will remain fully British and will not be part of the EU, but the deal will allow unhampered access to people and goods across the border. The detail will be worked out over the next six months.

There are two issues of significance. One is that the border fence will finally come down, and the other is that, to make this work, Gibraltar will join the Schengen area. The UK was never a member, but there have always been non-EU states within it (Iceland, Norway and Switzerland) so it is not an unprecedented step. Gibraltar will also follow EU rules, but then so does Northern Ireland. This will all be reviewed in four years’ time. Foreign Secretary Dominic Raab announced in his statement that “sovereignty is safeguarded” and that “border fluidity is clearly in the best interests of the people living on both sides.”

The Falklands issues are far more problematic. The Government there had been hoping that it would be included in the UK/EU trade deal, but there was never any suggestion that that would be the case. The Government is now in a difficult position. The Falklands is economically self-sufficient, which is due almost entirely to its large fishing waters. It currently exports 75% of its agricultural and fisheries products to the EU tariff-free, representing 40% of GDP. This also generates around 60% of government revenue. 75,000 tons of fish, mainly loligo squid, are exported to the EU every year, with a customs value well in excess of £100m. The Falklands government will continue to push for its own deal, but Boris Johnson’s Christmas message to the islands did not seem to offer an immediate solution.

There may be some leverage in the fact that Spanish boats fish the Falklands waters, but Johnson appeared to be moving on. In his message, he talked about “helping to manage the change that’s coming when the post-Brexit transition period ends” and blamed the EU for being “absolutely intransigent” about the exclusion of the Falklands and the other OTs from the trade deal. “In the long term”, he said, “our independent trade policy is going to open the door to all kinds of new markets for Falklands exports so that in the months and years ahead the world is going to be, if not your oyster, then certainly your loligo.”

The problem they have is that there are other sources of loligo squid, but not many other markets for it. The USA is also a big exporter. The news is better for Tristan de Chuna. Wendy Morton’s post deal statement also included a statement that: “Tristan da Cunha will continue to have tariff-free access to the EU market for its main export, lobster.”

Finally, there is the future of the Overseas Countries and Territories Association (OCTA). This is a global organisation covering mostly small island economies worldwide, which are also overseas territories of EU states. Despite their differences, they face similar challenges to ensure economic growth. These include geographical isolation, high transportation costs, the small size of their economies and local markets, high dependency on imports (including energy sources) and sometimes, poor diversification of exports, low competitiveness and, in some cases limited national institutional capacity.

With the UK not participating in EDF or Erasmus, it is possible that the UK may just pull out, which may well affect the organisation’s viability as a whole. If that happens, the British OTs need to be looking for an enhanced JMC process. So far, all OCTA members have expressed a desire to carry on. We shall see. Brexit is by no means “done”. Not if you are in an OT anyway.