Fisking “Common Market 2.0”

Below is the text of the “Common Market 2.0” paper put forward by the “Norway Plus Group” of MPs as a possible compromise on Brexit, with my comments inserted in red.

The central dilemma of Brexit is that Britain, if it goes ahead with it, must choose between:

  • a distant relationship with the EU (outside the customs union and single market), with a significant economic cost
  • or a close relationship (inside the customs union and single market), but then having to follow rules on which, as a non-member, it no longer has much of a say.

This proposal comes down on the latter side, but with a number of questionable claims, which I query in my comments.

Richard Corbett MEP


Re-setting the UK – Europe Relationship for the 21st Century
Lucy Powell MP and Robert Halfon MP
On behalf of the cross-party Norway Plus Group

Foreword

The UK is a great country with a deep and proud history. Yet, one thing most will probably agree on, we aren’t exactly covering ourselves in glory right now. In fact much of the public feel quite alarmed at the seeming mess we have got ourselves into with Brexit. Many are fed up to the back teeth of hearing about all the endless “Groundhog Day” twists and turns. All the while it’s getting worse, not better, as we head towards the exit door without any agreement over a deliverable plan. Not least because the promises made by the Leave campaign cannot be delivered.

What’s more, as things stand, it’s clear that there isn’t a parliamentary majority for any of the three main options being discussed: the Prime Minister’s deal, a no deal or a second referendum. Though if the ”Norway group” supported a second referendum, it would have a better chance, certainly as the last resort to avoid a no-deal Brexit.

As MPs at the centre of all this, we feel the same. However, the House of Commons has the power and the opportunity to do something about it. Increasingly, MPs from all parties are reaching the conclusion that we need to put aside tribal, political differences and accept that every option carries risks and no one outcome is anyone’s ideal.

Today we are coming together to argue for a Brexit deal that delivers the result of the 2016 referendum (even though polls show that a majority may not want Brexit anymore) and protects the economic interests of working people in Manchester, in Harlow and right across the UK. Our plan is based on the principles of “Norway Plus” and establishes that after the transition, in December 2020, the UK should join a new Common Market for the twenty-first century. Let’s call it Common Market 2.0. 

Politically, the Common Market 2.0 would:

  • Offer Theresa May a last chance of a deal that can command a cross-party majority (really?) and win the support of business leaders and trade unions;
  • Meet Labour’s six tests, and deliver on Jeremy Corbyn’s call for a customs union and a strong Single Market deal.
  • According to the EU’s chief negotiator Michel Barnier, offer genuinely frictionless trade with the EU as it is based on a set of institutions and procedures that already exist.

Substantively, we also believe our plan meets the key issues expressed in the referendum itself and the key stumbling blocks that have emerged since, as well as getting us as close as possible to “the exact same benefits” offered during the referendum.

Our proposal takes as its starting point the common refrain that we both heard from voters in our constituencies during the referendum campaign: “We voted for a Common Market, not all this political stuff.” In the 1970s and 1980s, the British people broadly supported our membership of the European Economic Community (EEC) because it delivered clear economic benefits to British businesses and workers. It was only as the “ever closer political union” took hold, that people began to turn against it. Common Market 2.0 offers us a way to recreate that simple economic relationship, which is free of all the political paraphernalia of the modern EU. A rewriting of history, see my comments below.

As members of Common Market 2.0, the UK would still have to accept the free movement of workers from other European countries, but we would have new powers to restrict European migration in certain circumstances if our government deems it necessary, because the European Economic Area (EEA) agreement gives members the right to unilaterally suspend the freedom of movement if it can show that it is having “serious economic, societal or environmental difficulties”. In addition, we believe the government should implement stricter enforcement of existing requirements for European migrants to find work within three months or otherwise demonstrate that they can support themselves without claiming benefits. Successive governments have failed to enforce these rules properly and have let down the working class communities we represent as a result. (See my comments below.)

