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Brexit Central: Why the EEA is not right for Britain

Date: 20 07 2017

Why the EEA is not right for Britain

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As a Brexiteer who has spent 10 years studying models of life outside the EU in order to promote a ‘positive vision’ of the great opportunities, and eight years doing deals on the European Parliament’s trade committee, I can confidently say it takes all of those 10 years really to understand it. The learning curve is indeed steep.

There is no ‘Eureka’ moment on what works best, just a recognition of just how complex technical matters intertwine, and how similar trade models can provide useful templates for our own unique deal.

There are over 50 different models of association with the EU, and a great deal of variety and complexity within the EU – where France signs up to everything including the Euro and Schengen, and the UK to as little as possible.

Nor is there any ‘soft’ or ‘hard’ Brexit – that’s Remoaner propaganda. There is just a good Brexit or bad Brexit – good being leaving with maximum opportunities and minimum disruption.

But the choice really boils down to two possible models of trade agreements: either the European Economic Agreement (EEA), or a better, wider and deeper form of the Canada (CETA) agreement – what I call ‘Super Canada’. The third option is not a trade agreement, it is the ‘no deal’ choice called World Trade Organisation (WTO) Most Favoured Nations (MFN) rules which could be applied immediately, with the UK already preparing its own WTO ‘schedule’ of commitments and tariff rates.

David Lidington helpfully made very clear on the Andrew Marr Show on 9th July that the “Government has decided to go for… a very ambitious trade and cooperation agreement… like Canada” and not the EEA agreement model.

Yet it seems that dark forces within the economic end of Whitehall, in league with Remainers such as Tony Blair, Lord Mandelson, Lord Heseltine, Sir Vince Cable, Lord O’Donnell and EU figures have seized the result of the election to fight a rearguard and highly undemocratic action to frustrate Brexit. The game plan is to spread Fear, Uncertainty and Doubt (FUD) – with warnings of cliff edges, ‘hard’ Brexits and Whitehall chaos – and demands for a ‘transitional’ deal, for at least two years but up to four years, based on the EEA that may be permanent.

1. What’s wrong with the EEA?

The EEA was designed to get countries into the EU, not out of it. The Norwegians have been stuck in this ‘temporary arrangement’ for 24 years. Nor is their any EU interest in substantially updating this agreement.

The EEA option, even if transitional, would be disastrous for the UK: it would ensure we have to sign up to thousands more EU laws without any of us MEPs or UK Council or Commission members to amend these. It would continue to contribute billions that could be used to reduce debt, boost UK infrastructure and, yes, assist the NHS. In the time of the EEA transition, EU immigration would remain out of control as the EEA allows uncontrolled free movement – four years of the transitional EEA mooted would see a net population increase of 1.2 million people – a Birmingham every 2 years gross – with huge burdens on services and housing, and serious public anger at ignoring the largest vote in British history.

David Cameron himself condemned the EEA option saying “whilst they pay, they don’t have a say” and “I would guard very strongly against that. Norway actually pays as much per head to the EU as we do. They actually take twice as many per head migrants as we do in this country, but of course they have no seat at the table, no ability to negotiate.”

The CBI also attacked the EEA, saying: “opting for the Norway model… would not solve many of the challenges some see with the UK’s current relationship with the EU. It would mean that businesses would still have to follow EU rules, but it would remove the UK’s ability to influence those rules… In addition, this option does not in any way accommodate those who want to see a reduction in Brussels’ influence on the UK and its regulatory development.”

It’s worth asking too the Norwegians who won the Referendum in 1994 to keep Norway out of the EU: Nei til EU, who have been trying to escape the EEA ever since. They advise the UK: “the EEA might work as a parking spot, but only at best for a short time, and the spot is pretty muddy and you might not get out.” For muddy, read quicksand.

They regard the EEA to be one-sided, with all new legislation coming from the EU, sovereignty being constantly undermined by the surveillance authority ESA and the EFTA Court through overstrict enforcement of EEA obligation, worse than the ECJ.

They say “we would warn you that EEA membership is subject to the same tidal pull of European integrationism as EU membership; that the safeguards are rarely robust enough, and that the costs are greater than with a looser and better form of trade deal.”

Like Cameron, they complain of ‘faxed democracy’ – where they have to adopt whole swathes of Single Market legislation without no ability to shape it, and with little veto power in practice.

Neither is EEA membership simple. Norway’s affiliation to the EU comprises over 70 different agreements, independent of the EEA. Moving from this to a later comprehensive trade deal could become ever more complex, difficult and slow.

Nei til EU advocate a simple bilateral trade agreement to replace the EEA as this is “no longer as problematic or unprecedented as it was when both our countries started looking at the EEC as an attractive option to associate around.”

The reasoning given for adopting the EEA and a transition, given as a ‘jobs first’ Brexit, is false logic: putting UK jobs first actually means safeguarding the 87% of the UK economy made up by the domestic UK economy and exports to the Rest of the World, less so that EU trade is only 13% of the UK economy.

