Tuesday, 7 November 2017

Brexit: taking the hint


Brexit observers will notice that in recent days, the European negotiating team have been dropping several not-so-subtle hints about the EFTA/EEA position. Such examples can be found here and here. These have been accompanied by yesterday evening's insightful debate in the House of Commons on membership of the Single Market (EEA), led by Stephen Kinnock, whom I have come to respect as a serious politician and effective mobiliser. He put forward the motion:

"That this House believes that for the UK to withdraw from the European Economic Area (EEA) it will have to trigger Article 127 of the EEA Agreement; calls on the Government to provide time for a debate and decision on a substantive motion on the UK's continued membership of the EEA; and further calls on the Government to undertake to abide by the outcome of that decision."

Do quickly note that here we have further evidence that leaving the EU does not necessarily - and in principle - mean leaving the EEA. The EEA Agreement has always been a separate treaty, and one to which the UK retains suis generis membership. Ahead of yesterday's debate, a few individuals, such as Adrian Yalland of the Single Market Justice campaign, contacted me to ask if I would contribute to Mr Kinnock's parliamentary briefing, which did flatter me somewhat, but timing was poor as I have been bogged down by essays at university. I would love to have helped compile the briefing but ultimately I need to prioritise my time and workload. The positive, though, is that Labour higher-ups appear energised by the EFTA option. This has my attention as we edge closer to the next General Election. 

Some weeks ago at this blog I decided that it simply wasn't worth my time writing about the merits of the Norway option, though I did at one point assure readers that an EFTA Brexit would never really leave the table, even if the government eventually decided against it. I simply passively accepted that a departure from the EEA was inevitable. To some extent my claim that the option would continue to recur in debate has been substantiated. The EU has a way of keeping neighbouring countries nestled closely to its remit, and Michel Barnier has repeatedly made clear that a Norway-style deal can be arranged. Last week, the European Union released an internal impact assessment of the different Brexit models. On the EFTA/EEA option, the document noted that "in economic terms this would be close, but not identical, to the status quo for a full member state." To my mind, this means stability. 

We should now look to taking these hints. As regards the scale of Brexit, we could do ourselves much heavier damage, and sliding into a ready-made package will be useful for preserving business confidence and avoiding a jungle of non-tariff barriers which would otherwise await us as a third country. The EEA Agreement is interesting in that it is simultaneously configured and configurable. It contains bolt-on agreements which take into account the needs of the add-on states. In the case of Liechtenstein we see unique quota arrangement on freedom of movement (which I don't argue we will be able to perfectly replicate) and in the case of Norway we see several protocols which commit all sides to cooperating on matters of customs clearance and the establishing of Mutual Border Inspection programmes. 

The EFTA/EEA position will accommodate Britain with respect to honouring both the integrity of the Single Market and the uniqueness of its non-EU members. It will simplify the Northern Ireland problem hugely, though there will still be issues around VAT and leaving the Union Customs Code (UCC) to deal with, which will not be especially easy. No longer will we have to worry about giving Northern Ireland special status within the EEA or establishing mechanisms for controlling any regulatory divergence. It will continue, almost completely, the current regime of centralising the enforcement and surveillance strategy, meaning that for any trade relevant to the EEA acquis, checks will not be necessary at the border. The beauty of the Single Market, after all, is that goods remain unimpeded by bureaucracy. This makes us all richer and has immeasurable benefits for trade facilitation. 

In essence, what we are talking about here is the ability to leave the EU without becoming a third country. We will avoid the sticky web of non-tariff barriers adjoining third country status whilst simultaneously recovering large pockets of domestic sovereignty. Many competencies will return, including very complicated policy areas like fisheries and agriculture, which will each require a few years to fully construct a distinct national setup. The less we have on our plate during withdrawal, the more room we'll have left over for the cake, if I can use the metaphor just briefly. 

EFTA/EEA is not perfect by any means. There are problems with the framework in which it operates and I accept these flaws. But the flaws which are reasonable to identify tend to be missed by commentators who prefer to churn out the kind of lazy, conventional wisdom that doesn't stand up to fact or any particularly thorough scrutiny. These people rely on misleading slogans like 'pay no say', whilst ignoring the general direction in which standard-setting and regulation have been headed since well before the twenty first century: upwards to global forums. Locked within the aegis of the Common Commercial Policy (CCP), Britain has played a limited role in the standard-setting arena, having been unable to exercise any right of initiative at trade-related agencies and any first mover advantage in policy areas where we retain huge political capital. Common Union positions have led to a dilution of our regulatory potential. 

But, given the logjam we now see in the Article 50 procedure, the EFTA position looks more like an olive branch than ever before. Perhaps this is the reason why so many committed eurosceptics have favoured this route out of the European Union for the last few decades. Try to leave everything in one go and see where you end up. What the country needs now is a period of calm. If we don't opt for EFTA/EEA then I would argue we are in immediate need for an extension to the Article 50 window, perhaps a doubling of the prescribed two years, which officials (prior to the signing of the Lisbon Treaty) at the constitutional conventions, as I have written elsewhere, did not bother to scrutinise adequately. 

As I see it, options are severely limited. The Commission will be open to one or the other because nobody but the insane on either side wants to arrive at a no deal scenario. There are too many documents, licenses and policy areas which require mutual recognition or cooperation immediately following Brexit. The best thing for us to do now is to commence negotiations in principle with EFTA, in accordance with Article 56 of the convention. Barnier and his team are beginning to make clear which way they think we should head, and in doing so refute any claims of a desire for punishment. We should take the hint before it's too late. 

2 comments:

  1. The Norway option would seem to be the only sane way for us to extricate ourselves gradually from the EU.

    Surely, sanity will prevail in the end? (although it does seem to me that the world has gone mad, so maybe it wont......)

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  2. Can you explain how VAT issues could play out under EEA/EFTA ?

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