In Common Market 2.0, most EU rules would not apply to us at all as we would be outside the common agriculture, fisheries, justice and home affairs policies. UK representatives would sit on the policy-shaping committees that draw up proposals for new Single Market legislation and we would be able to resist pressure to implement new rules that we don’t like. EU law would no longer have either “direct effect” or “direct applicability” in the UK. We would leave the jurisdiction of the European Court of Justice (ECJ) and join the European Free Trade Association (EFTA) court whose decisions are non-binding. UK courts would once again be supreme. Parliament would be fully sovereign. (See my comments below.)

Although we would still need to make a financial contribution for access to the Common Market 2.0, the annual amount would equate to not much more than half the amount we currently pay. (See my comments below.)

Finally, as members of both the Single Market and a new customs arrangement mirroring the current customs union, there would be no reason for the Irish backstop ever to be activated after the end of the transition. The union of Great Britain and Northern Ireland, which is precious to both of us, would remain intact and the foundations of peace in Northern Ireland as set out in the Good Friday Agreement preserved in perpetuity. (See my comments below.)

[Summary omitted]

1. Leading the way in a 21st century Common Market

Respecting the referendum result without wrecking the economy: why we need Common Market 2.0

In 1973 the UK joined the EEC – otherwise known as the Common Market – a decision that was subsequently supported by a public vote in 1975. Yet in 2016, 17.4 million people voted to leave the EEC’s successor – the EU. So, what changed between 1975 and 2016?

The answer is clear: the British people’s support for the UK’s relationship with the EU eroded, post-Maastricht. The EEC’s Common Market was popular amongst the British public, but the project of political integration advanced by the Maastricht Treaty in 1992 caused our paths to diverge.

This is a re-writing of history that owes a lot to the mythology propagated by Brexit supporters. The “political” dimension of the EEC/EU were there from the beginning, and were highlighted at the time we joined. Harold Wilson, presenting the reasons for British membership of the EEC in 1967, said: “the Government’s purpose derives above all from our recognition that Europe is now faced with the opportunity of a great move forward in political unity and that we can — and indeed must — play our full part in it.” The Heath government’s White Paper of 1971 spoke of “an ever closer union among European peoples”, an objective “to which this country can wholeheartedly subscribe”. It said that “what is proposed is a sharing and enlargement of individual national sovereignties in the general interest”. The media too highlighted the political significance: the Daily Mail (leader, 4 June 1975) referred explicitly to the goal of “political union”, saying that this was no “dark secret”. It asked whether the anti-Europeans hadn’t been listening “to the visionary words of European leaders for the past twenty-five years?”. The Daily Telegraph opined that defence, foreign affairs and economics “must all be harnessed to the task of strengthening Europe”. And we were, after all, leaving a free trade area, EFTA, because we wanted to join the broader scope of the EEC.

What has proved controversial over the years has not been the add-ons, but the common market itself, with its common rules. There have been far fewer complaints about foreign policy cooperation, environment and climate change policies, research, space, student exchanges, Europol and so on, than about single market rules (from irritating technical standards to general principles such as the four freedoms).

And as to the reference in the declaratory preamble of the treaties to an “ever closer union among the peoples of Europe”, this was in the treaties from the beginning and was a non-issue until Eurosceptics turned it into one at the time of the Maastricht negotiations. So John Major asked, and obtained, addition wording so it now reads “ever closer union among the peoples of Europe, in which decisions are taken as closely as possible to the citizen in accordance with the principle of subsidiarity (the principle which says “the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States”). No-one can reasonably imply that this sets you on a road to a centralised state, especially as any increase in the EU’s powers or field of competence requires qa treaty change that can only be adopted by unanimity with national ratification in each and every member country.

So saying “Common Market was popular amongst the British public, but the project of political integration advanced by the Maastricht Treaty” is to blame, is plain false.

