Sunday, 17 December 2017

Clarity at last

It is now clear that after the transition period is over, Britain faces a binary choice. It must put its weight behind either a Canadian or Norwegian model, with its own country-specific protocols fixed in. There are no other workable options. This was confirmed in an interview with Michel Barnier yesterday, as he injected refreshing clarity into a process which has been characterised mainly by haziness and vapid sloganeering. He told Prospect magazine:

"They have to realise there won’t be any cherry picking. We won’t mix up the various scenarios to create a specific one and accommodate their wishes, mixing, for instance, the advantages of the Norwegian model, member of the single market, with the simple requirements of the Canadian one. No way. They have to face the consequences of their own decision.”

The reason why these two models are held up as our post-Brexit options is because they are so profoundly different in every conceivable way. This is exactly the point. The gulf is deliberate and must be maintained for the sake of preserving the functional integrity of the Single Market. It is upon examination of the gulf - the marked difference in market access, surveillance and enforcement strategy and obligations - that we begin to see just how FTA frameworks differ from the EEA.

This blog presses for the Norway option based on available evidence. Norway retains full access to the Single Market and the ability to sign trade deals both independently and as part of the EFTA bloc. Like Canada, Norway is not subject to the ECJ and, as I have explained, its financial contributions do not go towards the EU budget. On free movement, it has at its disposal safeguard measures which can be invoked unilaterally and have a track record of usefulness.

If Norway were subject to the ECJ, had more limited access to the Single Market and had no extra leverage on freedom of movement (which I do not really oppose), I would support an FTA solution no question. But these things are not the case. Britain led the creation of the Single Market and its supply chains are tightly integrated within its framework. They are therefore more sensitive to friction posed by customs checks. We owe it to ourselves to stay inside more than anyone else.

The other key point made by Barnier in his interview relates to the issue of the looming trade deal. He reiterated, I think importantly, that "the actual negotiations on the future relationship will only begin once the UK leaves the EU.” This is important to flag up because so many in the Brexit chatterati are getting this confused. Trade negotiations start from the point at which the United Kingdom becomes a third country to the EU, not any sooner.

They cannot begin beforehand because there simply isn't time to negotiate a bespoke FTA in the window we have remaining. A UK-EU FTA will be unique in global trade in that it will not focus on regulatory convergence, but upon cementing differences. It will be a shredding of existing terms and a separating of the UK and the EU trading framework. The EU will not ratify any trade agreement which provides the UK with preferable terms. It won't be worth the hassle at the WTO.

In this respect I foresee UK-EU FTA negotiations lasting in excess of a decade with some periodic stalling. The fact that we start with symmetrical regulatory regimes is irrelevant. The point of the FTA, as I have said, would be to achieve difference and create a divide where currently there are bridges. Furthermore, upon Brexit the UK will be a new and inexperienced customs entity with representatives unused to distinct UK trade negotiations.

In the initial period of trading independence, we will find ourselves paddling. We will need to learn how to self-organise and engage with global trading forums and agreements. This is not as patronising as it may sound. Teams of human beings negotiate, and like with every other facet of human activity, experience is everything. Savviness and familiarity with legal structures will not come instantly. Our intellectual muscles will need stretching out of inactivity.

Either way, we are slowly moving towards a better understanding of what lies ahead. We can at least be thankful for the choice presented to us. Brussels prefers Norway but will not be able to force us into either funnel. It will be interesting to see how domestic politics influences the preference of whichever government is at the helm in 2021. As for me, I will continue to make the arguments for our continued EEA membership at this blog and in the public domain because this thing is not over until it's over.

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