The broader implications of APD

David Jessop, Gleaner Writer

Although the Caribbean is making headway in arguing its case for a change in the level at which the United Kingdom's Air Passenger Duty (APD) is charged, the issue still has some way to go politically.

As matters now stand, it appears that the British government will in its March 23 budget statement indicate its future thinking and may suggest alternative approaches on the APD, the UK's airline-ticket tax that unfairly discriminates against the Caribbean in favour of the United States.

How significant any changes will be has yet to be determined.

The UK government is sticking to language that suggests that only if these are major will there be a consultation period during which domestic and international parties, including the Caribbean, will be able to make representations.

At the same time, the UK government is making clear publicly and in private that it understands the Caribbean's concerns.

Final decision

Speaking about this in an adjournment debate in the UK Parliament on January 20, Justine Greening, the secretary to the UK Treasury, said that Caribbean ministers and the Caribbean Tourism Organisation (CTO) had set out the region's case effectively.

Any final decision, she said, would be based on evidence as the overall policy must be fair to passengers, fair to the industry, and should not lose sight of the need to drive the UK's economic growth.

Days earlier, the prime minister of Jamaica made clear the Caribbean's concerns in a strong statement at the opening of the Caribbean Hotels and Tourism Association's Caribbean Marketplace, the annual event at which future tourism business is contracted.

There, Prime Minister Golding said that the region was united in its position that the tax was manifestly unjust to the countries of the Caribbean region.

In what may be a sign of what is to come if the matter is not resolved, Mr Golding said: "Going to London and pleading are not the only options we have."

He had consulted widely and there were, he said, other options that the Caribbean may have to consider in tackling what "is not just unfair and unjust, but is in conflict with established global rules of tourism".

While it would be premature, he said, to speak on the position that the Government of Jamaica would take, there is no option that is off the table. "We are going to secure justice in this matter one way or the other".

In the coming weeks as officials and UK ministers consider the nature of what the UK chancellor of the exchequer may say on the issue, much needs to be done.

Foremost among the actions that the region has to encourage and support is having the Caribbean's diaspora in the UK take a much higher profile with members of parliament (MPs), ministers, and others.

Quite rightly, the region is deeply concerned about the impact that the tax is having on the regional tourism economy, and as Prime Minister Golding indicated, is looking at how it can, perhaps with other nations, combine to address the issue.

But what is sometimes lost is that this is more than a foreign-policy issue.

The APD is a UK domestic tax measure that is extra-territorial in its effect. This means that it is a matter for the UK electorate to lobby their parliamentary representatives on, and in this respect, the involvement of the Caribbean community in Britain is key.

Political pressure

They, as UK voters, know above all, the effect that the tax is having on their ability to travel back to the region and are more likely to be affected before any other group of visitors to the region. Initial evidence from airlines is that after the significant APD increases of November 2010, the greatest fall in bookings has been in the category of those visiting family and relatives - the so-called VFR market.

While the relationship between the diaspora and the region is sometimes difficult, it is clear the more that the community living in the UK can exert political pressure through letters, postcards, call-in programmes, and direct representations to their MPs and to ministers, the greater the likelihood that the Caribbean will get what it is seeking.

As one British MP recently noted, UK politics is continually changing. Government and Parliament's interaction with the voters was now as important as formal representations. Ideally, in the context of the APD, this meant that the two should work in tandem.

The APD and similar measures introduced unilaterally by Austria and Germany relate to a much broader issue that requires consideration in a more joined-up way as it touches the region's concerns about finance, aviation, maritime transport, development, tourism, and foreign policy.

What is not widely understood is that even if the particular design problems that the Caribbean is trying to address in relation to the APD's banding structure are resolved, the tax is the tip of a global fiscal iceberg that will eventually include all aviation and maritime transport.

Behind the previous UK government's decision to introduce the APD is a growing global movement to tax air and sea transport for their greenhouse gas emissions. This means for instance that in 2012, the European Union will begin to mutilateralise the issue by bringing aviation into its Emissions Trading System, known as EU ETS.

This alone, it is suggested, will result in aviation globally facing additional costs of around US$1.5 billion. The trading scheme, which already covers many European sectors, allows specified industries to emit greenhouse gases to an agreed limit, and then sells licences for higher levels of emissions. The airlines, and in due course, cruise ships, will pass on all of the costs of buying licences to passengers, varying the amount by route to take account of commercial considerations.

Aviation and sea transport were not included in the Kyoto Protocol on climate change due to difficulties in assigning emissions to any specific country.

Multilateral approach

However, it is expected that as the year proceeds, progress will be made on a multilateral approach that will establish principles to be used for market-based measures affecting aviation such as emissions trading schemes.

In practical terms this means that any future protocol on climate change is likely to include aviation and maritime transport.

For the moment, the APD issue in London to a significant extent rests on the ability of the Caribbean community as voters to have their voices heard in parallel to the representations made by governments and the CTO.

But in the longer term, the challenge will be for the region to ensure in multilateral fora that such measures are linked to development and the eventual resource transfer to small nations most at risk from climate change.

David Jessop is director of the Caribbean Council.david.jessop@caribbean-council.org