Would Scotland REALLY want to rejoin the EU after Brexit?

Nicola Sturgeon is currently attempting to create the momentum for a second Scottish independence referendum  – alias “Indyref 2”. The 2014 referendum was described at the time as a “once in a generation” but Sturgeon said last Monday that because the UK voted to leave the EU but Scotland did not, there has been a “change in material circumstances” since 2014 that justifies a second vote. She wants to give Scottish voters the option “to follow the U.K. to a hard Brexit — or to become an independent country.”

“Scotland’s future will be decided not just by me, the Scottish government or the (Scottish National Party),” she said. “It will be decided by the people of Scotland. It will be Scotland’s choice. And I trust the people to make that choice.”

Some recent reports claim that the SNP’s plan for an independent Scotland now involve gaining access to the Single Market by rejoining EFTA rather than trying to rejoin the EU. No doubt we will know more after the party’s forthcoming spring conference this weekend, but given the activities of malign individuals like Tony Blair south of the Border,  it is hard to believe that all Scots – and the SNP leadership in particular – have thrown in the towel as far as membership of the EU is concerned.

Perhaps, however, reality is beginning to dawn on at least some pro-remain Scots that rejoining the EU would be on massively disadvantageous terms because the country would not benefit from the opt-outs which successive British Prime Ministers the UK fought for and which the whole UK currently enjoys.

Were Scotland to overcome concerns in Madrid, which is worried about the Catalan separatist movement, as a new state joining the EU, this would be its fate:-

(a) It would have to adopt  the euro currency  – although this can be deferred somewhat.
Furthermore, what currency would a newly independent Scotland use between leaving the UK and joining the EU? Would it use the euro unofficially like ( say) Montenegro?

What is more, to join the Eurozone,  Scotland’s top- heavy public sector would have to be pruned as vigorously as in the “club Med” countries like Greece where many unemployed people no longer have access to the NHS and long-term unemployed households are on income of only 8.40 euros per day

(b) Scotland would not have the derogations which the UK presently enjoys. For instance, VAT would have to be added to food, children’s clothes, books and house sales. The minimum rate would be 5 per cent. But much, much more would be required to make good the deficit left by the withdrawal of subsidies from England

(c) If there were a strong possibility of a yes vote, financial institutions, pension funds, mutual organisations,  charities and other investors with members and clients in England would have a duty of care to protect them from currency risks, possible exchange restrictions and seizure of money from bank accounts (as happened in Cyprus), as an independent government would quickly become financially desperate. This would undermine the position of the considerable Scottish financial,sector.

(d) Scottish energy policy has been based on selling overpriced “renewable” electricity to England and buying cheap, conventionally produced electricity in the other direction when the wind doesn’t blow.
With the discrediting of the global warming myth, Independence would give England an excellent opportunity to discontinue the arrangement.

(e) The unkindest cut of all. There are already excellent English and Welsh whisky brands which could quickly be expanded and much reduce England’s demand for Scotch whisky.

(f) The much smaller area of Scottish territorial waters and Exclusive Economic Zone (Compared with those of the UK as a whole) would be shared among an unchanged number of EU trawlers, barred from English waters by Brexit.

All in all, the prospects for Scotland if it tries to re-join the EU do look bleak.  It is hard to say how widely these negative impacts are known among the Scottish population – or indeed, by Scotland’s politicians. As mentioned above, it is possible that the SNP’s recent talk of looking at EFTA rather than EU membership may be due to their recognition of  harsh reality of these disadvantages.

However, in the event of any attempt to whip up support for re-joining the EU by the SNP or anyone else, we believe the points set out above need to be widely publicised throughout Scotland. For anyone wishing to start the ball rolling, this helpful website gives a list of all Scottish newspapers, great and small.

Another nail in the coffin of the Single Market?

