Are EU In or Out? – Part 5: The Issues – Brexit Negotiations

Qualifier: The following article shall cite political views which represent, to the best of my understanding, the positions of the Official Remain and Leave campaigns. As such they may not necessarily represent the views held by myself or by any organisations or political parties of which I am a member. My own views shall be indicated throughout.

Are EU In or Out? – Part 1: What is The EU? can be read here

Are EU In or Out? – Part 2: A Brief History of Brexit can be read here

Are EU In or Out? – Part 3: The Issues – Immigration can be read here

Are EU In or Out? – Part 4: The Issues – Trade, Economy and Finance can be read here

Brexit Club2

Brexit Negotiations

One of the more contentious moments of the 2014 Scottish Independence campaign came about within the discussions over “what comes next?”. The post-vote negotiations over the unstitching of Scotland from the rest of the UK would have represented challenge at least on par with the separation of Ireland or the decolonisation process, if not greater. This may not have been helped by the fact that the British Union does not contain a formal legal mechanism for constituent member nations to leave, the Edinburgh Agreement and all that came after was essentially invented ad hoc. In contrast, the European Union does have a formal leaving mechanism in the form of Article 50 of the Treaty of the European Union, albeit that this mechanism has not been put into practice and was drafted only after the experience of Greenland’s process of leaving the European Communities in 1985. As this paper points out though, the comparison between Greenland and any UK leaving process is unlikely to be more than superficially similar as Greenland’s economic and political interaction with the EC at the time revolved very substantially around their fishing industry whereas the UK is far more economically and politically integrated.

PoP
The polls are tight. Neck-and-neck, even. Far too close to call and we’re only a couple of weeks away now. I think we owe it to ourselves to consider the possibility of a Brexit vote and to ask just what the Official Leave campaign wants to get out of their desired result, whether or not it’d be easy – or even possible – to achieve and if it actually chimes with the desires of many of their voters.

The “Leave” campaign view: The transition away from EU membership shall be easy and seamless. Even if we delay a triggering of Article 50, we can commence informal talks with the EU and thus extend the effective negotiating period beyond the two year timeframe. It shall be possible for the UK to maintain access to the Single Market whilst also eliminating our payments to Europe and without allowing in any immigrants through Freedom of Movement. There shall be no talk of Europe cutting off its nose to spite its face or taking “revenge” against us for daring to leave.

The “Remain” campaign view: The negotiations will be fraught with difficultly and if they are not completed within the minimum two year period then they will only continue if all 27 remaining EU members agree. If one vetoes or objects then the UK could be out without any deal at all. Regardless, the Leave campaign has not spelled out exactly what kind of deal it would like, how long it would take to achieve and how long it would take to replace any legislation currently underpinned by EU law. This period of uncertainty could do great damage to the UK economy as investment capital leaves. It will be impossible to delay triggering Article 50 to extend negotiations as it would not be in the interest of the EU to start “informal” talks before then nor would there be the legal mandate to do so.

The Common Green view:

With reflection back to the Indyref it’s possible to see many of the same arguments playing out amongst the two sides. One saying that we’re facing a great leap into the unknown, the other saying everything will be plain sailing. I do note, however, that the Leave campaign are not being held to quite the same exacting standards as Yes was. The No campaign made very great efforts to force Yes to lay out in great and exacting detail everything that would have to happen post-hoc even when some aspects were largely or even wholly controlled by No. Negotiations over currency and Scotland’s place in the EU were two prominent examples. The doubling-down of the negative campaigning from Remain, doubtless a result of the “success” of its use in both indyref and in the 2015 UK General Election, makes me recall a statement made by Alex Salmond during the indyref campaign that whilst a negative campaign can be beaten by an even more negative campaign, a positive campaign could beat ANY negative campaign. Once again, it’s almost as if “Project Fear” looked only at the number of votes cast and decided to plough on ahead regardless of any other costs.

One major difference between the indyref and EUref though is that whilst Scotland essentially only had two options post-vote, In the UK or Out, there are already several degrees of formal interaction between the EU and other states ranging, in order of level of integration, from formal membership of EFTA, through a series of bilateral agreements to similar, though distinct, effect (in the manner of Switzerland), through inter-trading bloc agreements like CETA and TTIP, and out to a looser arrangement governed only by international WTO trading rules. A few days ago I posted an informal poll to ask which option people would actually prefer to see negotiated.

