New paper: could we stay in the single market without re-joining EFTA?

LAst July, Professor George Yarrow of Oxford has added to the debate about future UK access to the single market with this paper, which claims that withdrawal from the EU does not automatically imply withdrawal from the European Economic Area (EEA).

This goes very much against the widely-held assumption that the EEA (or single market) is an agreement between the EU and the European Free Trade Area (EFTA) and every participant must bne a member of one or other. At the core of his argument is his assertion that the default position for a newly-independent UK is that, having been part of the EEA agreement as an EU member state, it  will remain within the Single Market and thus, we would not need to rejoin EFTA to maintain access to it.

Not everyone is convinced by his arguments, but the paper is nonetheless an interesting addition to the debate about the single market. Last week, we announced the publication of a Leave Alliance monograph which explains in detail what the single market actually is. Almost five months after the Brexit vote, there is still much confusion.  Being in the single market is not the same as being a member of the EU nor is the single market the same as the EU’s Customs Union. Turkey is a member of the Customs Union but not of the EEA while Norway is a member of the EEA but not of the EU’s customs union. This diagram is particularly helpful in explaining the complex relationships of the European nations. Quite which of these various overlapping circles an independent UK will find itself in.

It is very clear that in the medium-to-long term, the desire of virtually all leave campaigners is to be outside as many as possible. There are no disagreements here. The big issue – and one which is ultimately up to Mrs May’s government to decvide – is to come up with a seamless strategy which will see us through the EU’s exit door within the two-year timescale allowed by Article 50 while ensuring trade will continue to flow smoothly. In other words, it’s the more divisive issue of a short-term strategy which is the critical topic at the moment and Professor Yarrow’s paper is of particular relevance here.

Trading with Canada – the EFTA angle

Mrs May is keeping her cards close to her chest regarding the sort of post-Brexit relationship she is seeking with the EU. Of course, there has been much intense and often ill-informed speculation in the media, which (in our opinion) is better ignored.

Occasionally, however, she or one of her team lets slip the occasional clue. It looks highly likely that the “WTO option” alias “Hard Brexit” is a non-starter.  In an exchange between the Prime Minister and Jeremy Corbyn at Prime Minister’s Question Time last week, Mrs May said, “We’re going to deliver the best possible deal for trade in goods and services with and operation within the European Union, and we’re going to deliver an end to free movement.” A couple of days later, Greg Clark, the Business Secertary, told Andrew Marr that “our objective would be to ensure continued access to the markets in Europe and vice versa, without tariffs and without bureaucratic impediments.”

The obvious assumption is that some form of continuing membership of the European Economic Area is envisaged, either by re-joining EFTA, the European Free Trade Association, or by a one-off arrangment whereby the UK, as a current participant in the Single Market, will be allowed to continue to be a member of it after we leave the EU. Either way, once outside the EU, like Liechtenstein, we can avail ourselves of Article 112 of the EEA agreement and restrict freedom of movement by EU nationals into the UK.

This seems to be the direction in which Mrs May intends to take us. The decision of Nissan to produce two new models at its Sunderland plant points strongly towards some form of continued membersip of the EEA. The complexities of the supply chain, to which Greg Clark referred during his interview with Andrew Marr, are such that, without a guarantee that there would be no disruption, Toyota would have not made this commitment. As state aid – in the shape of compensation for loss of single market access – is ruled out by WTO  rules,  this once again points to some sort of continued access to the single market being Mrs May’s objective.

This, of course, has been a divisive issue among Brexit supporters. Ironically, if the government formally announces that this is the plan, it will bring our side closer together for no leave supporter views access to the single market, whether or not via EFTA membership, as anything other than a short-term holding position – to get us through the Brexit door without  disruption to trade. We all want a looser arrangement in the longer term.

However, EFTA membership would raise a number of interesting points. Firstly, EFTA already has a trade deal with Canada,  It is a much less contentious arrangement that the CETA deal between Canada and the EU. While all relevant parties have now signed the CETA deal, it is not yet in force and by the time it is fully implemented, we may well be on the way out. Signficantly, there has been objections from a few EU leaders to the idea of the UK automatically being able to “piggyback” onto trade deals to which it signed up as an EU member state.

As far as CETA is concerned, re-joining EFTA would not only cirumvent this problem, but would be a much better outsome, as the EFTA-Canada deal has a much simpler disputes system. Each party will nominate one person who is impartial, then they agree on a third person who will be the President of the tribunal, and the case is then heard. If this doesn’t work, the WTO arbitration process kicks in. All in all, this deal is much less likely to see our elected government sued by predatory multinationals. Anti-CETA campaigners should read more about the EFTA-Canada deal. Unfortunately, those who have e-mailed me about the subject do not seem to have EFTA on their radars at all. 