Between 1992 and 1995 UK public support for strengthening our country’s relationship with Europe dropped from 38% to 14% and never recovered. Support to leave the EU or weaken the relationship rocketed to over 50%. The events that followed – Tony Blair’s 2004 decision that the UK should accept free movement of people from the so-called accession eight (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia) without a transition period, then later the Eurozone and refugee crises – only served to heighten concern about the UK’s place in the European project.

The 2016 referendum was a call for the UK to leave the EU and its project of ever-deeper political integration. But the 52%/48% result is also a call to maintain a strong, close and productive economic relationship with those 500 million consumers on our doorstep. In short, the referendum result is an instruction to move house whilst remaining in the same neighbourhood. Yes, we’ll all still have our own houses, but the question is how our neighbourhood is run if we walk out of the neighbourhood committee.

The 52% to 48% margin of victory does not represent a mandate to remain in the EU and carry on with business as usual. But neither is it a call for a hard Canada-style Brexit, nor for leaving without a deal. We must leave the EU, but that does not mean we cannot negotiate a continued relationship with the EU – based on the principles of the Common Market 2.0 – that will secure a close economic and trading relationship.

The democratic will of the 52% must not be ignored, and the EU referendum should therefore be seen as a reset moment for the UK’s relationship with the EU.

If the reason to go ahead with Brexit is that it’s the “will of the people”, wouldn’t it be sensible to check that it still is their will? All the more so, as opinion polls indicate a significant shift of views, so this may well no longer be the will of the people. Given that the proposed Brexit doesn’t deliver the Leave campaign promises, shouldn’t the electorate have the right to reconsider? Or are we telling voters that they had their say three years ago and must now shut-up?

A newly formed UK-EU Common Market for the 21st century would reflect the strong economic ties between the UK and Europe that enjoyed broad democratic support throughout the 1970s and 1980s, respecting the public desire for striking the right balance between political sovereignty and economic integration. It would recast our country’s relationship with the EU in a way that would better reflect our history, geography and politics. Not at all. The non-economic policies of the EU mostly suit us fine, as I mentioned above.

The cross-party group ‘Norway Plus’ is therefore advocating that the UK leaves the EU and its political institutions in order to develop “Common Market 2.0” – a Brexit that respects the referendum result, protects the jobs and livelihoods of our constituents, and begins to reunite our deeply divided country.

The path to Common Market 2.0

Under the plan, the UK would leave the EU on 29 March 2019. (Wouldn’t this need more time to secure?) We would leave under the current terms of the Withdrawal Agreement, but with a significantly reworked Political Declaration. A more detailed and specific Political Declaration would outline the future relationship between the UK and the EU after the transition period. We would also seek to agree a side letter with the EU agreeing that all efforts would be made to deliver the future relationship before the end of the transition period – therefore, removing the need for the backstop ever to be activated.

The Political Declaration would commit both sides to negotiating a future relationship whereby – at the end of the transition period ending in December 2020 – the UK would join the EEA via the EFTA pillar, sitting alongside the “EEA3” of Norway, Iceland, and Liechtenstein.

EFTA is an intergovernmental organisation that promotes free trade and economic integration without political or monetary union. It was founded in 1960. The UK was a founder member until it joined the EEC in 1973 (because we were dissatisfied with the limits of EFTA).

The EEA Single Market is the extension of the EU’s Internal Market to cover the EEA3 (Switzerland has its own bilateral deal with the EU). Each EEA3 members pays into the EU but only for the institutions and services that the country accesses. They also contribute to funds to help less prosperous regions in the EU.

This form of Brexit would give the UK full membership of the Single Market (no – it is not “full membership”: it excludes agriculture and fish, and given that participation in the single market is vital for these sectors, that’s quite a gap) which the UK helped create, and which underpins so many British businesses’ trading success. But we would leave the EU’s political institutions (losing our say on the rules we’d have to follow), the jurisdiction of the ECJ (we’d have the EFTA Court instead, and deference to the ECJ on interpretations of EU law) the common agricultural and fisheries policies (and we’d have to negotiate with the EU about what we replace them with, if we want to keep exporting to the EU) and the EU’s drive towards “ever closer union” (on which we already have a veto). We would also increase our power to control freedom of movement (hardly – see below).

