Brexit - the first year

Saturday 24 June 2017  

It's been a year since we voted to leave the EU. And what a year it has been. Though everyone has their take on a year of Brexit, as ever there are few efforts more comprehensive than this latest work by Richard North of Priced just £4, you can buy it here...

Buy Now

24/06/2017 link

EEA is the cleanest, fastest, safest Brexit

Tuesday 20 June 2017  

We are not surprised a softer Brexit is viewed with suspicion. After all, the usual remainer suspects demand that we stay in the single market and remain in the customs union. Since they have tried every other means at their disposal to stop Brexit they have squandered their political capital. 

What makes it worse is that those MPs and personalities who argue for it have no real concept of what these terms mean or indeed how we go about it. It is entirely knee-jerk. Rather than seeing the potential merits of a such a setup they see it as a halfway house - which raises all the more suspicion that we could be sucked back in. Leavers want Theresa May to stick to her word that Brexit means Brexit and we cannot be half in, half out.

But then that is a misnomer. Nobody is half in, half out. You are either a member of the EU or you are not. Unequivocally, Norway is not a member of the EU. It just has a very sophisticated and comprehensive relationship with the EU. One might even say a "deep and special" relationship. Further to this, a customs union agreement is really just a trade deal to eliminate certain barriers to trade. None of this defeats the spirit of ending political union with the EU. 

For the Leave Alliance, we have never really been taken with the idea that there are immediate economic benefits to Brexit. We have always accepted there are substantial risks and that it is not primarily an economic proposition. With the EU being the nearest and largest regulatory and economic superpower it follows that we would require an extensive relationship with it and deep cooperation is still in our best interests. 

If anything we view Brexit as a preparation for the future. Over the last twenty years we have seen a steady growth of private and international regulatory authorities and global conventions bringing us ever closer to a global single market. When we look at the trade picture globally we see that regulation (the lack of common frameworks), not tariffs, is the biggest barrier to trade. 

It would be wrong to say that Britain did not enjoy influence in the EU but in the matter of adopting global rules and regulations Britain can be, and very often is, compelled or obliged to adopt them on the say so of the EU. While a common approach very often is in our interests, there are times when it is not - where such impositions remind us that we are only nominally sovereign.

Then with the dawn of the WTO agreement on technical barriers to trade, the EU has, of its own volition ceded the regulatory agenda to global bodies such as Codex and UNECE where we find we would have an enhanced role were we to be outside of ECJ control and out of the common commercial policy. If the trend is toward global regulation then it follows that the UK will need to be an active and independent player with its own vote and right of proposal. 

This new(ish) dynamic rather illustrates the futility of leaving the single market in that there is an ever growing convergence between the global standard and the EU standard and in many cases one and the same. The scope for deregulation is limited and largely undesirable since regulation largely serves to facilitate trade. In this respect, far from being a passive recipient of EU rules, as some assert, we would have a more active role in their creation and we would adopt them directly rather than through the EU middleman. In that respect we could have abolished roaming charges far sooner. The EU was a stalling factor.  

We should also note that in or out of the single market we will still be influenced by EU specific rules since the EU will remain a large component of our exports. Both Canada and New Zealand have recently overhauled their food safety rules to make them more compatible with those of the EU. More locally we see that Switzerland uses its national legislature to mirror EU rules and in some cases adopts ECJ and council decisions automatically as per the framework of their relationship. In that regard they have fewer powers of veto than Norway. 

It is our view that sovereingty is a much abused term and nebulous in nature. If it means anything it means having the right to say no, both in theory and in practice. We recognise that the ability to say no does not mean we always will and we recognise there will be trade offs and penalties for doing so. That choice though should rest with the people of Great Britain and Northern Ireland rather than technocrats in Brussels. 

We are of the view that events have surpassed many of the classic eurosceptic arguments, not least those matters around regulation. As painful as it was to adopt single market legislation we would not seek to repeat the pain of changing to a new regime only to find it evolves into pretty much what we have now. Moreover, we would note that the single market is not the sole property of the EU. It is a collaborative venture between Efta EEA members and the EU, and the UK's membership of it goes some way to evening out the balance of power. We would have considerable collective ability to lean on the EU to reform in ways we could not achieve as a member. 

