International Trade Architecture Strategy

Vision statement

Build and maintain effective structures that ensure Jersey's priorities are:

• reflected
• represented
• realised

Through participation in UK-driven international trade routes, where they match Jersey's bespoke interests.

To achieve this, we need to create conditions that facilitate engagement, offer clear governance, and meet Jersey's international obligations whilst enabling:

• innovation
• productivity
• economic growth

Statement from the Minister for External Relations

At a time of increased and sustained change, both across the global economy and closer to home, it's vital that Jersey remains agile, responsive, and receptive to developments on the international stage. The UK has an ambitious trading agenda and is fast rolling out a stream of new Free Trade Agreement (FTA) negotiations, as well as stepping up in its activities at the World Trade Organisation. Jersey is well placed, as part of the wider British family, to take advantage of the new trading landscape, should it choose to.

As set out in the Trade, Investment, and Growth Framework (TIGF), the Government of Jersey is committed to creating a sustainable, vibrant economy (see strategic priority number 3 of the Common Strategic Policy) for the island through supporting growth in trade and investment. For Jersey to get the maximum benefit from new trading opportunities generated by the UK, we need to create the right conditions for effective governance, open challenge, and close engagement with the UK and, as necessary, directly with international partners. This International Trade Architecture Strategy defines the structures needed to support Jersey's' engagement and participation in UK trade, forming an important pillar to the TIGF.

Alongside UK trading relations, it's important that Jersey preserves the ability to continue its own successful bilateral relationships with countries around the globe. The Global Relations Strategy which also sits within the TIGF, demonstrates our commitment to this. A revised version will be published later this year that will complement the work set out in this document.

The bilateral arrangements Global Relations pursue are very targeted, so the scope and scale of Jersey's participation in UK FTAs requires careful consideration and a tailored approach. Jersey's trademark exports enjoy global recognition, and we want to ensure that they can benefit from preferential tariff rates in the same way as UK goods. Jersey's service industry is well-renowned and, as trading relationships deepen, FTAs have the potential to offer not only greater market access but enhanced protections for businesses over time.

This strategy looks to establish the architecture required to support that success and deliver opportunities for Jersey across the UK's international trade agenda.

Context

As set out in the TIGF, the international trade arena is changing. Like the rest of the world, Jersey is adapting to the challenges and complexities of the global economy resulting from the:

• Covid-19 pandemic
• climate emergency
• realities of the UK's departure from the EU, finalised through the UK-EU Trade and Cooperation Agreement (TCA)
  

The UK's trading relationship with non-EU countries has also changed as a result of the UK once again becoming an independent member of the World Trade Organisation (WTO).

The UK's decision to leave the EU was a matter for the UK, not Jersey. As an independent, self-governing democracy exercising its own parliamentary sovereignty, Jersey was rightly outside of the UK's referendum process. Prior to the TCA being agreed, Jersey's relationship with the EU was through Protocol 3 of the UK's 1972 Accession, which fell away at the end of the Transition Period on 31 December 2020.

In consideration of the balance of alternatives, which would have seen Jersey outside of trade arrangements with the EU and UK, Jersey agreed to participate in the TCA, replicating much of the arrangements that existed previously in respect of goods. The Ministry of External Relations, hereafter referred to as External Relations (ER), led negotiations for Jersey on the TCA, and the Brexit Unit, now named the International Trade Unit (ITU), took the frontline role. ER manages Jersey's external relationships with other countries and regional organisations. ER consists of teams covering:

• Global Relations
• International Trade
• International Compliance
• UK Affairs
• European Relations

The ITU has been responsible for establishing the terms of the relationship between the UK and Jersey underneath the TCA. Clear accountable routes to manage disputes have been agreed through a Memorandum of Understanding (MoU). The focus is now on ensuring that Jersey's interests will be represented appropriately and effectively within new structures, including the specialised committees.