Brexit Poll

Whilst completely non-scientific (due to small sample but especially as I have no indication of Remain or Leave preference) the results did land near my hypothesis that results would be split in roughly two directions. There would be one broad camp which would want to maintain close ties with the EU (and declining support for looser arrangements) and another camp which would want as distant a relationship as possible (this view is visible within some Scottish independence proponents who claim that Scotland cannot be truly independent unless it cuts all such international ties). [Addendum: A poll published by the Adam Smith Institute may back up my poll by indicating substantial support for a Norway style agreement amongst Remain voters with a narrower margined objection to it amongst Leave voters].

Given this it might be an idea to lay these out so that folk understand just what each position could mean for the UK. In this I shall summarise, amongst other sources, a research paper produced in January by the Centre for European Reform.

(Re-)Join the European Free Trade Association:-

This would be the smallest of the possible changes (the CER also considered the possibility of a UK-specific “half membership” which allowed us to stay in but cherry pick the benefits we wanted on a sector-by-sector basis. This was considered to be untenable especially in light of a demand by voters for actually leaving).

EFTA was originally founded by the UK but it has evolved significantly since then. Essentially it allows members access to the Single Market and free trade with the EU but does not include EFTA members in some pan-EU programs such as the Common Fisheries Policy and Common Agricultural Policy. Further agreements are in place so that goods using EFTA members as a transit point between EU and non-EU countries do not gain a tax or tariff advantage for doing so (the way that British Crown Dependencies like the Channel Islands sometimes did so until recently).

It does, however, require members to participate in the Free Movement of people across borders

640px-Grensen_mellom_Norge_og_Sverige,_Karin_Beate_Nosterud

The EU/EFTA border between Sweden and Norway

Having pinned so much of their campaign on the issue of immigration, this point would obviously be a massive sticking point for Leave negotiators, even assuming that the UK would maintain its current opt-out of Schengen proper in lieu of the current Common Travel Area arrangements (I think I’m safe in that assumption by the way. I can’t foresee Leave negotiating CLOSER border ties with Europe).

Another issue against the UK re-joining EFTA is that of negotiating “clout”. Right now, Norway (pop. 5.1 million) is the second largest member of EFTA (total pop. 14 million) and gains a fair amount of influence for that. I’m not so sure they would particularly enjoy the prospect of being overshadowed by the UK (pop. 64.1 million), especially for the next several years whilst all of the deals are being made. Similarly to the EU, the consent of all other EFTA nations must be gained for new members to join. The UK could well be staring down the barrel of a veto here.

There’s also the issue of the costs involved in maintaining EFTA membership whilst sacrificing the CAP and development funds which come with full membership. Leave have also pinned much of their campaign on claims of EU “costs” based on a model which looks rather more like EFTA than the EU. It’d be, to use a huge euphemism, rather counter-ideological to walk into negotiations to try to achieve that very position. Finally, the sovereignty issue for Leave is the third pillar of their argument. Once again, EFTA membership would undermine that point as, quite simply, having the EU decide and impose trade deals on the UK with little or no input from them in return would be the very thing they claim to be trying to escape. I think it’s fair to say that the official Leave campaign would be even LESS happy with membership of EFTA as they are with the EU. Sorry Nordic fans, it won’t be happening this way whilst the Tories have anything to do with it.

Swiss-style Bilateral Agreements:-

The Swiss Ambassador to the EU discusses the Swiss arrangements and the similarities and differences with the UK’s arrangements.

Switzerland’s desire to maintain formal neutrality largely prevents it from formally joining groups like the EU or the EEA but there has still been a desire to share in some of the economic advantages that trading freely with the EU has brought. To this end, Switzerland has negotiated a series of bilateral agreements with the EU which brings it very similar arrangements to that of the EEA but without actual formal membership it. For the UK, and for Leave, this would probably alleviate many of the “sovereignty” arguments as the UK would be involved in deciding which EU programs it would involve itself with (although it still would be largely unable to decide the internal terms of those programs. If, for instance, the EU demanded some regulatory standard for a good or service then the UK may be required to meet that standard to trade freely that good or service).