Either viewed as a destination or a transitional mechanism there is a lot to be said for it. There is no reason why a flexible agreement like the EEA could not be evolved so that there would be no real need to leave it. We could very easily seek to expand and enhance it.

We do not view EEA/Efta as a second prize or a mitigating measure. It fulfils the requirement of being out of the EU with an independent trade policy and the restoration of the essential sovereignty that we demand. We would urge those who would like to see this outcome to present the option in a different light other than a retreat to safety. In its own right it has much going for it. 

For those hard line leavers who will accept nothing other than a bespoke trade deal, we would point out that any new relationship will eventually end up replicating the EEA agreement and we are wasting our time reinventing the wheel. 

We would also note that we will need a transitional agreement. In that, any transition that is not the EEA is a "deal" where the ECJ retains supreme authority. In other words, we dither in the EU considerably longer while we craft a bespoke arrangement, all the while being unable to pursue other trade avenues. Possibly long enough for a new government to halt the process. It seems to us that Efta EEA is the fastest and cleanest Brexit available - and we would be fools to hold out for an illusory perfection when adequate will do the job. 

20/06/2017 link

The Brexit Deception

Thursday 15 June 2017  

One bizarre facet of the online Brexit debate is that it happens in an alternate universe to those who influence government policy. It has meandered for many months but only now it is coming to a crunch point do we see minds starting to focus on practical solutions for Brexit. It would appear that the EEA as an interim is now the consensus view among academics, lawyers, journalists, remainers of all stripes and pragmatic leavers.

While previously the debate has been bogged down in confusion and misuse of distinct terms, there seems to have been a turnaround where people are finally getting to grips with it. That would be encouraging if it in any way influenced decision making at the heart of government. Sadly, it doesn't.

It would seem that the same entrenched ideas from the Tory fringes still rule the roost. The appointment of Steve Baker MP as the junior Brexit secretary tells us this. Just hours after his appointment he said: “We need a good, clean exit which minimises disruption and maximises opportunity. In other words, we need the ‘softest’ exit consistent with actually leaving and controlling laws, money borders and trade.”

This is essentially a more verbose variant of "Brexit means Brexit" and there is, as yet, no change to policy. In its own infinite wisdom this government believes we can have our cake and eat it. You have to hand it to him. To the uninitiated "clean Brexit" sounds perfectly reasonable. No loose ends, no looking back and everything tied up neatly before we go on our merry way.

As ever it comes down to the age old question. Is this naivety, dishonesty or both? That's actually the only easy question in this whole debate. It's both. We can say for a fact that the more technical problems have been raised with these people but issues are casually swept aside while the inner circle disseminate propaganda in support of an obviously flawed approach. This is why we're worried.

The very notion of a "clean Brexit" is dishonest. There is no clean Brexit, only degrees of very messy. To us the cleanest Brexit would be the one which doesn't expose us to debating every last minute detail. Instead of opting for a the EEA agreement we are now seeking a bespoke solution, one which will see us bogged down for many years, ramping up the uncertainty and in all likelihood threatens a substantial portion of our EU trade. Not by any measure would you call this "clean".

The only reason we can think that one would be so cavalier as to ignore the many intricate areas of process is that they have no intention of addressing them. We know that David Davis is the "moderate" of the hard liners but the rest of them are salivating for a "no deal" Brexit and will tell any lie in pursuit of that goal.

As to whether they can be stopped, it is entirely our of our hands. It's really up for the parliamentary party to act and unless moderate voices get their skates on then we are up a certain creek. For now all we can do is watch and wait in the hope that sanity will prevail - and keep making the case for a more pragmatic tone. It ain't over til it's over.

15/06/2017 link

A failure to prioritise will be our undoing

Sunday 7 May 2017  

Sometimes you just have to go back to basics. We want to leave the European Union. We want the United Kingdom as an entirely self-governing, self-confident, free trading nation state.

