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.

 

 

 

 

 

Former BBC journalist and manager in Belfast, Manchester and London, Editor Spolight; Political Editor BBC NI; Current Affairs Commissioning editor BBC Radio 4; Editor Political and Parliamentary Programmes, BBC Westminster; former London Editor Belfast Telegraph. Hon Senior Research Fellow, The Constitution Unit, Univ Coll. London