Written evidence submitted by the Falkland Islands Government (EUR0013)
Dear Dame Emily,
The UK-EU reset: rebuilding a strategic partnership in uncertain times
The Falkland Islands Government (FIG) welcomes the opportunity to respond to the Foreign Affairs Select Committee’s inquiry into the UK-EU reset.
Background
The Falkland Islands enjoyed a close relationship with the EU throughout the period of the UK’s membership. As a result, the Falkland Islands, along with the other inhabited UK Overseas Territories and the Overseas Countries and Territories of other EU Member States enjoyed access to a range of benefits, as set out in the EU’s Overseas Association Decision. These benefits included: tariff and quota free market access and access to dedicated and tailored funding streams aimed at infrastructure and the environment.
The Falkland Islands respects the decision taken in the 2016 referendum to withdraw from the EU. Once the decision was taken, we always believed it was in the wider interests of the Falkland Islands for the UK to make a success of life outside of the EU. With this in mind we were pleased that the UK was able to reach a deal with the EU in the form of the Trade and Cooperation Agreement (TCA).
In the TCA negotiations, between the UK and the EU, the Falkland Islands, and the other UK Overseas Territories, were represented by the UK negotiating team. However, when drafting the terms of reference for the negotiations, the UK failed to secure the inclusion of the Overseas Territories and therefore it was never possible for the impact of EU Exit on the Overseas Territories to be discussed in the negotiations.
Despite this, the UK negotiating team endeavoured to raise the issues of the Overseas Territories on a number of occasions, and sought a variety of creative solutions to try and resolve the impasse. We remain extremely grateful for these efforts. However, the EU were always very clear – their negotiating team had no mandate to discuss issues relating to the Overseas Territories.
The 2020 TCA therefore makes no provision for the Falkland Islands, and the other UK Overseas Territories, and no other agreement was concluded regarding our trading relationship with the EU. As a consequence, goods imported into the EU from the Falklands are now subject to the EU’s Common External Tariff. This means tariffs of between six and 18% for our fisheries exports and an average tariff of 42% for our lamb exports.
Importance of the fishing industry to the government and economy of the Falkland Islands
The fishing industry is of critical importance to the economy and government of the Falkland Islands, contributing roughly 60% of our GDP and 40% of total government revenue.
The importance of the EU as a market to the Falkland Islands
Over many years a deep and mutually beneficial relationship has been established between the fishing industries and economies of both Spain and the Falkland Islands.
As a result of this, the port of Vigo has become the gateway to the EU for 94% of the fish caught in Falklands’ waters – Loligo squid and a variety of finfish.
In the last year where complete figures are available, 288,373 tonnes of fish were imported into Spain through Vigo, of which 47,286 tonnes (16% of the total), with a customs value of €139m, came from the Falkland Islands. In the same year, 34% of all the calamari imported by Spain came from the Falkland Islands. Whilst the squid is caught in the Falklands, the majority of processing, added value, distribution, and marketing occurred in Spain and elsewhere.
The importance of the EU as a market for our fisheries exports is more than economic. As a result of the threat posed by Argentina’s sovereignty claim and the economic sanctions they impose on us, many other markets, not just in South America, remain closed to us.
The impact of tariffs
Given the importance of the EU as a market for our fishery exports and the significant contribution these exports make to the GDP and government revenue of the Falkland Islands, the introduction of tariffs was always going to prove challenging both for FIG and the Islands fishing industry.
In the last financial year the fishing companies in the Falkland Islands paid in the region of €15m in tariffs.
These figures might appear small in the context of larger nations, but for a country the size of the Falkland Islands the impact on our local economy and government revenue is significant. As an example, our fishing industry has been quite clear that in certain years, as a result of the imposition of tariffs, some vessels could be forced into a loss-making position.
It is also worth highlighting that given the small scale of our lamb exports to the EU the high average tariffs have all but resulted in a loss of the EU as a market for our exports.
Tariff mitigation?
The Falkland Islands has been very clear that tariffs cannot be the new status quo. It is the overriding policy of FIG to have them removed at the earliest opportunity. With this in mind, we are incredibly grateful for the technical discussions we have held over a number of years with a variety of relevant UK government departments. These discussions focussed on how in the short term we might be able to mitigate the tariffs. We have also worked with our fishing industry and their joint venture partners in Spain to explore the potential of Autonomous Tariff Quota (ATQ) for our Loligo squid exports to the EU.
ATQ’s are normally granted to raw materials, semi-finished goods or components not available in the EU (suspensions) or which are available but in insufficient quantities (tariff quotas), but no tariff quotas are granted for finished products. ATQs are also time limited and global and therefore open to everyone to take advantage of.
Discussions with UK government departments explored a range of options, including the reflagging of vessels. For a variety of detailed legislative and technical reasons none of the options we explored offered FIG or our fishing industry a long-term stable option to mitigate the tariffs. The same applies to our work with Spain on ATQ. FIG has therefore concluded that the only long-term solution is to work with the UK to persuade the EU to lift the tariffs.
Recognition of our status as a UK Overseas Territory
In 2013 the Falkland Islands held an internationally observed sovereignty referendum, in which 99.8% of voters, on a turnout of 92%, voted in favour of the Islands remaining a self-governing Overseas Territory of the UK. However, the freedom to live under the government we choose is something that continues to be questioned and attacked, by Argentina and her supporters.
During the UK’s membership of the EU, our status as a UK Overseas Territory was officially recognised in EU Treaties, most recently the Lisbon Treaty. This meant that the EU and its various institutions, and the Member States of the EU were bound to recognise our status. Given the ongoing challenges to UK sovereignty over the Falkland Islands and Islanders’ right to self-determination, this was an important guarantee of support.
The UK’s withdrawal from the EU means that this formal recognition no longer exists and whilst the EU and its institutions have publicly stated their continued recognition of our status, we are now exposed politically. Already we have seen the Government of Argentina seek to take advantage of this uncertainty. In 2023, for example, we saw Argentina succeed, for the first time, in having EU recognition of the “sovereignty dispute” and the use of the word “Malvinas” inserted into the communiqué following the EU and the Community of Latin American and the Caribbean states (Celac) summit. This resulted in the then UK Government and Official Opposition having to intervene at the highest levels to get the EU to clarify that their position regarding the status of the Falkland Islands had not changed.
It is important that this new reality is understood and that where possible, the UK Government and its network of embassies across the EU, make the case for UK sovereignty over the Falkland Islands and Islanders right to self-determination. The UK-EU reset is an excellent opportunity for this.
What would be an ideal outcome from the UK-EU reset negotiations for the Falkland Islands?
In our meetings with ministers and others, FIG has been very clear: we would like the UK Government to use the upcoming UK-EU reset negotiations to request the removal of the six – 18% tariffs currently imposed on our fisheries exports to the EU.
The recent imposition of a 42% tariff on our exports to the United States of America, a key market for our toothfish, makes the removal of tariffs on our EU exports all the more critical.
In order to avoid what happened during the previous TAC negotiations, we request that the UK Government is clear with the EU, before the negotiations start, that they wish to discuss the issue of tariffs on Falkland Islands fisheries exports to the EU.
The negotiations also offer an excellent opportunity to make the case for EU support for Falkland Islanders’ right to self-determination and our desire to remain a UK Overseas Territory.
If the Committee would like to discuss anything in this response in more detail, please do not hesitate to contact us:
Richard Hyslop
Falkland Islands Government Representative to the UK and Europe
We remain available to provide oral evidence should we be invited.
Yours sincerely,
The Hon Gavin Short MLA
Chair, Falkland Islands Legislative Assembly
8th April 2025