It’s worth noting though that the Swiss arrangement still requires payments for access to the Single Market and are themselves members of Schengen (although are currently struggling to reconcile that last point with their own internal thoughts on immigration) so I find this solution to be, again, rather at odds with the stated goals of Leave.

Below is the view of the Swiss model from a Swiss citizen in the form of a response to a pro-Leave film, Brexit: The Movie, which advocated this position.

The Canadian Option, CETA/TTIP:-

The recently concluded free trade deal between Canada and the EU perhaps lies rather closer to the actual desires of the Leave campaign than the previous two. Under this deal there would be no formal access to the Single Market nor any cross-payments to the EU, nor would there be any automatic requirement to take part in the CFP or CAP, nor would there be any special rights regarding immigration to and from the EU. Instead, as with the Swiss model, there would be a series of bilateral agreements covering each sector of interaction between the UK and the EU. The primary disagreement to this deal is the sheer complexity of the task at hand. CETA has taken eight years to reach the state where the articles have been agreed but the bill itself has not yet been passed by both governments and has not yet been implemented. Whilst it is conceivable that a quick deal could be reached based on modifications to the status quo (which would have, in many cases, been the case for Scotland/rUK relations following a 2014 Yes vote) it is equally conceivable that Leave will want to open up many articles for negotiation (remember their desire to cut “EU red tape”) and other countries will want to seek their own advantages from the deal.

For example; for every German who wants to keep automobile tariffs low so they can buy a British car there may be an Italian who does want Britain to compete with their luxury car market. For every British farmer who wants to keep exporting goods to the continent there may be a French farmer who’d prefer their goods were bought instead.

I can also foresee a scenario regarding the protectionism of the London finance industry. I mentioned in the previous article that the UK is currently the primary blocker against an EU Financial Transaction Tax. If, post Brexit, the EU introduces one it could drive a serious competitive wedge between London and the financial cities of the Continent. Further, much of the current regulatory frameworks are derived from EU law (the UK goes further that minimum EU standards in some instances and is free to do so) and would require a low of unpicking if “sovereignty” were to be “recovered”. And I do wonder how the public would react to Leave telling us that, after the 2008 crash, what Britain REALLY needed was less regulation of the banking industry so I struggle to understand what Leave could actually want to do here.

It’s really not clear how or what kind of deal could be reached to rationalise the views of Leave in this regard so as to gain a quick deal. I don’t think I’m alone in this. In January, Open Europe “wargamed” the Brexit negotiations in a three hour session between Lord Lamont (now a prominent figurehead within the Leave campaign) and several former Prime Ministers and Cabinet Ministers for the EU and member European countries, in other words, exactly the kind of people with whom the UK would have to be dealing in the event of a Leave vote.

A ten minute highlight reel of the Brexit Wargame. I highly encourage viewing of the full three hour version to complete understanding of the situation. Part 1. Part 2.

Another possible blocker for this kind of arrangement is the very nature of it. To put it mildly, TTIP and CETA have not been popular. Some within Leave (particularly within the political Left) have cited it as a primary reason for their vote. This rather ignores the fact that the Tories guiding this referendum are primary supporters of TTIP and would be quite happy with it.

Stop TTIP

This has not stopped the Official Leave campaign from producing anti-TTIP campaign material.

Brought out in the concluding remarks of the wargame is the desire from Leave to agree some kind of supra-national agreement between post-Brexit UK and the EU even if Lord Lamont couldn’t articulate what kind of a deal would be formed. This leads me to the conclusion that something akin to CETA (even if it is not modelled directly on it) is the likely most-favoured option of Leave. This should be considered carefully by those who voted in my informal poll mentioned earlier. This was, for them and by some considerable margin, the least desired of the four options.