It is the view of  leavers that Brexit could unleash the potential of the UK by way of being free of certain restraints imposed upon us by the EU. We take the view that the frameworks and parameters imposed upon us are often unnecessary, counter-productive and ultimately corrosive to public life. We seek to correct that.

For whatever reason, Britain has been unable to secure adequate flexibility from the EU and it is the near uniform view of eurosceptics that the fault lies in the constitution of the EU which is unlikely to ever be reformed. To do so would require substantial modifications to the founding treaties thus changing the nature of the European Union as an institution.

For the moment it would appear that there is no real desire on the continent to commit to such an undertaking therefore Britain must transform its relationship with the EU by the only real means possible. Departure.

For reasons that we could debate into the small hours, the UK has a different mentality to that of the continent. Perhaps that is something that comes with being an island. Perhaps that is to do with a long standing tradition of independence. Britain has influenced the world and still feels able to continue in that tradition.

It is, however, a grave mistake to assume that our departure from the EU does not come with certain political and moral obligations. Further still there is nothing to be gained by needlessly antagonising our European allies. An orderly and amicable exit is in the best interests of further relations.

If anything, the purpose of Brexit is to restore the right to choose our own path and our own allies in common endeavours. Membership of the EU is not always compatible with our national objectives and the inability to act in the direct national interest is intolerable. It should be noted, however, that it is in the national interest to ensure we have a close relationship with the EU based on cooperation and friendship. The ability to choose a different path does not rule out cooperation with the EU.

It is a matter of concern, therefore, that this government is already ramping up unhelpful rhetoric. In these such negotiations it is essential that we not lose sight of the broader objectives. There are some principles where we must make a stand, but on matters such as the financial settlement, though we should apply robust scrutiny to any demands, we should not let disagreement endanger the process.

Though the departure of the UK leaves the EU without a substantial contributor, we must still recognise that an union of twenty seven nations is still a power to be reckoned with and one which hold significant leverage. They have an agreed set of rules which we had some influence in the creation of, and we cannot expect or demand any special treatment. We have known from the outset what it means to be a third country and that is where we have chosen to be of our own volition.

What we would seek to achieve is a more commercially minded relationship allowing for the maximum level of economic integration and free trade as we can obtain without giving up overall control. That much should not be controversial or indeed impossible. What makes that less likely though is to quibble over minutia and create roadblocks over legacy issues.

In this we should not lose sight of the fact that we will be calling upon the EU to assist us in the transition. We would hope for a good deal of understanding while we prepare our own mechanisms of government and devise our own means of administration. It is in our best interests to ensure to continuity of the EU and its shared endeavours, not least because we will seek to participate in many of them as a partner in the future.

Since, were we to remain in the EU, we would be making considerable contributions to the EU budget, there is no real urgency in ending payments to the EU and contrary to the sloganeering of the Vote Leave campaign the matter of contributions was never the central issue for leavers. If the financial settlement requires that we make concessions then in the broader scheme of things it is better that we take the high road.

In this it is essential that the government reacts only to that which is said in an official capacity rather than innuendo and the fabrications of our print media. The mischief making of the Telegraph and the Financial Times has the potential to turn the public mood sour. The government would be well advised not to walk into these such ambushes.

We would also note that there is no time to be distracted by pointless bickering. The first order of business after the election should be to secure an extension to the talks. If it is still the view of the government that a complete settlement is achievable in two years then we can only conclude that it has not fully understood the size and scope of this undertaking. It risks a calamitous collapse or a complete surrender of leverage when time runs short.

It is presently a cause for alarm that this government believes that walking away is an option. It is impossible to overstate just how damaging an acrimonious split would be for both parties. As a negotiating ploy, such brinkmanship is irresponsible. More to the point it is simply not credible.

What we need to see from this government is is a recognition of the gravity of these talks. Thus far the cavalier attitude of Brexit ministers does not inspire confidence. They are playing fast and lose with the livelihoods of millions and putting all of our European trade at risk. The blithe assertion that we can function on WTO rules is in defiance of every learned opinion in the field.