As the UK now progresses its wider trade agenda with other countries around the world, it's important that Jersey responds by ensuring that involvement in any new Free Trade Agreements (FTAs) negotiated by the UK, achieve the best possible outcomes for the island.

The Government has outlined clear priorities for Jersey's economic growth and recovery in the wake of the Covid-19 pandemic in the Government Plan 2021 to 2024. The published TIGF demonstrates a further commitment to this renewal by identifying the core strategies across Government which drive, support, and deliver on international trade, investment, and economic growth. The TIGF presents a coherent, informed narrative and evidence base for use across Government and for external stakeholders. It provides a structure to:

• enhance collaboration
• target resource without duplication
• identify priority markets

The Framework brings together existing and emerging strategies, to build on good practice and to reinforce Government.

External Relations has an established role and clear track record in:

• negotiating agreements
• developing trade relations
• facilitating bespoke market access arrangements

As part of this, the ITU, throughout 2021 and following the conclusion of TCA, has focused its attention on 'Rest of World' FTAs and thus the creation of this International Trade Architecture (ITA) Strategy. The intention of the ITA is to:

• direct resource and attention on ensuring the maximum outcomes for Jersey through participating in UK driven FTAs
• exploring other trade arrangements
•  capitalising on the extension of the UK's WTO Membership to Jersey

The Economy Directorate are also defining an Export and Trade Opportunities Strategy, and an Inward Investment Strategy, which External Relations will support and collaborate on. The strategies will inform the focus of the ITA, but may also identify further bilateral opportunities where External Relation's expertise in trade facilitation could be best utilised.

The as yet unrealised, and perhaps even unknown, benefits to be gained from UK FTAs present interesting and exciting opportunities for Jersey to engage with and this ITA Strategy is intended to facilitate that by providing:

• structure
• assurance
• clarity
  

Our vision is to build and maintain effective structures that ensure Jersey's priorities are reflected, represented, and realised through participation in UK-driven international trade routes, where they match Jersey's bespoke interests. To achieve this, we need to create conditions that facilitate engagement, offer clear governance, and meet our international obligations, whilst enabling innovation, productivity, and economic growth. Each include aspects to enable us to respond, recover and renew opportunities:

• governance to form and implement committees and forums
• engagement to communicate and build relationships with partners and stakeholders
• obligations to fulfil agreed international responsibilities and duties
• innovation to explore and create new routes for Jersey's International Trade
• productivity to harness opportunities of the UK's International Trade Agenda
• growth to consider and enhance the TIGF

Current negotiations

Jersey's approach to date

During 2020, in parallel to negotiating Jersey's involvement in the TCA, ITU began planning for the new global trading arena for when the UK would depart from the EU. ITU have since been ensuring Jersey's interests are appropriately protected in the initial agreements that the UK has negotiated whilst also considering how the island should capitalise on opportunities offered through the redefining of international relationships.

The global Covid-19 crisis and resultant shift in market trends, has caused considerable uncertainty, with a sharp focus on recovery and rebuild. Therefore, ITU's immediate focus has been on ensuring Jersey does not miss potential opportunities in new FTAs, and that Jersey goods will not be disadvantaged whilst the Government develops its own sustainable strategies and green agenda. Longer term, the strategies under the TIGF will enable identification of bespoke priorities, enhancing Jersey's export market and encouraging inward investment. Until these strategies are more developed ITU are taking an approach which seeks deep and broad inclusion for Jersey in FTAs. This has been seen to date within the UK-Japan CEPA, UK-EEA FTA, and the UK-Australia FTA, which all include Jersey for goods and allow for future extension of other chapters, particularly services. Great care is being taken to ensure this approach does not impinge on Jersey's autonomy or negatively impact key business interests.

