The European Economic Area is looking more attractive as a Brexit solution but it aint perfect

It’s going to be a long haul. Perhaps we shouldn’t pay too much attention to the megaphone diplomacy – Junker’s claim that May was living in another galaxy, May accusing unnamed Commission bureaucrats of interfering in the British election. But it isn’t a good start. On balance May has come off slightly worse in early reactions without doing her any harm at all in the court of public opinion.

Attention is turning back to an outcome that was  identified almost  as soon as  the referendum ballots  had been  counted:  first that membership of the single market  for Scotland and Northern Ireland was incompatible with continuing membership of the single UK market, as explained by Michael Keating ; and second that the Norway option, or membership of the European Economic Area (EEA) might be the best solution available, not only for Northern Ireland and Scotland but the UK  as a whole, to prevent “ the Balkanisation of Britain.”

For the UK,  a remarkable U-turn appeared  yesterday by Simon Jenkins, ex- editor of several papers including the Times and the Evening Standard, now edited from this week by  the sacked Chancellor George Osborne. Jenkins gave precise grounds for concern for London, not only affecting the City but every bit as serious for the  metro way of life,  a future without  baristas.

 

Tomorrow an angry EU commission will reportedly release plans to force the euro currency market out of London. This means the City’s euro exchange business must relocate into the eurozone to continue trading. Since Europe’s rival banking centres are lobbying for this, they are pushing an open door.

Already Deutsche Bank, HSBC and UBS have announced a total of 8,000 jobs going to the Continent. Last Wednesday, Jes Staley of Barclays hinted at a similar move. The euro business is huge. Consultant EY calculates that it could involve 80,000 jobs.

Meanwhile, on the high street, Starbucks and Pret a Manger among others are panicking about baristas. Hospitals and care homes are frantic for migrant staff. London’s three biggest industries — finance, leisure and welfare — are wondering what is going on. A mass defection of low-paid staff could cost millions. Even the most insouciant “hard” Brexiteer must surely pause to think. Was Project Fear right after all? Was it just a matter of dates?

So far, like most Londoners, I assumed the Brexit talks would start tough but would soon be so hedged with deals as to be acceptably “soft”. Come 2019, May’s jolly musketeers would return from Brussels loaded with free trade, passported banks and reassurances for EU residents, who presently feel like Mexicans at a Trump rally. There would somehow be open borders for immigrants that were needed, and closed ones for the rest. It was inconceivable that banks would move, hospitals close and food rot in the fields. There would be deals, because everyone had an interest in them.

Britain has to live with Europe, trade with Europe, move at ease over Europe’s borders. It must remain part of Europe’s common economic space. There has to be a deal.

The best way through this mess was always a table d’hôte package, and the most sensible was to leave the EU but adopt the Norwegian option, of remaining with Europe’s free trade economic area (EEA). It is the softest of Brexits and far from perfect. May would have to fight her Right wing over immigration and respecting the European court. But it would work.

A detailed EEA  discussion paper for the European Policy Centre  has  written by a group of  Queen’s  academics.  The EEA option “would entail control of movement from the rest of the UK to Northern Ireland” (opposed by the DUP)  and would not avoid customs checks on goods travelling from the Republic /EU into Northern Ireland  (deplored by nationalists in particular). This is the first serious exploration of  the  solutions  for the problems of Brexit focusing on Northern Ireland I’ve seen and is to be warmly  welcomed.

One of the academics, the lawyer Chris McCrudden added  his case for a more active role by the two governments  to set priorities for  ending the impasse over the Assembly. I’ll summarise his analysis in a separate post

EPC discussion paper extracts

.Exacerbating the situation ( in NI) are tensions over Brexit, a lack of an agreed plan on the issue, and a fear that a UK withdrawal from the EU that fails to address the legitimate concerns of interests in Northern Ireland could act as a catalyst for a further deterioration of inter-communal relations.

Northern Ireland’s economy ‘is likely to be relatively more vulnerable to the type of structural changes triggered by a UK exit from the EU in comparison to the rest of the UK’. Whereas across nine scenarios the modelling found that on average, by 2030, UK gross value added would be 1.8% lower than the baseline, in Northern Ireland it would on average be 2.8% lower than the baseline.