There are times when experts can be disregarded. On the matter of who governs us, that is a something only the voters can decide. On matters of law and treaty though, the opinions of long retired party grandees and partisan think tanks cannot take precedence. There is no serious analysis that believes WTO rules alone are sufficient to even secure basic continuity of trade.

The Leave Alliance believes that the UK can do a great deal to enhance its trade with the rest of the world, but this should augment, not substitute EU trade. Though there is enormous potential to kick start global trade through multilateralism, for the interim, there is nothing that can replace the trade we stand to lose if these talks are mishandled. Further to this, soured relations with the EU would undoubtedly make our post-EU life far more difficult than it need be. It is difficult to see how we can entice other partners to enter agreements with us if we fail to honour our obligations.

Finally it should be noted that the government does not have a mandate for a more extreme Brexit. The support it presently enjoys is down to a collapse of coherent opposition. If for no other reason than enlightened self-preservation this government should be mindful that its political fortunes can very rapidly change if it fails to deliver a workable agreement. The referendum has thus far obliterated Labour and Ukip. The Conservative Party is not immune in these turbulent times. Since this government is evidently playing for party advantage over the good of the country, they would do well to think beyond the election in June.

07/05/2017 link

What’s wrong with the WTO Option?

Monday 13 March 2017  

Updated version

The WTO Option is an approach to Brexit much favoured by some groupings. It is an approach where the UK leaves the EU without having negotiated any trade agreements with the EU, either within the framework of Article 50 negotiations, or on the margins. Instead, it relies entirely on multilateral WTO agreements covering trade-related matters.

The general thrust of the WTO Option argument is that: "Were the UK to leave the EU, it would continue to have access to the EU's markets, as World Trade Organisation rules prevent the EU from imposing unfair, punitive tariffs on UK exports". In reality, the WTO rules only afford very limited protection against discrimination, and then only in respect of tariffs - which are no longer central to trade matters.

As the WTO site itself says, "by their very nature RTAs (Regional Trade Agreements — as is the EU) are discriminatory", and, under WTO rules, an amount of discrimination against third countries (and that would include the UK) is permitted. The WTO observes:

Modern RTAs, and not exclusively those linking the most developed economies, tend to go far beyond tariff-cutting exercises. They provide for increasingly complex regulations governing intra-trade (e.g. with respect to standards, safeguard provisions, customs administration, etc.) and they often also provide for a preferential regulatory framework for mutual services trade. The most sophisticated RTAs go beyond traditional trade policy mechanisms, to include regional rules on investment, competition, environment and labour.

The crunch issue here is the "preferential regulatory framework". Unless goods seeking entrance to the EU Single Market (i.e. British exports) conform to the regulations which comprise the framework, they are not permitted entry. Thus, the assertion that, if the UK left the EU, "it would continue to have access to the EU's markets …", is simply not true. And ,  to spell it out,  if it's not true, it's false.

With or without tariff issues being resolved ,  which are actually irrelevant to the access issue , the claim is false. Tariffs do not prevent access to a market. They simply impose a tax on entry. The actual barrier is the regulatory conformity,  what is known generally as a non-tariff barrier (NTB) or, sometimes, as technical barrier to trade (TBT).

Nevertheless, it is generally recognised that, in order to access the Single Market, goods must comply with EU rules. Conformity is the way of overcoming the NTB. But what advocates of the WTO option have not realised is that there is more to it than that . Much more. Potential exporters not only have to ensure their goods conform, they must provide evidence of their so doing. This requires putting the goods through a recognised system of what is known as "conformity assessment".

We are at this point entering serious nerd territory. If your eyes are beginning to glaze over, all we can say is welcome to the world as it really is. It has taken years of mind-numbing, tedious study to understand this amount of detail, and either you know it, or you don't. If you don't, you are going to make serious mistakes. And that is just what the WTO Option advocates have done. In a moment we’ll see why their mistakes are not so much serious as catastrophic.

And, for all that, the fundamentals are quite simple. The point about the Single Market is that border checks have been eliminated. The common rules are monitored by relevant national authorities and there is mutual recognition of standards. Thus, if you so desire, you can load a truck with grommets in Glasgow and ship them all the way to Alexandroupoli on the Turkish border, with just the occasional document check.