Currently, the Customs Union Arrangements that Jersey has agreed with the UK positions Jersey to benefit from all goods related elements of new trade deals, if we choose. The approach ITU are pursuing, and that has been successfully negotiated so far, focuses on initial goods inclusion but with express flexibility for wider inclusion in services, which goes beyond the scope of Jersey's participation in both the TCA and the UK's Continuity Trade Agreements (CTAs). It would also allow Jersey to proactively pursue environmental commitments in FTAs in the future if we wish.

CTAs came from existing EU trading arrangements that needed to be suitably adapted and codified as a result of the UK's exit from the EU, by the end of the transition period. As the provisions were rolled over, Jersey's involvement maintained the inclusion previously provided through Protocol 3, for goods only. In comparison, the new FTAs the UK is pursuing do not start from the same position as there are no existing arrangements on which to build. This grants Jersey the opportunity to adopt a broader attitude.

This broad approach to FTA participation was underpinned by analysis carried out in 2020, which drew on:

• Global Relations Strategic priorities
• Jersey Finance Limited (JFL) member presence
• goods export data and investment flows
• the Let's Talk Trade consultation caried out at the end of 2019

This considered markets such as the USA, being the largest economy in the world as measured by nominal GDP, and Japan, the third largest, whose GDP crossed the $5 trillion mark in 2019 (according to Investopedia).

To deliver maximal inclusion ITU will respond to the UK's own trade agenda and priorities and ensure the appropriate governance is in place with the UK Government. Longer term this will support delivery of a more targeted approach to different markets, according to further evidence.

The principles underpinning Jersey's approach to inclusion in future UK FTAs have been set out in a proposition debated and unanimously agreed by Members of the States Assembly on 25 November 2021. They include:

• protecting Jersey's existing constitutional autonomy
• ensuring Jersey businesses remain able to trade, grow, and diversify the Island's economy
• take account of existing international commitments

UK future ambition

The UK has been clear in its intent to continue capitalising on its new ability to negotiate trade agreements bilaterally and has outlined its future priorities for 2022. In the immediate term, this has focused on new agreements with countries that the EU did not have existing arrangements with such as the one with Australia which was concluded in December 2021, and New Zealand where agreement in principle was reached in October of the same year. Moving forwards, negotiations to accede to the trading bloc known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are underway and negotiations with India, projected to be the world's second largest economy by 2050 (according to PWC), have commenced. Consultations have also been held on new agreements with Gulf Cooperation Council (GCC). The Gulf Cooperation Council is a regional, intergovernmental political and economic union that consists of:

• Bahrain
• Kuwait
• Oman
• Qatar
• Saudi Arabia
• United Arab Emirates

The UK successfully concluded negotiations and signed agreements with Japan and the EEA for an enhanced trading relationship. This built on an extensive continuity program to ensure the 'rollover' and renewal of those FTAs the UK was party to when a member of the EU. Some of these CTAs contain review clauses committing both parties to commencing negotiations within a year of the agreement coming into force. These clauses are intended to strengthen trade between the respective countries by aiming for future agreements which are ambitious, comprehensive, and more tailored to specific interests than the continuity approach allowed. Notably in 2021, these reviews clauses have been triggered for Mexico and Canada, where the UK has held calls for input prior to new trade agreement negotiations with those countries beginning.

The key outcome that Jersey is initially seeking within UK negotiated FTAs at this time is the future ability to benefit from wider provisions in services, investment, and other chapters of agreements we have not previously participated in, through an extension mechanism. This allows us time to complete the work required under the TIGF, analyse how those newly negotiated FTAs progress, and determine what we would want to capitalise on to ensure that future inclusion provides the right level of benefit.

In addition to negotiating new FTAs, the UK became an independent member of the WTO on its exit from the EU. In response, we negotiated extension of the UK's membership to Jersey, which came into effect at the end of the transition phase on 31 December 2020.

The UK has made clear that it seeks to be a leader in reforming and renewing the global trading system through pushing for WTO modernisation in:

• services
• digital
• green trade

We will consider how these priorities may align with Jersey's and where there may be opportunities, for example in relation to Fintech aspirations. As with our current approach to FTAs, we will respond in the short term to ensure that future opportunities remain open and establish a clear structure to engage with the UK on these matters.