Last month, an event occurred which got little fanfare, but is likely to have a significant effect on the future of the UK, especially after Brexit. What happened was that the WTO Trade Facilitation Agreement has now entered into force

Lord Lamont, the former UK Chancellor of the Exchequer wrote in The Telegraph:wto

The single market is open to all advanced economies, in exchange for paying a relatively modest tariff of 3 to 4 per cent, something that evidently does not stop non-EU countries from selling within it.

‘Every developed country has access to the single market. The EU has a relatively low external tariff with the exception of certain goods such as agriculture.’[i]

When taken prima facie, Lord Lamont’s comments are seemingly correct. Only those countries who are essentially rogue states or have violated international agreements don’t have the ability to conduct trade with the EU, and the EU’s external tariffs are fairly low.

But Tariffs are only half of the story.

The problem of tariffs could be easily addressed by the UK signing a goods Free Trade Agreement (FTA) with the EU. Given the high volume of UK- EU 27 trade, this is seemingly a given.

A basic FTA need not take long to complete. The EU’s earlier iteration the European Economic Community (EEC) concluded basic FTAs in the early 70’s that took 6-7 months to agree, sign and come into force.

But the other half of the story relates to non-tariff barriers (NTBs), sometimes called “Non-Tariff Measures (NTMs)”. These comprise everything else that can slow down trade or make it more expensive or complex.

The European Commission describes the Single Market as:

‘…one territory without any internal borders or other regulatory obstacles to the free movement of goods and services. The Commission works to remove or reduce barriers to intra-EU trade and prevent the creation of new ones so enterprises can trade freely in the EU and beyond. It applies Treaty rules prohibiting quantitative restrictions on imports and exports (Articles 34 to 36 TFEU ) and manages the notification procedures on technical regulations (2015/1535) and technical barriers to trade.’[ii]

So the Single Market goes beyond tariff reduction, and encompasses far more than just a Free Trade agreement. This is why the ‘remain’ side in the EU referendum campaign were so concerned about the UK leaving the European Union’s Single Market.

‘Remainers’ believe that after Brexit, even if the UK does get a Free Trade Agreement, our importers and exporters will be deluged with red tape, endless forms, checks and other barriers to entry as we will be operating outside the Single Market.

These are valid concerns, but we believe they are largely exaggerated – and here are the reasons why:

wco

The EU has signed up to the WCO

In July 2007[iii], the EU signed up to the World Customs Organization (WCO) which works to enhance customs co-operation between signatory countries and works to simplify issues such as Rules of Origin (ROO).

From the European Commission’s own press release:

‘On 30 June 2007, the Council of the World Customs Organization (WCO) decided to accept the request of the European Union to join the WCO as of 1st July 2007. This decision grants to the European Union rights and obligations on an interim basis akin to those enjoyed by WCO Members.

‘The WCO plays an important role in promoting international customs co-operation and addressing new challenges for customs and trade. It is deeply involved in designing and implementing policies worldwide that integrate measures, which help ensure supply chain security, combat counterfeiting, promote trade and development, as well as guarantee efficient collection of customs revenues. Membership of the WCO highlights and confirms the central role and competence of the EU in international discussions on customs issues including customs reform. EU involvement in the WCO will focus on the full spectrum of customs issues, in particular the following broad areas:

  • Nomenclature and classification in the framework of the Harmonised system;
  • Origin of goods;
  • Customs value;
  • Simplification and harmonisation of customs procedures and trade facilitation;
  • Development of supply chain security standards;
  • Development of IPR enforcement standards;
  • Capacity building for customs modernisation and reforms, including in the context of development cooperation;
  • Mutual Administrative Assistance for the prevention, investigation and repression of customs offences.

‘The EU is a contracting party to several WCO Conventions, and contributes to the work of this organisation, including by ensuring presence and coordination with the Member States in defining and representing EU positions in the relevant bodies managing these conventions.’

The UK signed up to the WCO in the 1950’s and is a signatory in its own right, so will be able to address customs issues with the EU via this body after Brexit.

