The EEA option for Brexit: a stepping stone in choppy waters
8 August 2016
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While the Government slowly prepares itself for the daunting task ahead, a climate of uncertainty is fuelling a Remain movement determined to stop Brexit. In this they are aided and abetted by uncompromising Leavers who refuse to understand and acknowledge that leaving the EU is going to be very complicated and difficult.
As a committed advocate of our withdrawal from the European Union I was well aware of the uncertainty that would be created and the inherent complications and risks involved. In fact I have been warning about them for a long time. Despite this, I still voted to leave and have not regretted it for a moment; that’s what makes me just as committed as any of the people who now accuse me of being a ‘closet Remainer’.
There is no escaping reality; leaving the EU is a monumental task and we are going to have to be prepared to compromise. We must leave the same way we came in; gradually, in stages. The benefits of our newfound independence, for amusement’s sake let’s call them the “sunlit uplands”, are some way off over the horizon, first an orderly withdrawal is crucial.
The problems we face are numerous. Our civil service is ill prepared and the Department for International Trade and the Department for Exiting the EU are far from being functioning government departments ready to pursue their central purpose. We are preparing to embark on hugely important negotiations with no negotiating team and without a clearly stated idea of what we want to achieve. Looming over this is the economic damage caused by the uncertainty of our future trading relationship.
This is why it is crucial that we adopt an existing model as a political and legal framework to simplify Article 50 negotiations and allow for a carefully managed exit. The EEA option, which entails remaining in the Single Market via the EEA Agreement, is the optimal transitional arrangement which give us a “soft landing” and acts as a stepping stone in choppy waters.
The Leavers who oppose an EEA based solution assert that we’d be better off either leaving without a trade settlement or leaving the Single Market and negotiating a bespoke Free Trade Agreement instead. Unfortunately, their understanding of the Single Market and its current importance to us is lacking, and they oversimplify the process of concluding an FTA. This is when reality bites hard.
I’m quite sure we could negotiate a basic preferential trade agreement with the EU to deal with the issue of tariffs, but the Single Market is not just a tariff-free zone. It facilitates free trade because it is an area of harmonised regulation and mutually recognised standards and qualifications. These common rules allow for the elimination of customs barriers.
If we leave the Single Market without an agreement that deals with the multitude of technical barriers to trade, then we face major disruptions and certain recession. Our exports will become subject to checks and delays. Is the solution therefore to embark upon negotiations for a brand new free trade agreement?
The simple answer is no. It is extremely unlikely that a bespoke bilateral agreement under the aegis of Article 50 could be concluded in the two-year deadline. Unanimity is required to extend the negotiations which, considering the commercial interests at stake, is possible, even likely; but it isn’t certain and our trade relationship remains very uncertain in the meantime. Ten years to negotiate is the figure bandied around, though five years is potentially realistic. Trade agreements are incredibly complex treaties running to thousands of pages long and for the EU prolonged negotiations are the norm.
Work on the EU-Canadian Comprehensive Economic and Trade Agreement (CETA) – the model that David Davis has previously advocated – started in June 2007 and not until October 2013 were the crucial elements agreed upon. Now, nine years after negotiations begun, the agreement still hasn’t been concluded and ratified.
The Colombia-Peru deal was launched in June 2007 and provisionally applied in the first trimester of 2013, taking nearly five years. The current round of EU-Swiss talks started in 1994 and took 16 years to conclude. The process of the EU-South Korea took almost 18 years, with the official negotiations taking 5 years. The Mexico-EU FTA: preliminary talks started in 1995 and finished on 24 November 1999, the agreement coming into force on 1 July 2000, taking nearly five years to complete.
We must dispense with the misguided notion that a free trade agreement is a simple solution. Moreover, as us Brexiteers pointed out throughout the referendum campaign; our EU membership is about far more than trade. Brexit is about untangling ourselves from forty years of political integration and to imagine that it can be done easily and quickly is risible.
It will be frankly impossible to unravel the vast bundle of highly complex budgetary, legal, financial, commercial and political obligations and liabilities all at once. We just don’t have the capacity.
This is why a phased exit is essential and inevitable. There are so many potential points of negotiation that we will need to defer many of the substantive issues for further talks after we’ve left the EU. We must pursue an EEA-based market solution to secure business and trade continuity as part of our exit settlement.
Despite the protestations of uncompromising Leavers, numerous polls show support for a market-based relationship with the EU. This is not “association membership”; moving into the EEA means leaving political and judicial union and ending our EU membership. Full stop.
It represents vast repatriation of policymaking power with everything from trade to fishing, agriculture, energy, environment, transport, telecommunications and even foreign policy requiring us to rebuild independent policies. This is a huge rebuilding project and, frankly, it’s more than enough to be getting on with.
Yes, we still need to follow the rules of the marketplace meaning we have to comply with EEA-relevant EU law, but it is false to assert that we’d have “no say” in the process. Within the structure of EFTA (which hosts the EEA agreement) there is a range of consultative bodies, including the EEA Council, three joint committees and over 30 working groups. Crucially, whereas the UK is currently bound by Treaty to represent the EU common position in the international bodies and conferences from which the substance of so much EU regulation now originates, we will have a seat at the top tables, we will represent ourselves, and we will be free to form ad-hoc alliances to pursue shared goals and protect our interests.