EFTA countries are not in the customs union and are therefore able to negotiate their own trade deals. This should be the long-term aim of the UK (should it? Labour policy is for a permanent customs union. Creating a customs border, even with zero tariffs, will disrupt just-in-time deliveries, require more red tape for businesses trading with the EU – about half our trade – and take us out of the existing trade agreements we have via the EU with countries across the world). But to ensure a frictionless Irish border – and therefore remove the need to activate the Irish backstop as outlined in the Withdrawal Agreement – the UK would also need a derogation from the EFTA agreement in order to secure a customs arrangement, either permanent or temporary.

This new relationship would put the UK in a strong position to prosper and project our histories, cultures and political temperaments of its component parts. As Nick Boles and Stephen Kinnock have recently written, “this is a plan that has been hiding in plain sight since June 2016.”

A leading role in Europe, outside the EU

Brexit is not just a reset moment for the UK, but also for Europe. By leaving the EU and joining the EEA via the EFTA pillar the UK would kick-start the re-imagining of the European project that is so urgently and desperately required.

European leaders recognise the limitations of the EU’s one-size-fits-all, top-down approach to integration. (One size fits all has long been abandoned by the EU: 6 Member States are not in Schengen, 9 aren’t in the euro, 2 aren’t in the unified EU patent; 11 opted out of the divorce law regulation, 10 aren’t in the rules for recognition of property regimes of international couples, 6 don’t join in the EU public prosecutor system, 2 aren’t in PESCO, 2 aren’t in the Banking Resolution Fund, etc). President Macron in particular has spoken openly in support of a “Europe of several circles”, that better reflects the different histories, cultures and political temperaments of its component parts.

The UK would have a central role to play in leading a group of like-minded European countries that sit outside the political institutions of the EU but enjoy full participation in the Single Market. Membership of this outer ring of EFTA countries would bring significant benefits to the UK, as outlined throughout this pamphlet. There is no neat division between an outer ring and an inner ring. As mentioned above, some “inner ring” countries have opt-outs, while some “outer ring” ones have opt-ins (eg Norway etc in Schengen, Montenegro using the euro). There is no neat outer ring for the UK to “lead”, still less any sign that those countries want UK “leadership”!

UK membership would also bring substantial benefits to EFTA, increasing its size ten-fold to over 70 million people. EFTA’s institutions would be strengthened as would EFTA’s influence in debates with the EU. EFTA countries are in fact wary of seeing a country bigger than the rest of them added together muscling in on their arrangements.

Leading and strengthening an outer ring of EFTA countries would mean an exciting new future for the UK, EFTA and the EU. Wishful thinking.

The EU and EFTA countries support our proposals

The EU has consistently made clear that an EEA-based Brexit, combined with a form of customs union (in order to solve the Irish border issue), is one of three options for the UK-EU future relationship. Meanwhile, the governments of Norway and Iceland have also been positive about the UK joining EFTA. There are also several statements by their leading politicians that they are wary of this. Not to mention such reservations in this document that undermine its credibility.

The EU

The EU’s chief negotiator Michel Barnier has been clear that there are three models for the UK-EU future relationship: a Canada-style free trade agreement (which will inflict significant harm on our economy because it doesn’t include most services, and which would put our union at risk because it would only be for Great Britain), World Trade Organisation rules (which would be even worse), or our EFTA Common Market model.

In May 2018, Michel Barnier said:

The only frictionless model for the future with the UK would be Norway plus, Norway being part of the Single Market plus a customs union.

From the outset Barnier made it clear that an EEA-based Brexit would have been welcome from the EU side and that it had only not been explored because of the red lines that Theresa May had set out in her Lancaster House speech.