Harmonisation with EU rules

The UK’s rules and regulations are already synchronised with EU/EEA (European Economic Area) regulations and standards after decades of membership. This will also be true on the day after Brexit due to the Great Repeal Bill. Hence a strong (if not overwhelming) argument for ‘rules equivalence’ can be made.

The WTO Agreement on Rules of Origin (ROO)

This agreement encourages WTO countries (including all EU countries) to have fair and transparent rules pertaining to Rules of Origin:

 wtostructure

These rules state that:

‘Rules of origin shall not themselves create restrictive, distorting, or disruptive effects on international trade.  They shall not pose unduly strict requirements or require the fulfilment of a certain condition not related to manufacturing or processing, as a prerequisite for the determination of the country of origin….rules of origin are administered in a consistent, uniform, impartial and reasonable manner’.[iv]

Guidelines in the EU treaties

treatylisbon

Article 8 of the Lisbon Treaty states that:

‘The Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness, founded on the values of the Union and characterised by close and peaceful relations based on cooperation.[v]

As the UK will become a new ‘neighbouring country’ after Brexit, the EU is compelled to deal with us according to the Article 8 terms.

WTO Technical barriers to trade Agreement

The TBT agreement is key – it means that signatories (again, including the EU) agree to abide by rules about international product and technical standards. From the European Commission’s website:

‘The TBT notification procedure helps prevent the creation of international technical barriers to trade. It was introduced by the Agreement on Technical Barriers to Trade (the TBT Agreement), a multilateral agreement administered by the World Trade Organisation (WTO). It gives participants advanced knowledge of new technical regulations or conformity assessment procedures envisioned by other countries. The EU’s participation in the TBT Agreement helps businesses in EU countries access markets outside the EU.’

Aim of the TBT notification procedure

To avoid any potential technical barriers to trade, WTO Members submit national legislation at draft stage to other members of the TBT Agreement. They can then assess the impact on their exports and identify any provisions breaching the Agreement.

While allowing all WTO Members to maintain their right to adopt regulations, the TBT Agreement aims to:

  • prevent the creation of unnecessary and unjustified technical barriers to international trade;
  • prevent the adoption of protectionist measures;
  • encourage global harmonisation and mutual recognition of technical standards;
  • Enhance transparency.[vi]

The commission somewhat downplays the TBT agreement, however. What it actually states is that:

‘Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.

‘Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.

‘Where technical regulations are required and relevant international standards exist or their completion is imminent, Members shall use them, or the relevant parts of them, as a basis for their technical regulations. Members shall give positive consideration to accepting as equivalent technical regulations of other Members, even if these regulations differ from their own, provided they are satisfied that these regulations adequately fulfil the objectives of their own regulations.’[vii]

Since UK regulations and standards will be equivalent to their EU counterparts from day one, and will continue to meet international standards going forward, it will be extremely difficult for the EU to reject UK products sold into the EU market.

WTO Trade Facilitation Agreement

The most recent agreement, the WTO Trade Facilitation Agreement (TFA) will further increase trade co-operation.

As the WTO website states:

‘The TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area.’[viii]

Perhaps especially important for Northern Ireland post-Brexit, the TFA also states that:

‘Each Member shall ensure that its authorities and agencies responsible for border controls and procedures dealing with the importation, exportation, and transit of goods cooperate with one another and coordinate their activities in order to facilitate trade.

‘Each Member shall, to the extent possible and practicable, cooperate on mutually agreed terms with other Members with whom it shares a common border with a view to coordinating procedures at border crossings to facilitate cross-border trade.’

The WCO welcomed the ratification of the TFA agreement in their press release of 22 February 2017, in which they wrote:

‘The World Customs Organization (WCO) congratulates the World Trade Organization (WTO) on the entry into force today of the WTO Trade Facilitation Agreement; an agreement that will expedite the movement, release and clearance of goods, including goods in transit, and which sets out measures for effective cooperation between Customs and other authorities, as well as provisions for technical assistance and capacity building in this area.