But the moment we leave the EU, this stops. Your component manufacturer may still comply with exactly the same standards, but if the product requires independent testing , any testing houses and the regulatory agencies are no longer recognised. The consignment has no valid paperwork. And, without it, it must be subject to border checks, visual inspection and physical testing.

What that means in practice is that the customs inspector detains your shipment and takes samples to send to an approved testing house (one for the inspector, one for the office pool, one for the stevedores and one for the lab is often the case). Your container inspection is typically about £700 and detention costs about £80 a day for the ten days or so it will take to get your results back. Add the testing fee and you’re paying an extra £2,000 to deliver a container into the EU.

Apart from the costs, the delays are highly damaging. Many European industries have highly integrated supply chains, relying on components shipped from multiple countries right across Europe, working to a "just in time" regime. If even a small number of consignments are delayed, the whole system starts to snarl up.

Then, as European ports start having to deal with the unexpected burden of thousands of inspections, and a backlog of testing as a huge range of products sit at the ports awaiting results, the system will grind to a halt. It won't just slow down. It will stop. Trucks waiting to cross the Channel at Dover will be backed up the motorway all the way to London.

For animal products exported to the EU, the situation is even worse — if that is possible. Products from third countries (which is now the UK) are permitted entry only through Border Inspection Posts (BIPs). Only at these can they be inspected and, if necessary, detained for testing. But, for trade between the UK and EU member states, the capacity of BIP is entirely inadequate. Until more capacity has been provided, trade in these products stops dead — say goodbye to a £9 billion export trade.

If the way out of the country becomes blocked, very quickly the return route gets blocked and incoming trade from the EU starts suffering. In the UK, goods from the EU are no longer delivered. Trade slows. Manufacturers which depend on imported components start struggling and then have to close. And while the naysayers talk about losing three million jobs if we leave the EU, we are looking at twice that and more — seven or eight million jobs are at stake.

At this point, you might say, “But how can this possibly happen?”

The WTO Option advocates will tell you that countries such as China, the United States and Australia all trade with the EU without formal trade agreements, and therefore operate under WTO rules. They don't have these problems so why would the UK? The answer, however, is remarkably simple. These countries don't rely solely on WTO rules.

What the WTO Option advocates have done is make a very basic but fatal mistake. They’re so obsessed with tariffs, they haven’t begun to focus on non-tariff barriers. Thus, by and large, they are only looking at trade agreements dealing with tariffs — a sub-set of international agreements which are registered with the WTO. But there are many different types of agreement and many which involve trade, either directly or indirectly, which are not registered with the WTO. These, for our WTO Option advocates, remain under the radar. To them, they are invisible.

Yet one of the most important types of trade agreement is the Mutual Recognition Agreement (MRA) on conformity assessment. This gets round the problem of border checks, as the EU will then recognise the paperwork on product testing and conformity certification. Throw in an agreement on Customs cooperation — to ensure that official paperwork and systems mesh — and you are on your way to trouble-free border crossings.

China has a Mutual Recognition Agreement on Economic Operators, signed in May 2014, the United States has one on conformity assessment which runs to 81 pages, agreed in 1999. Australia has one on conformity assessment. 

All of these are outside the remit of the WTO but they are nonetheless trade agreements, and vital ones at that. But look then what the think-tank Global Britain — another WTO Option advocate — is doing. "As an example", it writes, "Australia has no trade agreement with the EU…". It then goes on to cite an EU web page, which actually tells us:

The EU and Australia conduct their trade and economic relations under the EU-Australia Partnership Framework of October 2008. This aims, apart from cooperation on the multilateral trade system and trade in services and investment issues, to facilitate trade in industrial products between the EU and Australia by reducing technical barriers, including conformity assessment procedures.

What is the EU-Australia Partnership Framework, if not (inter alia) a trade agreement? In the detail, it sets the framework for the all-important MRA on conformity assessment. One MRA runs to 110 pages, with an amendment running to a further 20 pages.

