19 March 2019
IEA publishes report on the EEA and EFTA models to leave the European Union
- There seem to be three broad variations to the EEA model:
- Not joining the European Free Trade Association (EFTA) and ‘continuing’ as party to the EEA Agreement
- Joining EFTA, and then becoming party to the EEA Agreement as an EFTA member
- Joining EFTA as an Associate Member and then becoming an EFTA party to the EEA Agreement.
- At present the EU position appears to be that all of these options require the UK, or at least Northern Ireland, to remain in a customs union with the EU to avoid a ‘hard border’ in Ireland.
- All of these options require other parties to concede to the UK’s actions, whether in joining EFTA, or renegotiating the EEA agreement:
- time is running out for any such negotiations, even if carried out during a transition period (if agreed) and there is little evidence of political will.
- Variation one (non-EFTA) can be discounted as the EEA Agreement is explicit about only applying to EFTA or EU members
- This is not easily altered as it is built into the ‘institutional provisions’ of the EEA Agreement
- The EU could still claim there needs to be a backstop to address the possibility that the UK might eventually leave to pursue a ‘Canada-style’ free trade agreement (“FTA”).
- Variation two precludes membership of the Customs Union, as EFTA members must apply to become party to all EFTA FTAs. Article 50 does not give the EU competence to negotiate an existing member state’s joining of the EFTA pillar of the EEA Agreement. The UK would need to leave first.
- Variation three would require a renegotiation of the EFTA convention, and it would not be guaranteed that a new ‘associate member’ would be allowed into the EEA by the EU. As with option two, the UK would need to leave the EU and then negotiate this.
- Even if the legal and political difficulties could be surmounted, all of these options simply delay the process of leaving, creating additional work in the interim for businesses, without dealing with uncertainty over the final arrangements. The difficulty of leaving the current arrangements demonstrates how challenging it would be to move out of EEA membership once in.
- Once in there are also further difficulties:
- The UK would not have meaningful input into lawmaking in key areas including financial services.
- The UK would be unable to end free movement of workers.
- It would be difficult to pursue significant trade deals with third countries or blocs like the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP), and all but impossible if the UK were also to be in a customs union.