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Jersey Chamber of Commerce speech

Speech on the conduct of Jersey's External Relations by the Minister for External Affairs to the Jersey Chamber of Commerce on 18 June 2014.

​Conduct of Jersey’s external relations – now and in the future

The title for this talk would have been impossible even five years ago. There was no Ministry of External Relations. The constitutional relationship between Jersey and the UK places responsibility for our international relations firmly with the UK government, together with defence.

A constitutional lawyer would have told you that we had domestic autonomy, that we were responsible for our domestic affairs – taxation, education, health and so on – but not for our external relations. There has been a sea change during the last 10 years. In part it was caused by stresses in the relationship between Jersey and the UK between 1997 and 2002, and a desire on Jersey’s part to assert and protect its own national interests, but in part it was caused by pressure on the UK civil service to reduce numbers.

So there was a mutual desire to encourage Jersey to assume some responsibilities for the conduct of foreign affairs. The States of Jersey Law 2005, sanctioned by the Crown, provided in its Preamble -
“Whereas it is recognized that Jersey has autonomous capacity in domestic affairs;
And whereas it is further recognized that there is an increasing need for Jersey to participate in matters of international affairs;”.
In 2007 an agreement was signed between the Chief Minister of the day and the Secretary of State which acknowledged that need to take part in the conduct of international affairs, and stated expressly that Jersey’s interests were sometimes different from those of the UK. That was an important statement because it recognized that Jersey was not the equivalent of an English county whose interests are largely indistinguishable from the interests of the whole country, but that Jersey was a separate state – not an independent state – but a state with interests of her own and a different identity.

Why do we need to conduct external relations? Well, the short answer to that is that we now live in an interconnected world. It is just not possible to isolate ourselves and keep our heads below the parapet, as was the policy of the Jersey government for a long time, hoping that the world would leave us alone. Our trade in Jersey Royals may be relatively local, but much of the other business that people do in and from Jersey is global. So the main purpose of our foreign policy is to protect and to promote our interests outside the Island. A core driver of our foreign policy is considering how we can help to improve the lives of Jersey people by encouraging trade and bringing wealth and prosperity to the Island. Put simply, we try to protect the Island from outside threats (political diplomacy) and to promote the Island as a place to do business (commercial diplomacy).

Perhaps I can take first the political diplomacy. When a sovereign state conducts foreign affairs it usually does so through an embassy in the country concerned. We are not sovereign but we do have some offices in the states that are most important to us. There is an office in Brussels, shared with Guernsey, which has responsibility for protecting and advancing our interests in the European Union. There is an office in Caen, also shared with Guernsey, the Bureau des Iles Anglo-Normandes (BIAN). The recently appointed head of office is a French woman with experience of the French public service, and we hope that that will give us improved access to the national government in Paris, as well, of course, as maintaining our longstanding and excellent regional relationships. Most recently, in September last year, we established an office in London, although at present this is a Jersey rather than a Channel Islands office. There is a small staff of 3 or 4 officials from the Ministry of External Relations, although Jersey Finance now uses the office as a base for doing business in London, and we expect that other public bodies will do the same.

Even in the short space of nine months the London office has made a considerable impact both on Westminster and Whitehall, and on the diplomatic community. Sitting next to a senior diplomat from an EU member state at a dinner last week I was explaining what Jersey had been doing, to which she replied “We have noticed”. It might be of interest to explain what other engagements took place on that visit to London. I hope that you will forgive me if it sounds a little like “A day in the life of the Foreign Minister”, but it may give a flavour of the conduct of Jersey’s external relations.
One of the target areas for the development of our financial services industry is Africa where in some countries the economic growth rates have been remarkable. The country with which we have the closest connections at present is South Africa but South Africa has recently been overtaken by Nigeria in terms of GDP. I visited the Nigerian High Commissioner with a view to building up a relationship and explaining how Jersey might be of interest to entrepreneurs in Nigeria and vice versa. Rather to my surprise I found on arrival that the entire interview was to be filmed by Nigerian television with a view to being broadcast later that day, although on which channel I never discovered. In diplomacy one has to be prepared for the unexpected.
Nigeria is a potentially important market, and the meeting with the High Commissioner, which would be reported back to his government in Abuja, was a first step towards a better understanding in this huge African country of where Jersey is, its constitutional position, and the technical skills available in the Island for the development of trade. I reminded the High Commissioner that on 3 occasions our law enforcement agencies had been able to procure the return to Nigeria of many millions of pounds stolen from the country by corrupt individuals and recovered by legal process from local institutions, and that the President had been received in the Old Library in 2006 on a mission to say thank you to the Attorney General. This naturally went down well.

That meeting was followed by an attendance on the High Commissioner of Swaziland – one of the smallest African countries with a population of just over a million. The purpose of this meeting was different. Swaziland is an impoverished state with significant problems of HIV/AIDS and a lack of economic growth. I explained to the High Commissioner how Jersey had been able to help Rwandan farmers by exporting bull semen and arranging for expert instruction on insemination to be given by the Royal Jersey Agricultural and Horticultural Society to technicians in that country. The result had been a dramatic increase in milk yields to the enormous advantage of thousands of small farmers. Apparently 95% of Swaziland’s milk consumption has to be imported at great cost, and the High Commissioner was keen to see whether the Rwandan experience could be repeated. We also talked about the possibility of helping Swaziland to train officials involved in financial regulation and the collection of taxes where we have great expertise.