To deliver Brexit based on Common Market 2.0 the UK will sign up to the current Withdrawal Agreement but renegotiate a substantially more specific and detailed Political Declaration. This Political Declaration would outline the future relationship between the UK and the EU based on the UK’s membership of EFTA and EEA. At the end of the transition, the UK would then join the EFTA. On its accession to EFTA, the UK would move into the EFTA pillar of the EEA. At the same time, the UK would join a customs union with the EU, which will mirror the current customs union ensuring no need to activate the Irish backstop. All this requires negotiation and agreement not just with the EU but with the EFTA countries (Norway, Iceland, Liechtenstein and Switzerland, the last one being currently in dispute with the EU about its arrangements with it).

An EEA-based Brexit and the treaty-based EEA Agreement forms a ready-made basis for the most orderly Brexit possible, and is the only acceptable, achievable agreement that can be agreed before the 29 March 2019.

EFTA countries

The Norwegian Prime Minister Erna Solberg has made it clear that Norway will welcome us into EFTA. She has said that Norway will help Britain “find solutions” if we want to join (28 November 2018).

If that is what they really want, we will find solutions in the future.

To find a good agreement is important for all European countries and I hope that we will see an orderly deal that doesn’t disrupt economic affairs in Europe.

The only notable Norwegian politicians to claim that Norway would reject our membership are campaigners for Norway to leave EFTA and join the EU.

The Icelandic Foreign Minister Guðlaugur Þór Þórðarson told BBC’s Newsnight:

We would be very positive towards the idea of the UK joining EFTA or the EEA.” Other leading politicians from these countries have expressed reservations. Not to mention such reservations undermines the credibility of this document.

2. Common Market 2.0: more control with continued economic access

Common Market 2.0 offers new powers to control immigration

Under Common Market 2.0 we would participate fully in the Single Market, which entails freedom of movement. We would however be in an improved position in two significant respects (in large parts delivering what David Cameron attempted but failed to secure in his renegotiation with the EU in 2016).

Under Common Market 2.0, the UK:

  • Would have a qualified but unilateral right to suspend any of the “Four Freedoms”;
  • We would have the right to impose restrictions on freedom of movement in the event of serious economic or social difficulties
  • Would be released from the EU’s “non- discriminatory” restrictions meaning new powers to better manage migrant workers.

First, we would have the power under Article 112 of the EEA Agreement to take “Safeguarding Measures”. This ‘safeguarding clause’ allows an EEA EFTA state to unilaterally take ‘appropriate measures’ in the event of ‘serious economic, societal or environmental difficulties of a sectoral or regional nature liable to persist’. This means that if immigration reached extreme levels, we would have the power to impose restrictions.

If used, this safeguard clause would not have to be the blunt instrument that some fear. For example, if ‘difficulties’ arose of a ‘regional nature’ it might be possible to restrict free movement in a particular region while keeping things as they are in other less affected areas. This means that if Scotland wanted to continue freedom of movement on current terms it
would be able to whilst parts of England under particularly heavy strain could implement safeguard measures. Practically, this might involve giving priority to UK nationals in job centres in certain regions or by reducing the entitlement to social security payments that new migrants could receive in certain areas of the country.

Article 113 of the EEA Agreement allows for such a renegotiation between the UK and the other EEA countries, in order to establish a long-term solution. The invoking party must call a conference and seek to resolve the underlying issues which led to the measure. This is done via the offices of the Joint Committee. If the negotiation breaks down, Article 114 permits the other EEA states to take proportionate counter-measures but only those “strictly necessary to remedy the imbalance.”

It is important to note that such a safeguard power might only be used in extreme circumstances, but is nonetheless an important power that the UK would benefit from.

Second, we would be able to exploit opportunities in existing rules. Freedom of movement, contrary to popular belief, is not an absolute right. After three months EEA nationals in other EEA countries need to be in work or have sufficient means to support themselves. If they do not, their right to reside may be revoked. Some EU countries already follow existing rules more strictly. For example, Belgium applies the existing rules after a six- month period and other countries such as Spain and Germany have imposed restrictions consistent with this principle.

