Thursday, 6 September 2018

Norway then Canada cannot work

The "Norway option" is often described as an off the shelf solution. It is only off the shelf insofar as it already exists but it is only the framework of a solution and one will will need to be configured for the UK's unique needs.

The EEA agreement can be tailored to meet our needs. It is an adaptive framework with country specific protocols and the UK will need several to cover fisheries, agriculture customs cooperation and most likely a distinct protocol for Northern Ireland. All of this will take almost as long to negotiate and implement as an FTA.

Consequently, the notion that we can use the EEA as a short term interim measure, as suggested by Nick Boles MP, is one not in touch with reality. He proposes that we pick up the EEA as a short term transition while we negotiate a Canada style FTA.

This would effectively double the workload where we spend considerable technical and diplomatic resource in configuring the EEA only to have to start the process all over again. We would ask, for starters, what the actual point is? A tailored EEA solution would be entirely adequate for our needs and one that addresses most of the technical dilemmas thrown up by Brexit. It would safeguard our EU trade in ways that an FTA wouldn't.

Put simply, if we leave the EEA we are treated as a third country and subject to full third country controls which even an unprecedented FTA cannot address. There is no economic utility in doing so. Were we to embark on such a process it would be with a view to full divergence in the hopes of serving larger markets elsewhere which is highly improbable.

Diverging on standards would create considerable customs problems for our EU trade, which of itself is troubling, but it is also fruitless since a number of countries already have harmonisation commitments with the EU centring on global standards - which are increasingly forming the backbone of EU regulation.

If the aim is a looser relationship than the EEA then it makes more sense to work with other Efta member to improve the EEA agreement over time and make better use of the system of veto. Moreover the UK would be welcomed as a fully committed member. In this it is difficult to see why EEA states would welcome the disruption to the EEA system for the sole benefit of the UK if we intend to leave it.

Superficially, "Norway then Canada" seems like a sensible approach but it ignores the level of work involved and assumes the EEA is immediately operable as though it were a software patch. It isn't. There is no possible way we can leave the EU without at least transitional provisions for fishing and agriculture and if we wish to retain participation in integrated markets, any new protocol would have to be permanent.

Though the UK has global ambitions the reality of trade points to the fact that we must continue to participate fully in European markets and Efta is the obvious vehicle for doing so. Should we take the EEA avenue then we must do so as a fully engaged member rather than using it as a cop out. It is difficult to see why the EU would entertain a transient use of it or deviate from the existing exit schedule if the end point is a Canada FTA. It will not seek to prolong Brexit or add another layer of complexity that would require coordination with EEA states.

We would urge Nick Boles and "Better Brexit" to rethink their proposal. It is impractical, unworkable and naive. The EEA is only going to work as a long term venture and should we commit to it there is every chance we can shape it into something better with the cooperation of the EU, perhaps even expanding it to Switzerland, thus consolidating the EU's neighbourhood relationships. Brexit is then a win-win for Europe and nobody feels used by it.

Longer term, as the UK establishes its own external trade relations it may be possible to phase out aspects of the single market where appropriate thus contributing to the overall wealth of Europe. The EU says that we cannot cherrypick from the single market, but there are ways to configure it from within and the UK is more likely to get what it wants by coordinating divergence with the EU rather than opening up retaliatory spats.

The short of it is that Britain needs a deep and comprehensive partnership that goes well beyond the scope of an FTA and the most intelligent means of doing so is to join a multilateral system such as the EEA. We can then go further as the EEA is not subject to the same WTO MFN clauses we find in FTAs. It then provides a framework for continuous and managed exit rather that attempting it all in one go. It has been our view from the beginning that Brexit is a process, not an event - and that much has not changed.

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