I have been asked to contribute to a Parliamentary briefing on the matter of the single market. This is my current thinking on the matter.
With regard to being a rule taker, that is an inevitability of modern trade. That is going to be the case whether we are in an FTA or a more comprehensive relationship like the EEA. With an FTA it tends to focus mainly on harmonisation of standards. EU FTAs are themselves written with a view to upholding the obligations of the WTO agreement on Technical Barriers to Trade (TBT). The tract inside EU FTAs is very often prose lifted verbatim from the WTO TBT agreement. What one immediately notices is that the EU is converging on global standards from OIE/Codex/ILO/IPCC/UNECE/ISO. This convergence is what allows for mutual recognition agreements on things like conformity assessment and recognition of qualifications.
Irrespective
of our relationship with the EU we will use the standards from those
global bodies as the basis for all domestic regulation. There is,
therefore, little point in leaving the single market or substantially
diverging.
The Tory assumption is that
because we are already convergent on the EU there should be no
difficulty in establishing a network of mutual recognition agreements
for the purposes of trade continuity. This is a grotesque
oversimplification. Alignment on standards is only a starter for ten and
it does not imply frictionless borders. They assume that the EU will
allow us free access without formal structures for harmonisation but the
EU is not in a position to make any special exceptions because of rules
on preferences set by the WTO.
If we want
to maintain frictionless borders then we will need regulatory union and
a customs agreement that deals with Rules of Origin. This will require
that we track the common external tariff. Any new third country
agreements will likely have ramifications on the frequency of
inspections to check that the UK is not being used to circumvent single
market protections. This is why a customs agreement is also necessary
for frictionless borders.
Had
we never joined the EU we would have an FTA that broadly covered most
of the above. The crucial point, however, is that we are not starting
from scratch. Reverse engineering is no easy feat.
Just
about every area of technical governance is regulated by the EU Acquis.
Simply copying and pasting all that regulation on to the UK statute
book does not mean we automatically have a functioning regulatory
regime. EU regulation has multiple dependencies on other standards and
sub regulation and names a number of systems, authorities and agencies.
To fully repatriate every area of governance we would have to edit out
all of those references and build domestic administrative bodies.
Naturally
this is going to be time consuming and expensive and there is precisely
zero chance that this kind of legal engineering can be completed in a
short implementation period. We would have to rebuild our institutions,
equip and train them while rewriting the syllabuses in technical
colleges etc. Divergence means that officials will have to re-qualify.
Insurance companies will demand it. This is what happened when we joined
the Single Market. Meat hygiene inspectors were suddenly told they had
to re-qualify.
The Tory ultras are
presently pushing for divergence as quickly as possible and they seek to
put sunset clauses on the EU rules we adopt. The reality, however,
dictates that we cannot repeal any of this legislation until we have a
fully functioning domestic regime with all the appropriate institutions
and agencies. We are looking at a number of years to do this. There are
no short cuts. So this is not a question as to the respective
merits of the EEA, rather it is a practical necessity to maintain
membership of it (and the institutions therein) in order for us to
gradually diverge without a cliff edge.
There
are a number critiques of the EEA option. All of them look at the
option in isolation rather than looking at it in the context of the
Brexit process. The EEA is a tool, not a destination. To understand this
you have to properly understand the exit sequence. This is where MPs
are utterly failing.
First we have to deal with
the phase one issues and the terms of separation. The future
relationship (whatever that may be) will have to be negotiated inside an
interim framework, one which more or less mirrors EU membership. Only
when you have something to implement can you then begin an
implementation period.
For Brexit we can
either choose a deep and comprehensive FTA (DCFTA) or we can go down the
EEA route. The former is the longer more uncertain path. We would be
opening every single one of the three hundred subject areas for
negotiation. What we will find when we do that is that a DCFTA doesn't
come close to our needs and if we want enhancements then we will have to
make major concessions.
This will be a
deeply political process both at home and among the member states. That
will make a slow process slower. All the while we are in a state of
Brexit limbo. We can avoid this entirely and have a "clean Brexit" by
adopting the EEA. That dictates that we continue to be members of
various EU agencies such as the EMA. That then commits us to financial
obligations but David Davis has already alluded to the fact that we will
continue contributing to some EU bodies whatever happens.
Currently
the debate is distracted by what sort of interim period we will have.
As much as the language is muddled, this is irrelevant. For a number of
technical and legal reasons the interim framework has to be EU
membership in all but name. There will be no divergence in this period
nor will we be signing any new third country FTAs. It is impossible.
What concerns us is the framework for divergence. This is what May is
calling the implementation period which is different to the interim
period.
Because we have to develop our
own domestic governance capacity we have no choice but to use the EEA
acquis and maintain membership of EU bodies simply so that the
regulatory regime functions. Were we to simply copy and paste EU
regulations they simply would not function. Regulations are not simply
technical by-laws. Regulations are regulatory systems.
Additionally,
until such a time as we are freed of EU it is a requirement that we
have a dispute resolution system. This will be an essential instrument
for the process of divergence (which will trigger disputes of its own)
and for all other matters in the future. So we have the option of using
Efta or we can spend some considerable time negotiating a new framework
for dispute resolution but it will have to mimic the Efta model because
nothing else works. It is either that or maintain ECJ rule. Like it or
lump it.
In effect the EEA Efta model is a
matter of technical necessity if we want a well structured Brexit
avoiding all the cliff edges. This is why all of the criticisms of the
EEA option are utterly irrelevant. We know it is suboptimal but it hands
down beats the alternatives. I know of no other practical way of doing
it. I suspect that we have already missed the boat on Efta membership
therefore we have to look at a shadow EEA with a form of associate
membership of Efta in order to use Efta courts.