( From) the range of issues raised by the First Minister and deputy First Minister in their post-referendum letter to the Prime Minister… the essential assumption underpinning the comments was clear. Any change to the status quo would have major implications for the Northern Ireland economy and any change to the border would have potentially significant economic, social and political consequences. The status quo should therefore be maintained.

. Disappointingly, there has been no official follow-up from the Northern Ireland Executive, and in the short term the negotiations on the formation of the Executive following the Assembly elections on 2 March 2017 will probably further delay the opportunity to develop such a follow-up…

Rejection of the single market and of the customs union is widely regarded as reflecting the preferences of more hard-line ‘Brexiteers’.. If anything, the content of the (UK) White Paper has exacerbated concerns that the views and interests of the region – as with Scotland – are effectively being ignored in practice by the UK government, despite the recognition in principle that the Northern Ireland peace process should not be endangered.

The UK government also appears to have rejected party political calls for a ‘special status’ for Northern Ireland, which we understand to mean that the UK government will not accept that Northern Ireland should remain within the EU. The government has not, we understand, rejected Northern Ireland being in the EEA.

Implications for Northern Ireland of membership in the EEA

Northern Ireland would, along with the rest of the UK, withdraw from the EU. It could then avail itself of participation in the EEA, a dynamic arrangement that is based on the aim of allowing EFTA member states to participate in the EU single market, i.e. the free movement of goods, services, capital and people, and adherence to EU norms and standards in that context. Inside the EEA, Northern Ireland would, along with the rest of the UK, be outside the customs union and outside the jurisdiction of the Court of Justice of the European Union. The United Kingdom as a whole would remain firmly outside the EU’s commitment to ‘ever closer union’.

Companies in Northern Ireland providing goods and services in the EU would retain full access to existing European markets, and would continue to trade freely with the rest of the UK.

The EEA is not simply the EU under another name, however, and constitutes a lesser degree of economic integration than the EU, in particular because it does not comprise a customs union. That means that if Northern Ireland were a member of the EEA, it could and would need to make whatever arrangements regarding customs issues that were thought appropriate with the rest of the UK, as well as with being in the EU single market.

The EEA would also go some way to safeguarding the status quo as regards maintenance of the spirit, if not the letter, of the Belfast/Good Friday Agreement, in providing membership of both Northern Ireland and the Republic of Ireland in a common European economic entity.

Importantly, even if it were a member of the EEA, Northern Ireland would be outside the EU’s Common Agricultural Policy (CAP) and the Common Fisheries Policy (CFP). In other areas, it would not be subject to EU directives on the approximation of indirect taxation such as Value Added Tax (VAT). The EEA has no rules on VAT, so Northern Ireland would be free to use the UK sales tax system, whatever it may be.

In the EEA, there would continue to be free movement of persons from the EU, including the Republic of Ireland, into Northern Ireland. Accordingly, access to migrant labour would be maintained.

The openness of Northern Ireland to free movement of persons from the EU would entail control of movement from the rest of the UK to Northern Ireland. Further, the UK might wish to apply immigration controls to movement from Northern Ireland to the rest of the UK, if it wishes to limit immigration of EU nationals.

Membership of the EEA would not, in itself, avoid a customs border between Northern Ireland and Ireland, although EEA membership means that no tariffs could be raised by EU member states on goods produced in Northern Ireland.

Correspondingly, rules of origin would have to be applied to goods moving from the EU through the Republic of Ireland into Northern Ireland or the rest of the UK, to ensure that any UK tariffs applicable to goods of EU origin are paid.

Is Northern Ireland’s participation in the European Economic Area feasible?

A much harder border on the island of Ireland would be avoided; the economic impact of Brexit on Northern Ireland would be lessened; and Brexit-related concerns for the future of the peace process would be reduced. Participating in the EEA would, however, be distinct from EU membership.

It would also pose a number of political and constitutional challenges for the UK and require the EEA Agreement to be amended. The EEA option would, however, ensure a high degree of continuity with the status quo. With the EEA there would be clarity; the economic uncertainty surrounding Brexit would therefore be reduced.