The strategy's architecture

The architecture of this strategy is:

• clear and has a clarity of purpose, roles and responsibilities carefully articulated
• flexible, modern and adaptable to the realities of live negotiations
• open, transparent and publicly accessible
  

We have a range of options to deliver this architecture through formal, structured arrangements in terms of MoUs and forums such as the Joint Trade Committee. As well as through agreeing processes for sharing information and managing responses to requests and WTO notifications.

Short term deliverables

Establish appropriate governance

Our structures, committees and strategies include:

Agree a Memorandum of Understanding (MoU) with the Department of International Trade (DIT)

The MoU will govern and structure how we interact with DIT on FTAs with trading partners from the rest of the world. The scope of this MoU will cover all FTAs which Jersey participates in, excluding the TCA which has its own arrangements, once the FTA enters into force.

Joint Trade Committee and Customs Committee Meetings

It was agreed to establish these forums as part of the governance arrangements in response to the extension of the UK's membership of the WTO to Jersey and to support the functioning of the Jersey-UK Customs Union. The inaugural meetings of each of these were held in 2021. All parties agreed that where possible the forums should:

• take a positive approach looking at new innovative ways of working
• deal with and potential issues in a constructive and dynamic way
• be used to set potential workstreams between committee meetings

Assess opportunities offered by the WTO for business and islanders

As of the 1 January 2021, the UK has been an independent member of the WTO, and the UK's WTO membership has applied to Jersey. The ITU look to capitalise and respond to this, considering routes of engagement and analysing potential opportunities available by virtue of membership.  Understanding the UKs own agenda better will be key to defining the role Jersey may want to play.

Identify, prioritise and pursue participation in the UK's International Trade Agenda

Continue to assess and respond to the UK's RoW FTA Programme of Negotiations and seek to ensure as broad a participation in FTAs as is in Jersey's interests. This will include continuing to ensure future opportunities remain open for further coverage as set out in the strategy.

Contribute to the development of connected strategies under the TIGF

The ITU will engage with and support the formation and refresh of trade related strategies including the new Export Strategy, and revision of Financial Services Strategy as well as others underneath the overarching Framework, particularly Global Relations. In turn, this ITA Strategy will be informed and updated to reflect the ambitions and conclusions of these strategies.

Actively participate in cross governmental green agenda

Establish how we can maximise potential opportunities within the international trade arena to enhance our own environmental and green credentials. Including how a focus and proactive approach may help develop international relations.

Long term goals

Putting the governance into action

We utilise new structures to achieve identified priorities:

Assess departmental policy priorities to inform and update the International Trade Strategy

Take into account policy areas of priority identified across Government, and review and update the ITA Strategy accordingly to ensure alignment and to maximise benefits.

Undertake services extension within UK FTA

Engage with external stakeholders and States Assembly members to ensure that services extension supports Jersey's interests. Consider the impact of new international commitments to ensure Jersey's ability to comply as necessary. Consult and collaborate with the UK to negotiate successful extension with third country partners.

Demonstrate a targeted approach to securing maximum results and benefits for Jersey through the FTAs and the WTO Programme

Building on evidence and proposals from new strategies, ensure Jersey's future ambition and key markets are represented within the UK's international trade agenda. This may include looking to broaden coverage in FTAs from the outset once a clear established baseline is in place.

Commit to continual review of the International Trade Strategy

Monitor and evaluate the progress and results of the ITA Strategy. Also consider the impact and value Jersey's inclusion with UK FTAs has delivered. This will inform any changes or amendments to the strategy such as refocusing efforts or reallocating resource.

Explore and evaluate with Global Relations, the benefits of bilateral engagement

In cases where the UK's approach does not align or serve the interests of Jersey, consider (together with Global Relations) opportunities for bilateral collaboration with trade partners.