There are, in fact, 82 agreements between the EU and Australia, of which 18 are bilateral. There are 65 between the EU and China, of which 13 are bilateral. Between the EU and the United States, there are 135, of which 55 are bilateral. As regards trading agreements, not only is Global Britain incorrect in its assertions, its authors apparently don’t even read their own reports.

Such is the importance of agreements such as the MRAs that the UK would have no option but to seek a deal with the EU, for which there is a facility within Article 50. But, the moment it sought such deals, it would no longer be relying exclusively on WTO rules. It would now be seeking bilateral agreements along the lines of the so-called "Swiss option". This comes with as many problems as the WTO Option, if not more, not least the length of time it would take to agree a Swiss-type arrangement (10 years or more?)…And that's assuming the EU wants another complex Swiss-type arrangement, which it doesn't.

One can say, unequivocally, that the UK could not survive as a trading nation by relying on the WTO Option. It would be an unmitigated disaster, and no responsible government should allow it. The option should be rejected.

13/03/2017 link

Opposition to the EEA is wholly irrational

Friday 2 September 2016  

Much of the speculation around what Britain should attempt to negotiate centres around what Britain shouldn't do rather than what it should. On the one hand we have John Mills of Labour Leave, absolutely adamant that the suicidal WTO option is a possibility and on the other we have Andrew Tyrie in an Open Europe report ruling out all of the options including the EEA.

"The UK need not replicate the arrangements of other countries" he asserts. It "will want more market access than Canada, whose trade deal with the EU contains only limited provisions on services, and more control and influence than Norway, which is a passive recipient of single market regulation."

This is cake and eat it stuff. Tyrie recognises the failings of the WTO option and that it should be avoided at all costs. The basis for this is that the WTO option says nothing of recognition of standards along with all the other issues surrounding non-tariff barriers. He recognises that a Canada deal is insufficient and so he leans toward a comprehensive and close relationship with the EU.

It appears he wants the same level of participation as Norway but a direct say over the rules. Some might say that is EU membership. However this blog would challenge the assertion that Norway is "a passive recipient of single market regulation". It isn't. As much as there is direct consultation and a veto mechanism within the agreement, Norway gets an enhanced say in the rules by way of being full participants in the global bodies where the rules are made. Tyrie make no real mention of this. He is merely repeating empty mantras.

This though is a common view and an enraged Tweeter informs us that "Britain does not need or want prior agreements. We can make our own agreement, not cobble together someone else's". Indeed we can make our own agreement but if we want to negotiate something as comprehensive as the EEA then we are looking at six to eight years of negotiation. Tyrie remarks that his fantasy scenario will indeed take more than two years and believes that some unspecified "transitional arrangement" will fill the void. There are no details as to what this looks like.

What critics of the EEA miss is that the EEA agreement is not just an agreement on single market participation. It is an interface mechanism with its own infrastructure for constant review and reform for the purposes of entering special conditions, exemptions and reservations. And so though we may be adopting an agreement that someone else has, there are mechanisms to tailor the agreement to the needs of the UK, be that enhanced controls over freedom of movement or better consultation on regulations.

Because it is a system of continuous development, including efforts to extend financial services access it is not set in stone. Far from cobbling together a copy of the Norway agreement we would simply be using the same conduits into the EU. The purpose of joining it is that as an agreement to which we are already a party, we would simply be switching sides, the groundwork for which we could do before even triggering Article 50 which means part of the process can be under way without having to negotiate and extension. We can have concurrent negotiations.

Once we have transitioned into EEA status we then use the mechanisms and processes to further negotiate our exit issue by issue, leaving things that work untouched. We then have no need of bespoke transitional agreements because the EEA very much is a bespoke transitional agreement with a view to eventually leaving the single market to participate in the global rules based system as it develops.

Opponents of the EEA really need to explain what the point of reinventing the wheel is. Why should we create unnecessary uncertainty to achieve much the same as what already exists? Moreover, the EU is not especially keen on a patchwork of agreements like Switzerland which need constant unstructured attention where neither side is happy with it. If it doesn't want that then why would it want to replicate an EEA style agreement solely for the benefit of the UK when it already has an interface mechanism for non-EU market participants?