 

 

 

 

 

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  • Jag

    If Albania is unable to get into the EEA, what hope for that delusional galoot, Theresa May.

    Maybe, after Brexit, when Scotland gets independence and Ireland reunifies, we can call what’s left “Albionia”.

  • Kevin Breslin

    We’re in the European Economic Area already.

  • Kevin Breslin

    The Democratic Unionists have really helped ensure the destruction of Northern Ireland as we know it.

    It’s either May’s Fool English Brexit, or some sort of Wisdom of Solomon special case solution that is divergent from England.

    It could come down to a rather unattractive choice between unity in Greater England or unity in Northern Ireland greater separated from England.

  • Brian O’Neill
  • Fred Jensen

    Best solution for this island is to take NI out of the UK customs zone. In other words, have customs checks between all ports and airports on this island and GB.

    Would be best of both worlds. NI would continue to be “British” and receive their £10 billion per year from London, and there would be no need for a hard border. Win win.

  • lizmcneill

    So we would go from having no border checks, to having two sets?

    Well done, Brexiteers, well done.

  • Karl

    People in NI are used to not perfect.

  • Oriel27

    thats obviously whats going to happen.
    its not possible to put checkpoints on 200 plus roads. The road i will be travelling home tonight after work (cross border), is 3 metres wide at border.
    This particular area wasnt welcoming to police,soldiers, customs men in the past and it certainly wont be again.

  • Fred Jensen

    Its what should happen. But Brexit is above all a political animal, not an economic one. So it won’t happen.

  • Oriel27

    When the economic pain hits home in Ireland – North and South as a result of a hard border, watch that political attitude changing fast.

  • SouthernMan

    Please read the last few paragraphs of
    Stephen Collins’ article in today’s IT.

    “Contrast that with our position today, after more than 40 years of EU membership.
    Our population is up to 4.8 million, living standards are higher than those in the UK and the Republic has become a truly independent state, with the self-confidence not only to fight our corner in Europe but to have a friendly, neighbourly relationship with the UK.”

    I ask my unionist friends, why not hitch your wagon to a star?

  • SouthernMan

    “Best” solution is a United Ireland.

  • Karl

    Better to rule in Hell than serve in Heaven? Very difficult for one of the lost tribes of Israel to decide their fate is with a bunch of foreign terrorists.

    I think EU membership will set the debate around unification in the future, with young protestants being less wedded to their parents ideology but also seeing the benefits of EU membership for individuals and not just for countries.

    We live in hope but sometimes end up in Larne. (ducks and runs)

  • Erewhon888

    Ambrose Evans-Pritchard writing in the Telegraph, included the following:

    “It is now imperative to draw up a ‘Plan B’ that limits the need for negotiations. I floated one possibility last week (to the horror of many readers): the revolutionary option of unilateral free trade, modulated by a free exchange rate that would cause extreme discomfort to the European Central Bank. We would never again have to admit Mr Juncker into the hallowed halls of a British institution.

    We should unilaterally announce total protection of all EU citizens living legitimately in the UK, regardless of what the EU does. We should unilaterally declare an open Irish border and total working rights and privileges for all Irish wishing to work in the UK, regulating back-door inflows of future EU migrants by other means.”

  • Fear Éireannach

    The thing is that this would mean checks on the ROI side of the border, as the UK would be flooded with hormone infested beef and the like. You might say that this isn’t the UK’s problem, but if you get a big killer dog and your neighbour has to erect a fence to keep his children safe, then it is your fault.

    More to the point, the EU would require all UK exports to the Continent to go through checks at one port somewhere and these exports would then not get there on time.

  • Angry Mob

    For purposes of clarification it should be pointed out that we are already in the EEA as a member of the EU which for all intents is the internal market. The EU is merely a supranational political union with a custom agreement tacked on among other things. The EEA is comprised of two pillars the one being the EU and the other being EFTA where the likes of Norway resides and it should really be referred to as the EEA/EFTA option, there is no EEA option per se.