So
then we get to the question of how we get from the EEA state to the
next state (whatever is negotiated). Even Brussels doesn't have a good
answer to this. I take the view that we stay in the EEA framework and
simply evolve our relationship over time rather the making a leap to a
different structure. I do not see the point of a bespoke DCFTA. In form
and function the EEA model does what we want. It fulfils in spirit the
relationship outlined in the Florence speech. It carries more
obligations than May intends but she is living in a fantasy world
anyway.
This is where you have to turn it
around on opponents and spell it out. Any which way, we are going to
end up with a deep and elaborate treaty with the EU with its own court
and membership of a number of EU bodies. It might as well be the EEA for
all the difference it makes.
As much as
the EEA option simplifies any implementation, it does not require
substantial legal engineering and we do not have to transpose all of it
on to the UK statute book. It can stay where it is. For whatever
differences there may be between a new Florentine fantasy relationship
and the EEA, they can be engineered into country specific protocols in
the EEA agreement. The EEA agreement is a system for EU relations. It is
configurable and there are opt outs and exceptions. It does not contain
regulation rather it points to EU regulation with EEA applicability. It
is therefore also possible that we could have an EEA style agreement
that does the same but that is reinventing the wheel.
Ultimately
it is the technical reality that dictates the EEA as the only viable
instrument, otherwise you are making it ten times more complex and drawn
out than it needs to be. The biggest and most attractive feature of the
EEA agreement is that it gets us out without getting bogged down in
minutia.
So to win this argument you first
need to make it absolutely clear that there is zero chance of the
process being concluded inside Article 50. David Davis and Theresa May
continue to pretend that we can fast track a bespoke deep relationship
and have it all tied up in two years. As much as this is a ridiculous
fantasy, it is also a lie. We are looking at five years at least to
build a bespoke agreement and many more to implement. EEA Efta shortens
the process and simplifies the implementation.
Ultimately
it's as the old saying goes. The best way to survive a knife fight is
not to get in one. The same is true of EU negotiations. An off the shelf
solution avoids having to negotiate things we definitely do not want to
end up negotiating.
Addressing the issue of
being a rule taker, firstly the EEA acquis is substantially less than
the whole EU body of law. It pertains mostly to technical governance and
it embodies the standards from OIE/Codex/ILO/IPCC/UNECE/ISO which we
would adopt in any case. This is the critical component of the whole
argument since we are routinely told that we would have no say in the
rules. Being that the EU itself is a rule taker we would simply shift
our lobbying from Brussels to Geneva to ensure that we shape the rules
that the EU adopts. I cannot overstate the significance of UNECE and
ISO.
The Tories think that ditching the EEA
means we have total sovereignty. They are dreaming. We are not going to
diverge substantially. Business doesn't want it and they will continue
to work to global standards regardless because insurers and
commercial contracts will demand it. There is no economic value in
divergence and all you get for your trouble is more red tape and more
barriers to trade. All you actually achieve by leaving the single market
is losing substantial market participation.
The
only real fly in the ointment is the matter of freedom of movement. Now
in this, there is a means in EEA Article 112 but it is a hard sell.
Everybody is determined to ignore it or shoot it down. It is true that
politically it would complicate matters with the EU and if we were to
try that on I rather expect we'd be hit with a number of vetoes
elsewhere. So this becomes a matter of political strategy.
The
way to tackle it is to make a big deal of the fact that there is no
concept of EU citizenship in the EEA. That substantially changes the
nature of freedom of movement. That is a considerable legal distinction.
What we would need to do is tell the public the priority is to complete
the technical process of leaving before we address matters of
immigration. What we then do, once we have left the EU and started work
on implementation, is start a big programme of immigration reforms.
I
won't go too deeply into this but ultimately the immigration that
bothers people is not from the EU. A very big gesture will have to be
made to compensate for maintaining a liberal EU immigration regime.
People will expect to see a change in the balance of immigration so some
of the loopholes will have to be closed to slow immigration from south
Asian countries - and we will have to substantially liberalise borders
with Canada, New Zealand and Australia, even if we have to do it
unilaterally. It will improve attitudes to immigration. It's as much a
matter of changing perceptions.
The most
important point I would make is that we are very seriously running out
of time. The absolute priority is buying ourselves more time and forcing
the government to admit that the process of leaving will take
substantially longer. The nature of our future relationship is a
secondary matter to the successful conclusion of Article 50 talks. That
requires that the government properly engages in the phase one issues as
per the EU sequence. We then have to establish the shape of the
framework for the interim period with open acknowledgement that this is
continuity membership without voting rights. Only then can we seriously
talk about the future relationship.
The
danger right now is that the government has a seriously flawed idea of
how the mechanics of Brexit works and is seeking to do far too much in
an unrealistic time frame. I am unable to say if it is a genuine
misapprehension or an elaborate web of lies. My worry is that when
Barnier once again reiterates that the deal the UK seeks (as outlined in
Florence) is not possible under the aegis of Article 50, it will be
presented as evidence of EU intransigence and subsequently used as a
justification to walk out of talks. They will get away with that if the
public continues to believe Article 50 is the whole process.
It
is fundamentally important that MPs understand that we are looking at a
long and delicate process that will take a number of years. The Tories
are trying to rush it because they want it done and dusted before the
next election. They are playing fast and loose with the future of the
country. It is therefore incumbent on the opposition to seek to educate
all involved on the timeframe, the structure and the constraints. The
lack of coherence and comprehension is inexcusable.
Once
we conclude Article 50 talks we are not up against the clock and there
is then space for a more reasoned debate about the future relationship.
Presently it is a luxury we do not have. The immediate mission is to
expose the government's misapprehension of how the talks work. If we can
get that kind of clarity and we progress to the interim phase then the
arguments for the single market will make themselves. We will then be in
a phase where the agenda is dictated by technical realities.
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