More to the point, why add the complication to something which need not be complex? Effectively the EEA serves as a Brexit safe space with no cliff edges where the process of exit happens at a pace that doesn't disturb business.

What Tyrie is doing is closing down the debate, rubbishing entirely viable options in favour of a lengthy and risky process for no real advantage. You could point out the numerous deficiencies in the EEA agreement where Norway suffers, but the obvious point is that we are not Norway. We have market clout and we have world leading industries which means we have a strong hand when we seek new annexes to the agreement.

Moreover there is a structured means of reviewing the EEA agreement. Entering some custom final agreement means we have to persuade the EU to open it up for review in the future. The EEA already has review systems in place so we can revisit things we get wrong.

As to immigration, the EEA does have safeguard measures on freedom of movement and we can leverage them into a more formal quota system within the EEA framework. That would be a strong start to immigration reform. This would be sufficient if we use the opportunity to also tackle non-EU immigration issues. We will still need a fairly high turnover of EU people and we do not want to close down opportunities for UK citizens living in the EU. One thing the UK does not want to do is cut its nose off to spite its face. Full control is neither necessary or desirable and the advantages are slender.

There is every reason to believe the EU would be amenable to EEA membership. Firstly a messy Brexit is damaging to the EU economy as a whole. Secondly, as discussed, a bespoke system is time consuming and will require ongoing use of diplomatic runtime for the next decade. Using that which is already in place requires only a marginal increase in resource. The alternatives to the EU require a gargantuan commitment of intellectual resources right about the time the EU needs to be directing its trade expertise elsewhere. Not least with the alleged imminent failure of TTIP and CETA.

The EU can either concede on Freedom of Movement for the sake of a cost effective Brexit or we can create risks and complications that serve nobody. There is no reason why we should accept freedom of movement as an EU red line since every other member wants similar concessions and at some point in the future the EU, if it wants to survive, it will have to bend to this dynamic. Nobody is happy with freedom of movement as it stands and a refusal to reform it is more likely to see others moving toward exit than any special concession for the UK.

When looking at the available options it would appear that the EEA is the instrument most people can live with. Scotland will want full single market participation and so will the forty eight per cent of the UK who voted to remain. There simply isn't a large enough majority for the hardline Brexit proposed by eurosceptic Tories. It would not bring the benefits they believe it does and a hard Brexit would be considered one of the greatest unforced political errors of all time. By the same token, attempting a bespoke agreement would be considered a curiously pointless waste of energy.

From the beginning The Leave Alliance has maintained that Brexit is a process, not an event. The EEA is far from ideal but in the very first instance it does return control over some crucial areas of policy which gives us enough to be getting on with. The structure of the agreement means that we can revisit the process at our leisure and provides the least disruption for the EU and the UK which is ultimately what the markets want too. There is no value in attempting to appease the unappeasable by pursuing a hard Brexit because it will not deliver in its promises. Tory fantasies of "free trade" are for the birds. Nowhere in the real world does this exist.

It is to our great bemusement that there is such an irrational phobia of the EEA. It is is the most pragmatic, most flexible means of leaving the EU and it is not set in stone even after the fact. The often repeated canard that Norway has no influence is demonstrably untrue, as is the assertion that the EEA means accepting full EU freedom of movement. It is our view that those who persist in repeating these mantras do so for less than honest reasons.

02/09/2016 link

Brexit: The danger we now face

Wednesday 6 July 2016  

With the first round of the Conservative Party leadership contest out of the way, we see Theresa May emerge with what should be an unassailable lead of 165, taking votes from exactly half of the 330 Conservative MPs.

Leadsom trailed badly with a mere 66 votes but beat Gove, with only 48 votes, to second place. Crabb took fourth place with 34 votes and Fox brought up the rear with a mere 16. These two have now pulled out, pledging their support to Mrs May for the next round, to be held on Thursday. 

On the face of it, this should give Mrs May a commanding lead, but leave Leadsom still in the race, with the final decision to be put to the constituency members. Struck down by the "curse of the Tory frontrunner", we could then see Leadsom take the crown – and the keys to No 10. 