Of the limited options in front of us; this is by far the best. The Brexiteer vision of an independent, self-governing, globally trading nation can be achieved, but the EEA option is a critical stage in our evolution. We can make a success of Brexit and to do so the first goal must be a de-risked, economically secure secession. This will give us a soft landing and a strong platform to build on.
Ben Kelly (@TheScepticIsle) is the Online Director at Conservatives for Liberty.
As a committed advocate of our withdrawal from the European Union I was well aware of the uncertainty that would be created and the inherent complications and risks involved. In fact I have been warning about them for a long time. Despite this, I still voted to leave and have not regretted it for a moment; that’s what makes me just as committed as any of the people who now accuse me of being a ‘closet Remainer’.
There is no escaping reality; leaving the EU is a monumental task and we are going to have to be prepared to compromise. We must leave the same way we came in; gradually, in stages. The benefits of our newfound independence, for amusement’s sake let’s call them the “sunlit uplands”, are some way off over the horizon, first an orderly withdrawal is crucial.
The problems we face are numerous. Our civil service is ill prepared and the Department for International Trade and the Department for Exiting the EU are far from being functioning government departments ready to pursue their central purpose. We are preparing to embark on hugely important negotiations with no negotiating team and without a clearly stated idea of what we want to achieve. Looming over this is the economic damage caused by the uncertainty of our future trading relationship.
This is why it is crucial that we adopt an existing model as a political and legal framework to simplify Article 50 negotiations and allow for a carefully managed exit. The EEA option, which entails remaining in the Single Market via the EEA Agreement, is the optimal transitional arrangement which give us a “soft landing” and acts as a stepping stone in choppy waters.
The Leavers who oppose an EEA based solution assert that we’d be better off either leaving without a trade settlement or leaving the Single Market and negotiating a bespoke Free Trade Agreement instead. Unfortunately, their understanding of the Single Market and its current importance to us is lacking, and they oversimplify the process of concluding an FTA. This is when reality bites hard.
I’m quite sure we could negotiate a basic preferential trade agreement with the EU to deal with the issue of tariffs, but the Single Market is not just a tariff-free zone. It facilitates free trade because it is an area of harmonised regulation and mutually recognised standards and qualifications. These common rules allow for the elimination of customs barriers.
If we leave the Single Market without an agreement that deals with the multitude of technical barriers to trade, then we face major disruptions and certain recession. Our exports will become subject to checks and delays. Is the solution therefore to embark upon negotiations for a brand new free trade agreement?
The simple answer is no. It is extremely unlikely that a bespoke bilateral agreement under the aegis of Article 50 could be concluded in the two-year deadline. Unanimity is required to extend the negotiations which, considering the commercial interests at stake, is possible, even likely; but it isn’t certain and our trade relationship remains very uncertain in the meantime. Ten years to negotiate is the figure bandied around, though five years is potentially realistic. Trade agreements are incredibly complex treaties running to thousands of pages long and for the EU prolonged negotiations are the norm.
Work on the EU-Canadian Comprehensive Economic and Trade Agreement (CETA) – the model that David Davis has previously advocated – started in June 2007 and not until October 2013 were the crucial elements agreed upon. Now, nine years after negotiations begun, the agreement still hasn’t been concluded and ratified.
The Colombia-Peru deal was launched in June 2007 and provisionally applied in the first trimester of 2013, taking nearly five years. The current round of EU-Swiss talks started in 1994 and took 16 years to conclude. The process of the EU-South Korea took almost 18 years, with the official negotiations taking 5 years. The Mexico-EU FTA: preliminary talks started in 1995 and finished on 24 November 1999, the agreement coming into force on 1 July 2000, taking nearly five years to complete.
We must dispense with the misguided notion that a free trade agreement is a simple solution. Moreover, as us Brexiteers pointed out throughout the referendum campaign; our EU membership is about far more than trade. Brexit is about untangling ourselves from forty years of political integration and to imagine that it can be done easily and quickly is risible.
It will be frankly impossible to unravel the vast bundle of highly complex budgetary, legal, financial, commercial and political obligations and liabilities all at once. We just don’t have the capacity.
This is why a phased exit is essential and inevitable. There are so many potential points of negotiation that we will need to defer many of the substantive issues for further talks after we’ve left the EU. We must pursue an EEA-based market solution to secure business and trade continuity as part of our exit settlement.
Despite the protestations of uncompromising Leavers, numerous polls show support for a market-based relationship with the EU. This is not “association membership”; moving into the EEA means leaving political and judicial union and ending our EU membership. Full stop.
It represents vast repatriation of policymaking power with everything from trade to fishing, agriculture, energy, environment, transport, telecommunications and even foreign policy requiring us to rebuild independent policies. This is a huge rebuilding project and, frankly, it’s more than enough to be getting on with.
