Brexit trade deal: what it means for Jersey

Sunday 27 December 2020

Jersey has unanimously – but begrudgingly – given its support to a UK/EU trade agreement that ends a 40-year relationship with the world’s largest trading block, which most thought was a very good deal for the Island.

But because Jersey decided not to join the EU as a full member in the early 70s, it had no say in the decision to tear up that beneficial relationship, which was on borrowed time as soon as the UK voted to leave the EU in 2016.

In the States today, Members all agreed that faced with a binary decision of ‘in’ or ‘out’, it was better to sign up to the trade deal than be left as an outcast with no clarity of its constitutional relationship north or south.

That said, Jersey can still decide to extract itself in the next three months if, on reflection, it feels that being outside of the deal is better than being in.

Ministers put on a brave face during more than six-hours of debate.

External Relations Minister Ian Gorst, who had picked up the Brexit baton in 2018 when he took over from Sir Philip Bailhache, said: “The world does not stand still. This trade agreement is not the end of the issue; it is the start of a new relationship that we will forge with Brussels, with Member States, particularly with France, and our most important constitutional partner, the United Kingdom.

“Will there be challenges? There certainly will. And the economic situation that we will find ourselves in, post the covid pandemic, will be challenging. But do I think that we as an island and as a community can rise to those challenges and make the most of the opportunity and be confident in our economy, the strength and resilience of our financial services industry, our digital industry and other sectors of the economy, I absolutely do! 

“And therefore, on balance, time will test whether we have made the right decision. But I have no hesitation in recommending that Jersey takes its place in this new relationship with the European Union”.

But what does signing the trade deal actually mean for Jersey?

Picture: External Relations Minister Ian Gorst agrees that the fishing industry will need more government support to access EU markets in the post-Brexit world.

Fishing

Everyone in Jersey – ministers and fishermen alike - wanted to cast the Granville Bay Agreement adrift with most agreeing that it had been signed with the best of intentions in 2000 but was now stacked strongly in France’s favour. The agreement meant that the French had joint responsibility for managing stocks in Jersey’s territorial waters between three and 12 nautical miles.

Unfortunately, although the Granville Bay Agreement has now been superseded, its legacy is that Jersey is now out of kilter with Guernsey and the Isle of Man, which have retained their right to fish exclusively out to six miles - double that of Jersey.

For the EU, a line in the sand was that no one should be better off as a result of the UK deciding to leave. It meant that it would not budge to let Jersey extend its zone of exclusivity from three miles to six. 

The Jersey Fishermen’s Association has called the UK/EU deal a “catastrophic failure” because it fails to address this three-mile disparity and allows the French to still catch fish in local waters, albeit under a Jersey-controlled licence system.

But begrudgingly accepting the EU’s ‘no gain’ red line, the Association is calling for the three-mile limit to be drawn from the Island’s offshore reefs, such as Les Ecréhous, Minquiers and Paternosters, rather than Jersey’s own tidal range. 

In the States today, Environment Minister John Young said: “It is an open secret that our fishermen had much higher expectations for any agreement. Under the Bay of Granville Agreement, the industry has become very unbalanced in favour of our French neighbours, and therefore we have a declining fishery.

“Obviously, we wish to have exclusive control of our 0-6-mile range but that was clearly not acceptable to the EU because nobody should gain from the decision of Brexit. 

“But nonetheless they have come back and asked that arrangements be established to recognise what they call the sovereignty of our offshore reefs and, by doing so, where the law takes those boundary points for our three miles are taken.

“We are going to have to establish clarity during the 90-day period on those baseline measurements. I cannot give any undertakings about where that work will end up because it is a matter of international maritime law. It is not an easy matter to resolve and I need to see how far we can go on that within the 90-day period.”

Ministers recognised that Jersey fishermen will still face many challenges despite the lack of tariffs. These are likely to include non-financial barriers, such as extra checks on landing and stricter quality measures. 

It is also likely that, because only certain ports will be allowed to accept non-EU produce, Jersey-caught and grown seafood will have to travel to the UK before continuing to France, even though previously they were directly shipped the short distance to Granville and St Malo.  

Aware of such barriers, the Government is proposing to create a new set of measures, including financial, to help the fishing industry. It also plans to increase funding to the Environment Department’s Marine Resources team, who will have responsibility for not only issuing and regulating licences but also carrying out scientific research to ensure Jersey’s waters are aren’t over-fished and its biodiversity protected.

Pictured: The deal doesn‘t directly affect Jersey’s primary industry, financial services.

What about financial services?

The Island’s main breadwinner, financial services, was not a significant part of this trade deal but that is not to say the EU didn’t want it to be.

During the debate, ministers revealed that the EU pushed hard for the UK to force Jersey and the other Crown Dependencies to collect VAT on behalf of EU member states, something that was strongly rebutted by the UK on their dependencies’ behalf. 

However, the exclusion of tax matters in the deal came at a price. Separate to it but a condition of the EU signing, Jersey and Guernsey have been asked to commit to “endeavour to establish arrangements to cooperate with the EU on the recovery of claims related to VAT, customs duties and excise duties within a reasonable time frame”. 

The EU also succeeded in getting the UK to sign up to a separate non-legally-binding declaration on “harmful taxation”, which the two sides will now work on. However, in the debate, Senator Ian Gorst said that Jersey was quite comfortable with this, as it already complied with the highest standards of regulation and information sharing.

What happens now?

In Jersey acquiescing to allowing licensed French boats to fish up to three miles of its shores, the EU agreed to give the Island a 90-day period to properly review the full text of the agreement, giving States Members a chance to reject it. Before the main debate, they agreed to amend it to allow Scrutiny to proper analyse the full text, speak to legal experts, and bring the matter back to the Assembly if they didn’t like what they found.

There is also a lot of work to be done around the new management arrangements for the Island’s territorial waters and helping fishermen and shellfish farmers to access the French market, where 80% of Jersey’s total catch is exported to.

Other aspects of the UK leaving the EU have already been dealt with but are no less significant. British nationals, for instance, lose the automatic right to work in the EU from Friday. And EU nationals living in Jersey have until the summer to apply for settled status to allow them to continue living and working in Jersey. Jersey students will also no longer be entitled to join the Erasmus scheme.

Pictured: If Jersey had not signed up to this deal, exports to the UK could have faced some barriers to free trade.

What if Jersey had voted against the deal, or reject it as part of the 90-day review process? 

Senator Gorst addressed this directly in the States Chamber today:

“If we decided not to be part of the trade agreement on the terms being offered, we would communicate that to the UK government and decisions in the UK parliament later this week would not include the Bailiwick of Jersey," he said.

“In the short term, that would mean that any trade that we wish to do with the EU would be subject to tariffs, we would fall back to the Bay of Granville fisheries arrangement and, of course, it would become more complex and complicated supply lines into the UK with Jersey product because they would technically be liable to tariffs, where other UK-sourced goods wouldn’t be. 

“The UK government has been clear with me and I’ve been clear with them that the Customs arrangements that we signed in 2018 would remain in place, and therefore we would continue to have the benefit of those arrangements, as would the Common Travel Area. 

“But there is no doubt that there would, potentially under the surface, be an element of friction that wasn’t there before, which I don’t think would be to our benefit. 

“We would, in the first instance, need the UK to issue us with various entrustments [or delegated powers], one of which would be to think about what our future relationship with the EU might be. That can’t be taken for granted and it would not be straightforward. And also, we would have to deal with fishing matters with our French neighbours.”