‘The WCO takes this opportunity to highlight that it will continue to seek improvements throughout the global supply chain to obtain the highest levels of safety, security and integrity, which will enhance trade facilitation for compliant actors. This will ultimately have a positive effect on the relationship between all border agencies and the Private Sector.

‘The entry into force of the Trade Facilitation Agreement (TFA) is an important milestone for the international trade and Customs community, coming about as a result of the fact that it has been ratified by 110 WTO Members, which pushes it above the threshold needed to take effect, namely ratification by two-thirds of the WTO’s 164 Members.’[ix]

In conclusion:

  • The volume and UK and EU will likely at least sign a basic goods FTA; meaning tariff-free goods trade will continue.
  • The UK’s rules and regulations are already synchronised with EU regulations and standards. This will also be true on the day after Brexit.
  • The UK and EU are signed up to the WCO, which exists to help simplify and resolve customs issues.
  • The WTO TBT agreement prohibits the EU from banning UK goods that meet international standards.
  • The WTO agreement on Rules of Origin means that the EU will have to ensure rules of origin are administered “in a consistent, uniform, impartial and reasonable manner” when dealing with exports from the UK.
  • The WTO Trade Facilitation agreement means the EU must co-operate with the UK on issues around the “movement, release and clearance of goods”.

When we combine these factors together we see that after Brexit, UK trade with the EU will be very similar after Brexit as before Brexit.

The EU has signed up to many agreements and treaties which in effect reduce the uniqueness of the single market.

Britain can therefore essentially have almost duplicate trade relationship by falling back on these international agreements (if necessary) which would mean that the UK could have the majority of the benefits of Single Market membership, but be free to choose which rules to obey when not exporting to the EU 27 countries or for domestic sale.

The TFA might not then be the final nail in the Single Market coffin (it is still useful to EEA members), but it is one substantial step towards reducing the importance of the Single Market to a post-Brexit UK.


[i] http://www.telegraph.co.uk/news/2016/06/13/not-only-can-britain-can-leave-the-eu-and-have-access-to-the-sin/

[ii] https://ec.europa.eu/growth/single-market_en

[iii] https://ec.europa.eu/taxation_customs/business/international-affairs/international-customs-cooperation-mutual-administrative-assistance-agreements/world-customs-organization_en

[iv] https://www.wto.org/english/docs_e/legal_e/22-roo_e.htm

[v] http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-european-union-and-comments/title-1-common-provisions/6-article-8.html

[vi] https://ec.europa.eu/growth/single-market/barriers-to-trade/tbt_en

[vii] https://www.wto.org/english/docs_e/legal_e/17-tbt.pdf

[viii] https://www.wto.org/english/tratop_e/tradfa_e/tradfa_introduction_e.htm

[ix] http://www.wcoomd.org/en/media/newsroom/2017/february/wco-welcomes-entry-into-force-of-the-wto-trade-facilitation-agreement.aspx

This article first appeared on the Bruges Group website and is used with permission.

Could the Dutch follow us out of the EU door?

A new poll about attitudes to the EU in Holland, undertaken for the Bruges Group, by Maurice de Hond shortly before the country’s General Election, shows the Dutch prefer alternatives to the EU rather than EU membership. Support for Nexit (i.e., the total of  EFTA and FTA supporters) stood at 56% as opposed to 44% EU supporting continued EU membership. This compares to an IPSOS poll last year showing 64% preferred to remain in the EU. With the Netherlands going to the polls on 15th March, this poll could help pro-sovereignty parties. The poll gave respondents two choices for leaving the EU, the EFTA (European Free Trade Association) option and the FTA (Free Trade Agreement) option, which also included controlling immigration. The results show the Dutch are open to a working alternative, such as EFTA.

The full results were as follows:

39% = EU/Single Market
23% = EFTA/Single market (European Free Trade Association)
27% = FTA (Free Trade Association)
11% = Don’t Know

When Don’t Knows are excluded, this equates to:
56% = Nexit (EFTA+FTA)
44% = EU

The detailed results showed equally men and women supported Nexit options.