No Deal, World Trade Organisation Rules Only:-

So what happens if either no deal is reached or no deal is even approached between the UK and EU? The “fallback” option is to retract the UK’s relationship to regulations governed by the WTO in a manner similar to EU relations with the USA (pre-TTIP) or China. This option is the one which would allow the “most” control or sovereignty (I would argue that being a member of a political union from which one could leave at any time of our choosing is a fully sovereign decision and entails no loss of it. Compare the UK’s membership of the EU to Scotland’s membership of the UK, for example) for those who highly value this factor and would not require any membership fees and would allow full control over immigration and the “freedom” to make any other trade deals the UK would wish to make. Sounds good. A major exception lies within the WTO regulations though. All trade deals must be “non-discriminatory“.

This means that no single nation can treat any other single nation any better than their “most-favoured trading partner”. If the UK wanted to, say, give Japan a tax break on electronics imports then it must give the USA and all other WTO members the same tax break. If it wanted to raise a tax barrier on those imports from Japan then it must raise them on all nations (although a significant exception in this regard applies to goods traded “unfairly” like the below-cost dumping of Chinese steel). This would significantly limit the UK’s ability to make those “sovereign trade deals” that Leave has stated that it desires. The WTO is gradually taking us to the position of globalised free trade (the comparative merits and demerits of which could be a debate for another article). A fallback to WTO regulations may be a useful “Plan B” for Leave if they can’t get the deal they actually want but I’m not sure that they are doing a good job of explaining what the UK would get out of it. I’m not sure it will produce a comparative advantage over the other options except under the circumstances of a botched or blocked trade deal. I’m not convinced this option should be considered a “goal”.

Conclusion

As said earlier, I find it curious that the Official Leave campaign has not been held (unfairly or otherwise) to the same dogged scrutiny that Yes was in 2014. Without that pressure we’ve been left in the position that while we can be fairly sure what Leave want to gain from a Brexit it’s not entirely clear how they want to achieve it and it’s equally unclear how those goals could even, in principle, be achieved. The blame for this doesn’t entirely rest on Leave though as the negative scaremongering from the Project Fear camp of Remain does very little to actually enlighten or teach, much less encourage any kind of explanation. If Official Remain does scrape a victory from this debate it will not have come from the strengths of its arguments. Mind you, nor will have Leave.

For my own part, as a Remain voter, for both the UK and for an independent Scotland, if I can’t be a member of EU then I’d, socially speaking, prefer the EFTA option but I’d be deeply concerned at impact of the loss of CAP funding on our farming industry whilst not having the membership fee money to compensate – this would be particularly profound in the case of an independent Scotland. From an economic perspective, the CETA style option is probably the one I’d tack towards but, and this is a large “but”, it must be dealt with far more transparently than TTIP and CETA have and absolutely must contain protections against objectionable statutes like ISDS. The negotiations also must take reference not only of the current state of the economy but also the future state as we want to build it. A deal which simply turns the UK into an appendage of an unfettered London financial industry is not a goal to which I, nor I think many other people, would wish to aspire.

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8 thoughts on “Are EU In or Out? – Part 5: The Issues – Brexit Negotiations

  1. Captain pedant here, again ;). Some typos . .

    ” . .and any UK leaving process is unlikely to more than superficially similar”

    to be more than?

    “Right nor, Norway (pop. 5.08 million) is the largest member . .”

    Right now?

    ” . .passed by both governments and it has not year been implemented)

    Don’t know what’s missing/added here.

    ” . . of our choosing is a fully sovereign decision an entails no loss of it.”

    and entails?

    Like

  2. Typos? (Second try. The first comment didn’t seem to ‘take’.)

    ” . .and any UK leaving process is unlikely to more than superficially similar”

    to be more than?

    “Right nor, Norway (pop. 5.08 million) is the largest member . .”

    Right now?

    ” . .passed by both governments and it has not year been implemented)

    Don’t know what’s missing/added here.

    ” . . of our choosing is a fully sovereign decision an entails no loss of it.”

    and entails?

    Like

  3. Pingback: Are EU In or Out? – Contents Page | The Common Green

  4. Pingback: Are EU In or Out? – Side Note:- The Leaving Framework | The Common Green

  5. Pingback: Are EU In or Out? – Part 6: The Issues – Sovereignty | The Common Green

  6. Pingback: Are EU In or Out? – Part 7: Final Thoughts | The Common Green

  7. Pingback: EU’re Out, Apparently | The Common Green

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