Whilst the EU does represent 44% of exports, with the Rest of World at 56%, the fact is that all international trade is a comparatively small part of the UK economy – a quarter, compared say to Ireland’s two thirds.

The UK mostly enjoys a surplus with non-EU and Commonwealth nations – such as £10bn surplus with the USA, dominated by services. This is a natural focus for our first UK free trade deals. Deficits with us reveal the fact our market is considered ‘soft’ by EU producers such as Germany.

The lower pound makes the UK more competitive for exports – which are at record levels since Brexit – and makes imports less attractive, as does the threat of WTO tariffs. The British Chamber of Commerce found 13% of its members to be ‘reshoring’ – creating jobs and production in Britain to replace imports.

The assumption too that staying within the EU Single Market is vital to jobs is also wayward – access is important, yes, but not membership. Even the EU accepts the costs outweigh the benefits by over two to one – such as 700,000 pages of EU acquis legislation, much overregulation – and the market is incomplete in important sectors such as services.

It is also utter nonsense to talk of ‘trading’ Single Market access for freedom of movement. You don’t need free movement for access to the Single Market – only four non-EU nations do (all EFTA, only Norway and Iceland in reality). I have had to explain this basic reality to a very senior British Minister and EU colleagues.

Nor do the EFTA nations pay for Single Market access – another myth. I have the former Norwegian Ambassador to the EU on record saying they pay zero for access – though they do make voluntary contributions through EEA Grants bodies.

Free movement is a rarity in world trade deals: the EU-Canadian CETA has no free movement, nor does NAFTA (US/Canada/Mexico), nor the Trans Pacific Partnership, nor the EU’s recent Japan, Vietnam, Colombia/Peru, and South Korea deals.

2. What’s wrong with a transitional deal using the EEA?

Firstly, why do we need so much more time to deliver the deal? Australia did three trade deals with its top trade partners (China, Japan and Korea) all in one year. All that is missing is political will.

Nor is it credible that the City of London, which does multi-billion pound deals on a daily basis – many very fast, such as mergers and acquisitions – is seemingly so pathetic at coping with an EU deal in two years plus.

So rather than a ‘transitional’ period – which translates into a non-deal spun out for four years – we should only allow an ‘implementation period’ – which means the deal is done, and we agree it will take effect on a certain later date. This does seem sensible for customs arrangements.

The idea of delaying a trade deal through transitional arrangements also seriously risks the UK going to ‘the back of the queue’ on doing a final deal.

Last week in my Trade Committee a senior German MEP bemoaned the fact the EU has taken five years to progress the proposed EU-Australian and New Zealand trade deals despite having such close links.

The EU loses interest in doing trade deals very quickly. Their chief negotiator on the US TTIP deal was also doing India – resources are limited. The UK has the EU’s rapt attention for two years only under Article 50, and importantly, a deal would be done under qualified majority voting in that time, not unaminity.

It would be a fatal mistake to presume that the EU will be interested in doing a new deal with the UK quickly once we enter a ‘transitional’ EEA-style deal. We would get ‘stuck’ for decades. We must do our deal when we have their attention.

EU-India has stalled after 8 years of negotiations, China hasn’t started, the Gulf states (GCC) have waited 18 years, the USA’s TTIP failed, Japan is in the pipeline but will take until late 2019, Canada took 7 years but only 3 years were actual negotiations – 4 years were wasted by human rights and investor arguments.

3. So what’s the solution?

We must focus on what we want out of this process, not how it starts. The Government is rightly seeking a deep and special partnership and a very ambitious trade and cooperation agreement with the EU.

I propose the UK should adopt what I call a ‘Super Canada’ deal – bigger, wider and deeper that the Canadian CETA trade deal (Canada+). It would deliver 100% tariff- and quota-free access to each others’ markets and will beef up the services chapter substantially to safeguard the City of London and other valuable services. My conversations with the EU Trade Commissioner and Chairman of the Trade Committee suggest great EU support for this option, as well as in the UK.

There would also be a parallel Strategic Partnership Agreement (SPA) like Canada’s covering non-trade issues such as security, defence, foreign affairs, policing, counter-terrorism cooperation, continued membership of EU programmes and agencies, and how we work together in future, such as Canada’s Joint Ministerial Committee. I expect that there will be very close future collaboration and high level meetings from Prime Ministers and EU Presidents, through to Ministers and technical experts.

Alongside would be other very important and supportive agreements, such as a Customs Agreement to ensure a smooth flow of goods and services post-Brexit so that French cheeses or Spanish tomatoes don’t rot in Dover and UK producers avoid similar hold ups. My timescale would be to do the deal by the end of March 2019, with the effective end of EU membership at the end of 2019 after a short ‘implementation phase’.

The combination of such a deep and comprehensive trade deal, political and other agreements will ensure Britain really does take back control. The EEA alternative is bogus, dangerous and an unhelpful anti-Brexit distraction.

July 19th, 2017: Brexit Central