The national media on the continent is even more censored than the UK media, so the EFTA option may well be the easiest route to self-government and restoring democracy.

If the Dutch were to have a successful Nexit referendum, it would help our own Brexit negotiations if there was another country looking for a similar simple free trade agreement, with full immigration control. There is also the option of the other EFTA countries looking to renegotiate their terms and joining the UK and other European countries looking for self-government.

Interestingly, a similar poll for the UK, commissioned before last year’s referendum for the Bruges Group and undertaken by Opinium, showed 61% would support an EFTA+FTA option.

In summary, this poll shows that there is a real possibility the Netherlands may hold a Nexit referendum, with good chances of winning if the EFTA option is selected along with, maybe, a more phased approach to immigration control –  e.g. new Eastern Europeans having a 1 year working working visa, with a points system for staying longer. Since European relations have been in flux for hundreds of years, new ideas for trade agreements that benefit the majority of people, including the EFTA option, are showing in this poll.

The Bruges Group press release can be found here, with results tables

The Daily Express has published the poll results:

There are a number of options for EFTA membership:
– Full membership
– Associate membership

There are also a number of ways EFTA countries can trade with the EU
– EFTA/Single Market (Norway, Iceland)
– EFTA/Single Market, with immigration control (Liechtenstein)
– EFTA/bilateral (Switzerland)
– EFTA/FTA (Free Trade Agreement) (e.g. South Korea)
– EFTA/WTO rules (World Trade Organisation) (similar to China, which exports €300bn to the EU a year)

For regular updates about EFTA and the UK and Europe see here
For EFTA seminar powerpoints see here.
For a list of EFTA worldwide free trade agreements, see here

Hugo van Randwyck has been suggesting the EFTA option as a stepping stone for full self-government, starting with a transition to EFTA/Single Market, and using the articles 112 and 113 for phasing restoring self-government from the Single Market, e.g. immigration control . With the a simple FTA as the aim. In addition, looking at the option of northern Europe becoming an EFTA zone, with new members, the UK, Netherlands, Sweden, Denmark, Finland, Austria ,Ireland, joining Switzerland, Norway, Iceland and Liechtenstein. He has written for the Bruges Group and also CIB.

Brexit and some alternative facts

In a time of universal deceit, telling the truth is a revolutionary act. (anonymous, often misattributed to Eric Blair aka George Orwell)

The truth is usually more complex and subtle than the simplistic soundbyte beloved of politicians and media headline writers. Fake news is not necessarily the problem; misinformation can be spread because the basic assumptions are incorrect, the background has not been thoroughly investigated or it is just speculation masquerading as fact.

The following are a couple of quite significant examples.  However, please don’t take my word and incomplete knowledge of these subjects for granted.  A much better source is Eureferendum.com and the original source documents.

Control of EU Immigration Requires Leaving the Single Market – NOT TRUE

How often have we heard or read this, but it is not actually correct.  The Single Market (aka European Economic Area), created by the European Union (EU) and to which the members of the European Free Trade Association (EFTA) also belong has free movement of goods, persons, services and capital as basic principles (set by the EU). The conditions of access of members of EFTA to the single market are set out in the Agreement on the European Economic Area which also includes free movement as a basic principle.

However, the EEA Agreement also includes an opt-out which can be applied unilaterally by members of EFTA (see Chapter 4, Safeguard Provisions, Article 112), but obviously not by Members States of the EU.  It states:

  1. If serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising, a Contracting Party may unilaterally take appropriate measures under the conditions and procedures laid down in Article 113.
  2. Such safeguard measures shall be restricted with regard to their scope and duration to what is strictly necessary in order to remedy the situation. Priority shall be given to such measures as will least disturb the functioning of this Agreement.