Of course, EFTA has suffered from a low profile for many years. Apart from Liechtenstein, which joined in 1991, no other country has become an EFTA member since 1970. The organisation has lost member after member to the EU and has had to accept underdog status in its dealings with the EU. It now has only 4 members as opposed to the 28 member states of the EU. Iceland, which currently holds the EFTA presidency, has expressed its support for the UK rejoining. “The EFTA countries might make an agreement with the UK,” said Iceland’s Foreign Minister Lilja Alfredsdottir. “We are chairing the EFTA right now and I put it as a priority to analyse the possibilities that EFTA had on this front.

Of course, the UK’s re-accession to EFTA would tip the balance slightly. It would still be much smaller than the EU, but the additional presence of a heavyweight European nation would certainly give he organisation some extra clout. More importantly, it would put EFTA back in the spotlight, which could be something of a worry to the EU. Would applicant countries like Serbia, Montenegro or even Turkey start to weigh the two options of EFTA or EU membership and decide that, even if they would not be bribed with further EU funds,  preserving their political freedom by joining an organisation that is committed to trade and not political integration might be a better bet? What about Sweden and Denmark, who may be tempted to follow us out of the Brexit door?

Back in the 1980s, Jacques Delors envisioned the EU and EFTA states as working in cooperation as partners in a “European village”, which in due course became the European Economic Area (EEA) alis the Single Market. However, following the collapse of the Soviet Union, there were fears that if joint decision making between the EU and EFTA was to be implemented,  the newly-independent nations of Central and Eastern Europe may plump for EFTA rather than the EU, which the EU hierarchy was none too keen on. The EU therefore had to be the lead partner and EFTA subordinate in the EEA. With EFTA still draining members to the EU in the 1990s, it had little choice in the matter. 

Now, however, Brexit has dealt a hammer blow to the credibility of the entire EU project at what was already a difficult time.  It has also put the final nail in the coffin as far as any hopes that existing EFTA members might leave it and join the EU. Making the EU more attractive than EFTA may have been a simple job in the early 1990s; the UK rejoining EFTA after Brexit in a couple of years’ time would lead to a very different perception of the situation.

Of course, to repeat, the EEA or indeed EFTA is not a long-term arrangement for the UK. Ideally, what is needed is a continent-wide free trade agreement – one without the baggage of CETA or TTIP – which would replace the EEA, probably EFTA too and would only include free movement of capital, goods and services like any normal free trade agreement. This is a long-term goal around which all Brexit supporters could unite.  In the short term however, EFTA, while far from perfect, may prove a valuable tool for tipping the balance of influence in Europe away from Brussels, which would be no bad thing.

(with thanks to Hugo van Randwyck for details about the EFTA/Canada FTA)

Remainiacs have moved their goalposts!

While the official Leave campaign faced much flak – both during and after the campaign – for giving misleading information, the Remain campaign was no better.

This scathing article exposes their hypocrisy. The author compares current statements from hard-core remainers with the things they were saying during the campaign.  The cusp of the author’s argument is that  Open Britain, which is what the failed Britain Stronger in Europe has now become, is arguing that leaving the Single Market would be a disaster. A few months ago, on the other hand, they were saying that leaving the EU would be a disaster. In other words, adopting the exit strategy they are now throwing their weight behind, would mean there need not be any economic damage from withdrawal. This isn’t what they were saying in the run up to June 23rd.  To quote:-

For top Remainers the EU referendum was never about economics. It was about their craven desire to live in an amorphous internationalist blob where the nation state is fatally undermined and the strongest level of government and identity reforms at the European level. That’s what they wanted but couldn’t say in public. And so instead they falsely equated the EU with the single market in an attempt to scare low information voters and assorted unthinking lefties that voting for Brexit inherently meant economic doom.”

We must be thankful that most remainers, including Labour MPs, have accepted the result of June’s vote but it would be very good news if they were prepared to admit that they were at the time deliberately diverting attention away from the EEA/EFTA option which they are now ardently embracing. From David Cameron downwards, they all knew that this exit route would take us out of the political union, preserve our trade links and – most importantly – be a far more popular option than continued EU membership.

Furthermore, this implicit admission shoots dead any idea of a second referendum. If erstwhile hard-core remainers are admitting that the EEA/EFTA  exit route really isn’t too bad, they would be laughed out of town if they tried to crank up Project Fear again. Thankfully, the goalposts have moved; the debate is no longer about in or out, but rather about the best route out. For this, we must be thankful.

Photo by grassrootsgroundswell

Yet more media muddle

As we reported yesterday, Mrs May is not giving much of her Brexit strategy away at the moment. For anyone wishing to find out more, great care needs to be taken as some reports in the press are, shall we say, somewhat less than helpful.