However, we are dealing with what is slated to be one of the most sophisticated electorates in the world. In a bid to strengthen May's position out in the country, her supporters could transfer enough votes to Gove to assure him the second place, reducing to run-off to a contest between May and Gove the "Boris killer". In that scenario, May wins convincingly. 

Should the more likely scenario arise, with a final contest between May and Leadsom, and Leadsom wins, we are faced with the great danger of having a prime minister who has little understanding of what it takes to negotiate a successful withdrawal from the EU.

On the other hand, if May is elected, we are faced with a danger just as great, in having a prime minister who brokers an exit plan which is so successful that we end up stuck with it, and in a position far worse than we are at present. 

If this sounds perverse, it is. What we are seeing from the "remains" is a sudden enthusiasm for the Efta/EEA or "Norway option", an option which, prior to the referendum, they had all been falling over themselves to demolish. 

This, as readers here well know, we support as an interim option, acknowledging that it would be untenable for the United Kingdom in the longer term. We thus look for a different end game, which then takes us out of the EEA.

Unfortunately, the opposition is wise to the flaws of the EEA option and, from the Robert Schuman Foundation, the intellectual heart of the EU, we see proposals to modify the EEA to such an extent that it will soften some of the worst features of the EEA, and thus weaken the pressure to move on. 

What they have in mind are changes to Part VII of the EEA Agreement, addressing "the inability of the EEA States" (they mean Efta states) to take part in the vote over the internal market rules.

Instead of the Council of the European Union (formerly the Council of Ministers) taking the dominant role, the EEA Council would be the body charged with approving Single Market legislation, thereby giving Efta members some "say" in how the rules were made. 

These decision-making powers might also be extended to the Union’s programmes in which the Efta states had chosen to participate, such as the research framework. 

Similarly, the Foundation argues, it might be possible for the mixed EEA parliamentary committee to be transformed to include all Union parliamentarians and "European Members of Parliament" appointed by the non-EU EEA States. These EMPs would meet in Brussels and be able to take part in co-decision in the same way as the EEA Council. 

As to freedom of movement, the Foundation acknowledges that it would continue to apply. But it notes that "the EEA Agreement provides safeguard mechanisms that can be activated unilaterally". Thus, far from trying to conceal or argue against the Liechtenstein solution, it seems possible that the UK could be offered this as a way out of the free movement impasse.

The changes proposed, if implemented - plus the application of the Liechtenstein solution (which would perhaps involve some reciprocal restrictions) - would effectively formalise the creation of a multi-speed Europe. The UK would become part of the "outer circle" of a construct dominated by the eurozone, the result little different from the "associate membership" expected of a new treaty.

By this means, we could be on the way to becoming a "second-class citizen", locked in a Greater Europe whose appetite for the creation of a United States of Europe would be entirely undiminished. The only difference is that it would be disguised as membership of an enhanced EEA, possibly termed the "EEA-plus". We would be "out" but still in.

In the choice between May and Leadsom, therefore, we could find ourselves wedged between two undesirable outcomes – a choice between second-class membership in an enhanced EEA, or the chaos of a world outside the Single Market with no coherent replacement. In these choices, there is danger either way. 

The obvious antidote is to create a third way, the idea set out in Flexcit, where the third phase offers the opportunity of creating a genuine Europe-wide single market, freed from the grip of Brussels. For that, we will probably have to look not to either of the leadership contender front runners, but to Parliament, which has the power to shape the exit settlement, if it chooses to use that power. 

To that effect, as Flexcit nears 100,000 downloads, we have published a new edition, Version 7. This is the first written specifically for the post-referendum period. It is marginally shorter, despite additions which cover border issues in Ireland, EU budget contributions and the Liechtenstein solution, omitting some of the arguments relevant only to the referendum campaign.

Progressively, we will reshape the contents to put more emphasis on the end game, rather than on the mechanics of leaving the EU, in the hope of influencing the final outcome. 

Read more:

Managing immigration within the EEA: The Liechtenstein solution

In response to common misconceptions of the EEA option

06/07/2016 link


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