Yes, we still need to follow the rules of the marketplace meaning we have to comply with EEA-relevant EU law, but it is false to assert that we’d have “no say” in the process. Within the structure of EFTA (which hosts the EEA agreement) there is a range of consultative bodies, including the EEA Council, three joint committees and over 30 working groups. Crucially, whereas the UK is currently bound by Treaty to represent the EU common position in the international bodies and conferences from which the substance of so much EU regulation now originates, we will have a seat at the top tables, we will represent ourselves, and we will be free to form ad-hoc alliances to pursue shared goals and protect our interests.
Of the limited options in front of us; this is by far the best. The Brexiteer vision of an independent, self-governing, globally trading nation can be achieved, but the EEA option is a critical stage in our evolution. We can make a success of Brexit and to do so the first goal must be a de-risked, economically secure secession. This will give us a soft landing and a strong platform to build on.
Ben Kelly (@TheScepticIsle) is the Online Director at Conservatives for Liberty.
10 thoughts on “The EEA option for Brexit: a stepping stone in choppy waters”
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I don’t get it. The article asserts that the EEA Option should be a ‘stepping stone’ or a ‘transition’, but why should it not be a long term trading relationship.
Many successful territories operate a variant of the EEA option and it looks like quite a good outcome to me, one that includes 3 of the 4 happiest countries in the world apparently. If there was a better outcome as a next step beyond the EEA option, then all those territories would be progressing onto that next step, whatever it may be.
EEA membership is not an option. As the remain camp pointed during the referendum it means ‘fax democracy’ with the U.K. having to accept EU law that is has no influence over, making financial contributions to the EU budget which are (in the case of Norway) as much per person as the UK as a member, and having to accept EU freedom of movement and the unlimited migration of unskilled workers that this implies. It is obviously a bad option and the City of London is recoiling from it because it would mean it and all other industry in the UK being regulated from Brussels without any say in the regulations they would be forced to comply with.
Hmmmm, Ben, is it just me or is this in anyway a concept from Dr Richard North’s plan flexcit? from http://www.eureferendum.com?
IEA must be embarrassed to allow this, as they essentially rejected it when they ran their brexit plan competition.
I dare say we can all agree that concluding Trade Agreements with the European Union
takes a very long time. That is not so much because of the nature of Trade Agreements,
but because of the nature of the European Union. Incidentally, it was not ‘the IEA’ that
‘rejected’ Richard North’s entry to the IEA Brexit prize competition, but the independent
judging panel.
:Anonymous
“making financial contributions to the EU budget which are (in the case of Norway) as much per person as the UK as a member”
That isn’t true, although I suspect it came from none less than David Cameron so people trusted it ( at least a bit ). If the contribution was in proportion to the UK/NOR GDP ratio, then it would be £2.4bn a year, quite a saving from the £10bn gross contribution currently being made.
( http://www.eu-norway.org/eu/Financial-contribution , tradingeconomics.com , and a £ to Euro exchange rate of 1.18 will get you the numbers to arrive at around the £2.4bn figure ).
This has been commented on by Flexcit author Dr Richard North on his blog here http://www.eureferendum.com/blogview.aspx?blogno=86174
I agree with Stuart Mackey that the thoughts expressed above have already been very fully explored by Dr North in his Flexcit document, with further explanations in the monographs he has produced since the referendum. However, Mr Kelly’s summary is well written and easy for someone new to the concept of a phased withdrawal from the EU to understand. All that needs to be added is a formal acknowledgement of Dr North’s detailed work.
Why is the IEA getting Ben Kelly to pen what amounts to a thinned down version of Dr. North’s FLEXCIT plan?
I can’t understand why the IEA simply don’t just hire Dr, North to do the explaining…..
To Andrew Carey: even £2.4bn UK contribution is totally unacceptable. In practice the UK has 15 times the population of Norway so I think your figures underestimate what we would pay as EEA members.
All the UK desires is free trade with the EU similar to that which Canada, Mexico, South Korea, Northern Africa etc. Have, none of whom pay pay for it. So difficult to see why UK should pay anything for free trade, and suffer the other disadvantages of membership of the single market such as having our domestic industry regulated by Brussels and unlimited unskilled migration.
WTO rules are the benchmark against which any other deal should be viewed. WTO rules would see the UK exchequer raise £1.7bn in tariffs on German cars alone (10% tariff on £17bn Trade deficit with Germany in cars alone, £51bn total deficit). The 10% eU common external tariff on agricultural goods would also hit French and Irish food exporters much more than the UK where less than 1% are employed in agriculture. So there should be no question of UK desiring to pay £2.4billion to avoid a WTO tariff regime which would not touch the UK’s service exports as trade in the EU tariff on services is 0%. If German industrial and French agricultural producers want tariff free access to a UK market then it is they who should pay for it. Frankly even if they were to pay the UK should still reject single market membership as the loss of sovereignty and unlimited unskilled migration have been rejected in the referendum.
To “Anonymous” (Today at 14.13):
Did you miss the sentence in paragraph 3, namely “We must leave the same way we came in; gradually, in stages.”? What was recommended above was just Stage 1.
I recommend that you read the Flexcit document (or The Market Solution summary) and, especially, Dr North’s recent Monograph 2 (The WTO Option and its application to Brexit).
All available from http://www.eureferendum.com