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Sticking With Protocol 3 6 April 2004

The special Protocol 3 relationship with Europe remains the best option for the Island despite concerns about the future development of the EU, according to Chief Minister Richard Corkill MHK.

Mr Corkill confirmed that agreement had been reached to safeguard the relationship in the event of the creation of a new Constitution for Europe. The outcome follows successful negotiations - also involving Jersey and Guernsey, and supported by the United Kingdom - to protect the status quo.

The Protocol 3 arrangement, in place for more than 30 years, keeps the Isle of Man outside of the European Union but allows free trade in manufactured items and agricultural produce between the Island and EU countries.

The Chief Minister was commenting following calls from the Manx EU Realist Group for the Isle of Man Government to consider radical measures, including abandoning Protocol 3 and declaring complete independence, to insulate the Island against the influence of the EU.

Said Mr Corkill:

"It is the Manx Governmentís policy to maintain a high level of vigilance and scrutiny over the EU, and to keep the relationship under regular review. But we have to face the hard facts of geography and economics Ė it is absolutely unrealistic to think that the Island could prosper in total isolation from our neighbours."

The Chief Minister continued:

"We are a small island surrounded by EU member states. Even as an independent entity in a globalised economy we would still need a trading link with Europe at least equivalent to Protocol 3.

"The Isle of Man Government does not have a crystal ball and we cannot accurately predict, anymore than anyone else can, which of the many scenarios for the future of the EU will actually materialise. It is still not clear if and when the UK will adopt the euro, whether the European Constitution will be agreed, and how the ten new member states will change the nature of Europe.

"However, in the meantime there is nothing definite on the horizon that would justify the huge risks of scrapping Protocol 3. To abandon a sound position on the basis of fear and speculation as to what might happen in the longer term would be premature and irresponsible, to say the least.

"Nor should the Island jeopardise its success and stability just to make a dramatic gesture against the EU and set an example for others. That might be good for the wider anti-EU movement but it would not be good for the Isle of Man."

Mr Corkill added:

"Nevertheless, I do appreciate the genuine concerns of the Manx EU Realist Group, and its members should be congratulated for stimulating public debate on these vitally important issues. I agree entirely that the Island needs to remain vigilant in regard to Europe, that there is no room whatsoever for complacency, and that our economy should grow on a truly global basis.

"It could be that, eventually, the groupís worst-case vision of the future of the EU may be justified by what transpires. But the Island should not be panicked into reacting short-term to what are still only longer-term possibilities."

The Protocol 3 arrangement was established for the British Crown Dependencies (the Isle of Man, Jersey and Guernsey) when the United Kingdom joined the then EEC (European Economic Community) in 1972.

The relationship is a limited one, providing for the free movement of goods - manufactured items and agriculture produce - between the Island and EU countries. Otherwise the Island is not bound by EU legislation and it pays nothing to, and receives nothing from, EU funds.

Manx Government representatives have been ensuring that the draft Treaty to introduce a new European Constitution, should it be agreed and ratified by EU member states, will not materially alter the Protocol 3 relationship.

Nor will the relationship be changed by the forthcoming enlargement of the European Union to take in ten new members: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.

References in Manx law relevant to Protocol 3 are being updated, via the European Union (Accessions) Bill 2004, to reflect the increase in EU membership from 15 to 25 countries. The Bill takes account of the fact that the EU will be much larger, but does not affect the nature of the relationship itself.

Any migrants from the new EU member states arriving in the Isle of Man will be subject to work permit requirements and will not be entitled to most social security benefits, including two of the main benefits, Income Support and Jobseekerís Allowance.

Although the Isle of Man is not part of the European Union, the Manx Government is co-operating with two initiatives from Brussels known collectively as the EU Tax Package. They are the Savings Directive and the Code of Conduct on Business Taxation.

The Savings Directive is designed to combat tax evasion by EU citizens with bank accounts outside their home countries. It requires member states, their dependencies and certain other countries to exchange information on such savings, or deduct a withholding tax for return to the home country.

The Isle of Man is opting for the withholding tax approach, in line with Jersey, Guernsey, Austria, Belgium, Luxembourg and Switzerland. The tax, to be introduced in January 2005 at the earliest, will be charged only on savings interest earned by individuals resident in EU countries. It will not apply to businesses or non-EU residents.

The Code of Conduct on Business Taxation seeks the phasing out of preferential tax rates, or tax exemptions, for particular types of business. The Isle of Man - where tax exempt sectors provide significant employment and economic activity - is complying with the Codeís desire for greater uniformity by moving to a standard zero rate of income tax for business, and is on course to achieve this by 2006.

The Island is not constitutionally bound to accommodate these EU measures, but does so as an internationally responsible jurisdiction co-operating with neighbouring countries which are important to its economy. The Manx Governmentís response to the EU Tax Package, endorsed by Tynwald, is seen as reinforcing the Islandís international reputation while protecting the finance sector and boosting the development of a diverse economy.

THE Isle of Man Government monitors EU developments through a range of bodies and sources.

These include the Constitutional and External Relations Committee of the Council of Ministers, and the External Relations Division of the Chief Secretaryís Office, which scrutinises information from and about the EU on a daily basis.

Through the UK Department of Constitutional Affairs, the Manx Government has access to British Government information on the EU. But it has an additional, independent and expert source of monitoring and analysis through the Brussels-based legal firm White & Case.

The Isle of Man is also a member of the Islands Commission of the Conference of Peripheral Maritime Regions (CPMR), an international organisation that focuses on EU activities relevant to island and coastal areas around the edges of Europe.

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