Writing in the Independent, John Rentoul informs us that “Finally, we know what Brexit actually means – Theresa May intends ot take us out of the single market.” Has  Mr Rentoul spotted something that the rest of us have missed? He noticed that Mrs May made it clear that “‘we are not leaving only to return to the jurisdiction of the European Court of Justice.”  He therefore concludes that, “given that the ECJ is the court that enforces the rules of the EU single market, this was confirmation that she intends to take us out of it.”

QED – except that it isn’t true. Whatever the role of the ECJ in enforcing the single market regulations among EU member states, it has no power over Norway, Iceland and Liechtenstein, the non-EU countries who are part of EFTA and access the single market via the EEA Agreement.  Robert Oulds’ book Everything you wanted to know about the EU explains the difference clearly (p189) :-

Whereas the European Commission and the European Court of Justice regulate the EU’s compliance with the terms of the EEA agreement, EFTA’s side is managed by its own institutions.”

In other words, Mr Rentoul is jumping to conclusions. Mrs May has said that “it is not going to be a Norway model”, but she said nothing to preclude the Liechtenstein model – in other words,. re-joining EFTA and accessing the single market via the EEA agreement but invoking Article 112 of that agreement to reduce migration from the EU.

Another piece to take with a very hefty pinch of salt is this piece in the Irish Times by Professor Vernon Bogdanor, David Cameron’s former tutor.  Entitled Why Brexit will be Margaret Thatcher’s revenge, the piece claims that “those most likely to have voted for Brexit will suffer most after Article 50 is triggered.” It goes on to say that “Contrary to popular perceptions, article 50 inaugurates a withdrawal process, not a trade agreement.” I would like to know how many people Professor Bogdanor has met who really think that invoking Article 50 was anything to do with a trade agreement. I certainly haven’t met any!

Getting off on a bad note, he then parades even more ingorance than Mr Rentoul about the EEA. “Matters would be easier, of course, were Britain to emulate Norway and join the European Economic Area, ” he writes. Excuse me! As a mamber of the EU, the UK is ALREADY a member of the EEA. What I presume he means is that we should remain a participant in the EEA by re-joining EFTA, but it isn’t what he said. He then goes on to claim that “The EEA obliges member states to incorporate not only current EU laws, but also future legislation, into domestic law, and to accept the principle of free movement.” Wrong again. The EFTA countries who are part of the EEA are only required to transpose legislation specifically marked “EEA relevant” into domestic law.  Last October, Dr Richard North calculated that only 4,947 out of 23,076 pieces of legislation – in other words, about 21% of the total Acquis – had been incorporated onto Norway’s statute books, much of it technical in nature and much of it also originating with international bodies like the WTO, with the EU merely acting as a conduit.  As for free movement, there is some freedom to restrict it using Article 112 of the EEA, as we have aready noted.

Neither Messrs Rentoul nor Bogdanor seem aware of the Norwegian veto of the Third Postal Directive in 2012, which insisted on deregulating postal services across the EEA. This proves the point that non-EU countries cannot be touched by the ECJ and thus have far greater latitude in dealing with EU legislation, even when marked “EEA relevant.”

Next comes another myth:- “Per head, Norway currently pays around 83 per cent of the British contribution.” In 2015,  Norway paid £1.66 per head of population to access the EEA. We paid about £150. Either the great Professor inadvertantly included Norway’s voluntary contribution to various EU schemes or his calculator seems to be suffering from a chronic malfunction.

He then rounds up his dismissal of any EEA-type relationship by repeating the “regulation without representation” nonsense. Dear Professor Bogdanor, please get your facts right. Norway is represented on the Committess which create EEA-relevant law, even though the country does not have a vote. Read these words of Anne Tvinnereim, a Norwegian politician, who knows what she is talking about. “We do get to influence the position,” she said. “Most of the politics is done long before it {a new law} gets to the voting stage.”

Professor Bogdanor then rejects the Swiss option, which virtually everyone else has already done, but this leaves him with only the WTO option as a possible route, something which Mrs May, by proposing the nationalisation of EU law (in other words, giving laws passed by the EU their authority from our Parliament rather than the EU via the 1972 Accession Treaty) seems to have ruled out.

He is right to conclude that newly-independent UK will be more global. “The irony is that…..leaving the EU will expose Britain to more globalisation, not less.  Brexit, therefore, will be Margaret Thatcher’s revenge. It will suit the vision of the Tory right which hopes that, outside the EU, Britain could become like Hong Kong or Singapore, a global trading hub.” However, he then falls into the common trap of saying that this is exactly what Brexit voters don’t want. Vernon, old chap, I was accused by my opponent in one debate of selling a vision of an independent UK which was just that – “Singapore on steroids” to quote his words.