    It is endearing however people are starting to catch up, I was extolling the virtues of the EEA/EFTA solution last year but alas it seemed to only fall upon deaf ears from those who on the remain side who recognised the threat as truthfully it was better deal than EU membership and those on the leave side who believed it not to go far enough. Whilst it has limitations it’s undoubtedly a better deal that what we have now and as an off the shelf solution for exiting the EU with the least possible pain it is idiocy to consider anything else, especially as time is not on the UK’s side and wasted further more with Ms May’s dithering . Swift ratification of EFTA membership may have given time to discuss a bilateral customs agreement akin to what Turkey has but I wouldn’t hold my breath.

  • Nicholas Whyte

    There is zero diplomatic traction for Northern Ireland to remain in the EEA post-Brexit, or indeed for any special status.

    The Irish government hasn’t asked for it, the UK government hasn’t asked for it and Stormont certainly hasn’t asked for it. And nobody else in the EU institutions is going to raise the question.

    The EEA proposal dodges the crucial question of how Northern Ireland would fit into the EEA institutions along with three sovereign states, two of which have much smaller populations than NI and all of which are anxious to protect their status.

    I’m not saying it’s a bad idea, I’m just saying that it is not going to happen.

  • Fear Éireannach

    What then is the point of the discussion of Northern Ireland at all, if it is just to be the same as GB? How can NI be discussed first in any meaningful way if that is the complete discussion? Is it all just another pretence? Is all the milk trade etc to just stop?

    And nobody said that NI should join the EEA explicitly, as in taking part in the institutions, it could simply photocopy their provisions. Monaco isn’t in the EU but acts as an appendage of France, for instance.

  • Nicholas Whyte

    Your first para – all good questions. I’m not the person who can answer them.

    Second para – well, I find it difficult to read the EPC paper any other way than NI should join the EEA explicitly; and even photocopying the provisions still means institutions of some kind. It’s an important part of the equation which can’t simply be ignored.

  • Fear Éireannach

    The point is that people have been talking about invisible borders without having any real answers for questions of detail. I think NI would benefit from maintaining EU agricultural and food regulations, and some institutional arrangement would be needed for that and the UK generally might go in a different direction.
    But NI needs attention for things that arise on land borders that simply don’t arise in a ferry crossing. Can a person from Buncrana chose a sofa in a Derry shop and have it delivered? Can a farmer in Cullyhanna ring a supplier in Castleblayney and have 20 bags of animal feed delivered? I suspect the Irish government and EU have thought about this and the British government have not. I doubt if the Irish government has strong views on the mechanisms as long as they work and do not adversely change the present situation. The British government has no views on the mechanism as they pretend there isn’t a problem.

  • Nicholas Whyte

    I bet that in the end the whole UK will maintain EU agriculture and food regulations; many non-EU members do if they want to trade agricultural produce with the EU and each other. It may be that no special institutional arrangement is needed – my information is that the Commission can recognise smaller units as adhering to particular standards.

    Apart from that, I agree with everything else in your comment.

  • Fear Éireannach

    The recent House of Lords report on agriculture made that point. However there is a cheap food lobby in Britain that wants New Zealand lamb and Brazilian beef and this might well banjax the food regulation aspect of things, especially as the straight banana propaganda over the years have made people regard EU food regulations as excessive.

  • lizmcneill

    How can Britain unilaterally declare an open border? And how does that wash with the “take back control” crowd?

  • Nicholas Whyte

    Well, if they choose to banjax agricultural trade for the U.K. as a whole, they certainly won’t stop to think about any special arrangement for Northern
    Ireland!

  • Reader

    Fear Éireannach: The thing is that this would mean checks on the ROI side of the border, as the UK would be flooded with hormone infested beef and the like.
    Food tracking is independent of customs borders – that’s how the source of the horsemeat burgers was traced.
    Fear Éireannach: You might say that this isn’t the UK’s problem, but if you get a big killer dog and your neighbour has to erect a fence to keep his children safe, then it is your fault.
    It will be handy to have the focal points of the anger on the far side of the border for a change. Ireland, in its own interests, should be trying to make a free trade arrangement work for Brexit. However, the good news is that the EU has committed to a good border solution for Ireland – so the customs posts might be at Rosslare rather than on the border.