Consider specific inclusion for Jersey in environment and sustainability-based chapters

Analyse opportunities to extend coverage to some of the more forward thinking and innovative environmental and sustainable commitments in UK trade agreements, further enhancing our international reputation. This could be through extension mechanisms or as part of future day 1 inclusion in new FTAs.

Barriers and challenges

As with all goals, the pathway to achieving these is not straightforward. It's worth being open about some of the challenges and potential barriers that ITU has and will continue to face.

Timelines

This current UK Governments desire to move at pace in progressing new trade deals with partner countries is admirable and understandable. However, it imposes arbitrary and tight timelines upon Jersey in order to respond.

The questions we will need to balance are our preparedness to meet those same timelines and judge whether so doing is in Jersey's interests. We need to ensure that working to pace does not impact our constitutional process for undertaking due scrutiny and a thorough assessment of the potential impacts for Jersey. This underscores the need for, and importance of, establishing the right governance structures with the UK to manage and agree expectations on all sides.

Tight timeframes means that Jersey's initial inclusion in some new trade agreements negotiated by the UK is only possible in relation to goods which is familiar to us. However, we continue to be creative in our initial approach to overcome this and ensure foundations and opportunities are there for the future.

Shifting global political priorities

In the aftermath of the Covid-19 pandemic, considerable uncertainty is being faced around the globe at the cumulative impact of:

• high energy prices
• supply chain disruptions
• anticipated higher inflation

As a consequence, new political priorities are forming for different governments under the same pressures to stabilise and improve the economic situation and this will lead to an emergence of clearer trends over time. Currently, we appear likely to be facing either a shared commitment to collaboration from world leaders in order to stimulate global trade, or an increased prioritisation and protectiveness towards domestic matters and local economies. Jersey's own aspirations will be evolving within this context and will be taking account of the political proclivities emerging around the world. We will continue to build in sufficient flexibility within our structures to adapt and respond to these trends as they emerge.

Balancing Jersey's interests

Jersey's involvement in FTAs negotiated by the UK will always mean that we are not party to the agreement in our own right. Securing our inclusion will require us to demonstrate benefits of this to the negotiating partner. This will be particularly important to countries with whom we don't have established bilateral relationships. It's also highly likely that for countries where we do have existing bilateral arrangements for specific purposes, such as Double Taxation Agreements, it will still be in our interests to seek wider market access opportunities in the UK's FTAs. In such instances the impetus will remain with Jersey to suitably express the benefits of our inclusion that serve the mutual interests of all parties. As the UK is the signatory partner, the additional challenge for us to manage will be ensuring that Jersey's international identity remains suitably and sufficiently expressed within the terms of the FTA text. This further underlines the necessity for transparent and clear processes and forums for communication, where Jersey's individual narrative is delivered and understood.

Conclusion

In the period of transition since the TCA was concluded and the implementation process has begun, the ITU has laid a significant amount of groundwork for the launch of this strategy in early 2022. Jersey has agreed to participate in several new trading relationships and is poised to continue to do so.

In securing an Assembly endorsed mandate for Jersey's future participation in UK FTAs in the short term, a clear pathway to maximising opportunities lies before us. We are taking a positive and proactive approach to ensure our core interests are protected and that Jersey's ability to adhere to new international commitments without compromising our autonomy is maintained. We will be focussing on the immediate deliverables that ensure we get the governance structures right for the long term and mitigate some of the challenges outlined above.

Jersey's trademark exports enjoy global recognition and we want to ensure that they can benefit from preferential tariff rates in the same way. Jersey's service industry is well-renowned and as trading relationships deepen, FTAs have the potential to offer not only greater market access but enhanced protections for businesses overtime.

The TIGF and all the strategies that sit within it, including this one, are vital in developing our own trading ambitions and understanding for the future.  We have committed to reviewing this strategy and to publishing further iterations as our position evolves in the new international trade landscape emerging.