These altruistic aspects of the diplomatic effort are not the only reason for engaging with countries like Swaziland. There is a national interest too. Our detractors claim, wrongly but insistently, that Jersey helps to suck resources out of 3rd world countries and contributes to the evasion or avoidance of tax by local businesses in those countries. Having tax agreements with countries like Swaziland and helping them to enhance their tax raising capacity counters negative perceptions of Jersey as a tax haven where people salt away money in order to avoid the payment of taxes that are properly due.

In the UK the message has begun to sink in that Jersey does comply with all relevant international standards, and has been assessed by international organisations like the IMF and the OECD as a cooperative and transparent jurisdiction. Outside the UK there is still much work to be done. The constant message that we try to deliver is that Jersey is committed to an open international system based on rules which apply across the board. We are not secretive or opaque either in our laws or administrative practices. The tax rates that are seen on the tin are the tax rates that apply. Level playing fields in crucial areas such as tax information exchange are very important because if the system is unfairly stacked against us, we cannot be competitive. We have a good story to tell, and Ministers and officials deliver it as often as possible. It was not by chance that the Prime Minister said not long ago that Jersey was not a tax haven.

And finally I had a meeting with a Conservative backbencher who knows Jersey well and is a good friend of the Island. All these meetings would not have been possible without much preliminary spadework by officials in the London and Jersey offices of the Ministry of External Relations.

Political diplomacy shades into commercial diplomacy. My colleagues in the Treasury and the Department of Economic Development are both very active in the conduct of external affairs in the sense that they travel frequently to China, to the Gulf area, to India, to Israel and to other places where we are seeking to build commercial relationships. It makes a big difference to Jersey entrepreneurs and businesses, particularly in places like China and the Arab states, to have political support in breaking into new markets. In China, in particular, companies will not trade with outside businesses unless they know that the business in question has been given the seal of approval by the powers that be. To obtain that seal of approval, ministers have to interact with their opposite numbers so as to build trust and knowledge. They have to work hard to understand the local culture and traditions so that one does not inadvertently give offence.
Quite often it is important for the regulator, the Jersey Financial Services Commission, to be part of this process. The JFSC has a number of MOUs with regulatory bodies in China and in the Gulf. These arrangements, together with Tax Information Exchange Agreements and Double Taxation Agreements provide a framework which helps to build confidence and creates an environment where companies and individuals feel comfortable doing business with each other. It takes time. In the Gulf there is a saying that five touches are important – one must shake hands with a person on five separate occasions before one can expect that the relationship is sufficiently advanced to do business.

Large countries sometimes exert raw power to get their own way in foreign relations. The age of the gunboat has probably passed, but military power is still a factor. Jersey has none of that, but we have something called soft power which can occasionally be just as effective. Our constitutional history, our heritage, and our landscape are assets that we should and do deploy. Cultural diplomacy is all part of the game. One does not build a good relationship with another country or business on the basis of money or commercial expertise alone. Numbers of visiting ambassadors have been fascinated by the coin hoard, and the historical resonances of the exhibition around the original Copley painting of the Death of Major Peirson. The 17 diplomats from the Arab Ambassadors’ Council who came to Jersey a few weeks ago were greatly impressed by the castle at Mont Orgueil, and the stunning landscapes along the north coast. Art and history, culture and heritage are powerful weapons when one is seeking to build relationships with those from other cultures.

I want to close by saying a few words about another important aspect of the work of the Ministry of External Relations and that is in the context of constitutional relationships. We all know that we have an autonomous relationship with the UK which gives us the privilege of self-government over a wide range of matters. The relationship has served us well, and our fiscal autonomy has given us the relative prosperity that we enjoy today. The policy of the government of Jersey is that we are content with that relationship and do not want to change it. Whatever minor problems there may be from time to time in our relationship with the sovereign power, so long as the relationship is respected, there is no urge to change. Nor do we want to see any change in our relations with the EU. Protocol 3 has again served us well over 40 years, and to seek a change would be difficult, if not impossible.

But the tectonic plates of constitutional relationships within Europe are shifting, and whether we like it or not, we may be faced with some quite challenging decisions in the next 4 years. First, there is the referendum in Scotland. Our position is, like all countries, that whether to claim independence is a matter for the Scottish people, and we have no official view upon it. It would not be helpful to Jersey to support the UK government only to find that the Scots had voted “Yes”. Nor would the contrary position be sensible. It is not our business. Yet the outcome of the vote is going to affect us indirectly. If the Scots vote “Yes”, there will obviously be major readjustments in the banking and financial sector, and in a host of other areas, including the relationships with the EU. Even if the Scots vote “No”, there will still be significant changes in the rules governing devolution, and there may be spin off effects for us.

But the most important referendum is not the Scottish one, but the referendum that the Conservative Party has promised voters in the UK (or England and Wales as the case may be) in 2017. The significance for us is that if voters decide that the UK should leave the EU, our own relationship with Europe disappears. Our relationship with the EU is set out in Protocol 3 to the UK’s Treaty of Accession. If the UK is no longer in the EU, then our trading relationship also goes. We would have to have a new relationship. Of course that may not happen. Voters may decide that the UK’s interests lie within the EU and that they are satisfied with such changes as the UK government may be able to negotiate. But the implications for Jersey of a UK decision to leave the EU are profound, and much work is being done in this area so as to ensure, so far as we are able, that we are prepared for any eventuality.

In the past, the Island’s defences were based upon our native granite and our ships sailed the high seas to promote trade. In the modern world protection comes from sustained and skilful political engagement in the capitals of the world, and trade is supported by building trust between other countries and our Island. Granite and sail have been replaced by diplomats and airline tickets, but the work to protect and to promote our island continues.
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