There are many of us who are excited by the global trading opportunities which Brexit will provide. A recent Fabian Society report linked the Brexit vote with economic deprivation and the lack of government spending on areas populated by the white working classes, but a look at the Brexit vote map shows that this is only part of the story. Many prosperous areas in the South East also voted for Brexit. In rural East Sussex where I live, plenty of large houses, presumably inhabited by people who are not at all economically deprived, displayed large “Vote Leave” boards in their gardens and outside their gates.

On one point I would agree with Professor Bogdanor:-  “Britain….has a deep-seated skills problem…. The priority, if May’s socially responsible capitalism is to be become a reality, must be a radical skills policy. That means more resources devoted to further education colleges, currently the Cinderellas of the education service, and to university technical colleges, for those whose skills are technical and vocational rather than academic.” Yes indeed, to make the most of Brexit, our education system needs to be signficantly re-vamped from top to bottom. Last year, we published Generations Betrayed, a booklet by Chris McGovern, which shows how much the history syllabus needs to be reformed. This, however, is only one of many features about the UK education system which is unsatisfactory.

In conclusion, however, after having ploughed through these confusing articles, the abiding thoughts they leave is a fervent hope that the people who are advising Mrs May about the best Brexit route are considerably more clued-up than Messrs Rentoul and Bogdanor and actually know what they are talking about.

Photo by NS Newsflash

Five more monographs on Brexit from the Leave Alliance

The Leave Alliance, of which the Campaign for an Independent Britain is a member, has produced five further monographs on the subject of Brexit.

They can be downloaded here:-

Post-Brexit regulation

Trade agreements

WTO Schedules and Concessions

A European Economic Space

Liechtenstein reprised

Alternatively, a full list of monographs can be found on this page of the Leave Alliance website.

All are well worth reading, setting out some of the issues we will need to face when negotiating our exit from the EU.

 

 

BREXIT – Onwards from the Referendum by Edward Spalton

(This article was written for our Chairman’s local newspaper, the “Three villages” magazine)

The leading campaigns on both sides of the EU referendum were lacking in honesty. In that, they followed the example of successive British governments which have all pretended that the European project concerned the economy (“The Common Market”) when it was always about developing a single European government under which the nations of Europe would be subordinated in a new polity. We know from official documents that the government understood this from 1960.

The Remain side presented the EU as being about the economy and the Leave side emphasised the cash savings from leaving. Both exaggerated greatly.

In 1971 the Foreign Office advised the government “…there would be a major responsibility on HM Government and on all political parties not to exacerbate public concern by attributing unpopular policies to the remote and unmanageable workings of the (European) Community”. The referendum was the last hurrah for this long-maintained policy of deceit. The leaders of all the main parties stuck to it and lost. So we are now moving in a new direction and the impetus has come from the people not from the political establishment.

Mrs May has said that “Brexit means Brexit” but people are naturally apprehensive about how things will develop. There are three main approaches to forming a new relationship with our European neighbours:

  • The Bilateral Option – An agreement or series of agreements negotiated individually, as Switzerland has done. This takes a very long time – 16 years for the Swiss.
  • The WTO Option – To have a minimal agreement with the EU and to rely on the rules of the World Trade Organisation. This would involve paying tariffs on certain classes of goods exported to the EU (and vice versa) but would be very cumbersome if it was not accompanied by a Mutual Recognition Agreement on quality standards, allowing containers to pass EU customs without having to be individually inspected(and vice versa).
  • The EEA/Efta Option.  This is sometimes called “The Norway Option”. EEA stands for European Economic Area and Efta for European Free Trade Association.

Effectively this is inside the “Common Market” but outside  the EU political union. Britain is free from most EU policies including Foreign & Security, Justice & Home Affairs, Economic & Monetary Union, the EU Court of Justice, the Customs Union, Common Trade Policy, Common Fisheries Policy, Common Agricultural Policy.  But we would have to observe the rules of the Single Market. Contrary to the general belief it is possible for EEA countries to impose their own restrictions on excessive inward migration of EU citizens under Articles 112 and 113 of the EEA agreement.

Some 80% of EU regulation on trade is now adopted from global bodies such as the UN and WTO. EU membership keeps Britain from having a voice there. So paradoxically, EEA states, which are not EU members, have a bigger direct say on many EU regulations than EU members which are bound by the “Common Position” decided by the EU Commission.

By Googling “FLEXCIT” you can get a full description of how the EEA/Efta option might work. The short version is 48 pages. The full document is over 420 pages. The government may, of course, choose to combine some elements of these three listed options. Things are more complicated than the sloganeering of the referendum suggested but, given careful thought and steady purpose, there is not really anything to fear.