This opt-out is intended to be temporary (until a permanent solution is implemented), but nevertheless can be invoked and maintained in the absence of that permanent solution.  It has been used already by Liechtenstein to control immigration and Iceland to control capital flows in the wake of the financial crisis.

The EU negotiators are already setting terms for the EU-UK negotiations – NOT TRUE

How often has the media reported that this or that person, with an appropriate grand EU-related title, is already laying down tough terms for us? In reality, at the moment there are no negotiators as such – just political nominations by various posturing organisations within the EU set-up and their self-important leaders or other politicians. The small print of the Lisbon Treaty Article 50 states:

  1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
  2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

Article 218(3) of the Treaty on the Functioning of the European Union states:

  1. Without prejudice to the specific provisions laid down in Article 207, agreements between the Union and third countries or international organisations shall be negotiated and concluded in accordance with the following procedure.
  2. The Council shall authorise the opening of negotiations, adopt negotiating directives, authorise the signing of agreements and conclude them.
  3. The Commission, or the High Representative of the Union for Foreign Affairs and Security Policy where the agreement envisaged relates exclusively or principally to the common foreign and security policy, shall submit recommendations to the Council, which shall adopt a decision authorising the opening of negotiations and, depending on the subject of the agreement envisaged, nominating the Union negotiator or the head of the Union’s negotiating team.
  4. The Council may address directives to the negotiator and designate a special committee in consultation with which the negotiations must be conducted.
  5. The Council, on a proposal by the negotiator, shall adopt a decision authorising the signing of the agreement and, if necessary, its provisional application before entry into force.

Clearly negotiations are with the Council (of the European Union) who nominates a negotiator and, at the time of writing, they haven’t done so, officially at least.

To sum up, all is not what is reported or stated to be true facts and because they are repeated so often, if not vehemently, it is easy to be taken in.

A quick look at the Brexit White Paper

The government White Paper this week charts the course the government intends to take to achieve the second leg of Brexit following the referendum result.  This should be to provide a ‘safe and beneficial exit’.

In effect, the government is not attempting to reach a withdrawal and settlement of the new relationship with the EU within two years after triggering Article 50, but is aiming to reach a settlement of the ‘framework’ within two years and thus leaving all the details for many years in the future.

It seems the government is splitting the Brexit job into two parts.

Job One:   Leaving the EU is being interpreted as negotiating a ‘framework’ within which the detailed negotiations will sit.

Job Two:   Detailed negotiations after the UK formally leaves the EU with a ‘framework’ settled.

So the question is this – can the government negotiate the details after formally leaving the EU with a framework agreement but in which framework the details are that each ‘chapter’ of the interface comes up for negotiation maybe years later?

In a way, the government is agreeing with the basic plan offered by the Leave Alliance during the referendum campaign – that the job is too big and complicated to do in two years.  The Leave Alliance solution was to remain in the EEA for some years, thus parking trade and other issues.  The government’s solution is to agree a ‘framework’ within two years and carry out the detailed negotiations later.  In this way it can argue that the UK has left the EU within two years.

Of course the first problem is then that the EU may well reject the splitting of the negotiations into ‘framework’ and ‘details’ because this is a new concept and because the ‘details’ are to some extent the ‘framework’.

Will the electorate and the Conservative Party accept that the UK will for most purposes still be in the EU after two years and the full withdrawal will take many years?

Also, by proposing to leave the EEA single market the government has added to its negotiating burden as it will have to secure trade agreements with the EFTA countries.

What happens if this course is pursued?  It depends on how the EU reacts.  It may go along with this in order to get the UK out of the formal political structure.  It might also say that the idea of separating the ‘framework’ and the ‘details’ is not realistic and put forward a more radical programme of detachment.

The Leave Alliance proposal would have been more certain, quicker, more attractive to the EU and would have more electoral support in the UK.  It would rest on off-the-shelf proven solutions.  The government’s proposals are the opposite of all these sensible proposals, are far more risky and uncertain and will involve the UK in many EU activities for years to come.