Of course, we can also do more to apply the Single Market rules that the UK is already party to. Examples of the policies that other countries inside the Single Market have adopted include restricting public sector jobs7 to nationals only and requiring migrants planning to stay longer than a few months to register upon entry 8 with the relevant local authority. As former Home Secretaries Alan Johnson and Charles Clarke have advocated, we could prevent recruitment agencies advertising abroad and, in high unemployment sectors, new jobs could first be offered to local unemployed people. A national identity system would establish secure digital identities for everyone, and make it easier to identify illegal migration. We could also reform the posted workers directive 10 to ensure that companies bringing in workers from abroad pay at the local rate. Finally, we should establish a well- resourced and focused migration impact fund to help local communities manage the impact of rapid population change. A total of £35 million was available through the fund for each of the financial years 2009-10 and 2010-11.

This last paragraph is indeed the way forward – and doesn’t require leaving the EU. It can be combined with measures addressing the conditions for migration to the UK from outside the EU, which is where the bulk of migration to Britain actually comes from, regulated by national, not EU rules. The EEA safeguards are actually limited in scope, require ongoing review, have only been used once (by Liechtenstein) and permit counter measures. That leaves UK citizens in other EU countries vulnerable. Far better to use the existing EU safeguards we never used, address non-EU migration and take domestic measures. Read more here. 

Common Market 2.0 would enhance our national sovereignty

Under the Common Market 2.0 proposal, the UK would have:

  • A voice in the consultation process of the proposed new EEA law (indeed, merely consultative)
  • A vote on the EEA Joint Committee where unanimity is required
  • A domestic right of refusal to implement new EEA law into its own domestic law

Common Market 2.0 would restore policy- making power in a wide variety of areas, end direct effect and direct applicability of European Law, ensure British influence in theshaping of Single Market regulations and end the jurisdiction of the ECJ. Contrary to how the EEA is often misrepresented, the UK would have a voice, vote and right of refusal over proposed new EEA law.

One treaty – two independent jurisdictions The EEA Agreement is not ‘EU’ law, it is its own stand-alone body of international law which covers two separate and independent jurisdictions (rather like law covering the whole of the UK covers the separate jurisdictions of the UK). This means as a continuing signatory state to the EEA Agreement, the law would actually be “our” law, because it would belong equally to all the contracting parties irrespective of whether they are EU or EFTA member states. Just as EU law is currently “our” law because it belongs equally to all the contracting parties – and is adopted with all of them having a full say. But EEA law follows EU law, voluntarily in theory but unavoidably in practice in almost all cases. This is because the whole point of the EEA is that the non-EU countries involved have agreed to enact legislation similar to that passed in the EU, notably in the areas of consumer protection, environment, company law, social policy and statistics.

ECJ Jurisdiction ends

Under Common Market 2.0 we would still leave the oversight of the ECJ but would come under the jurisdiction of the EFTA court. The EFTA Court is a separate and independent court covering a separate and independent jurisdiction. And contrary to what many believe, except for decisions pre-dating the EEA Agreement in 1994, the EFTA court is not obliged to “follow” the decisions of the ECJ. This again is similar to how the English courts are not obliged to follow the decisions of the Scottish courts.

The EEA Court does defer to the ECJ. In Case E-18/11 Irish Bank Resolution Corporation Ltd v Kaupþing hf the EFTA Court noted that the objective of establishing a homogeneous European Economic Area can only be achieved if EFTA and EU citizens and economic operators enjoy the same rights in both the EU and EFTA pillars of the EEA. In practice it is the ECJ that leads, and exclusively so when it comes to the interpretation of legislation adopted by the EU, which is at the origin of EEA law.

Although highly authoritative; EFTA rulings are not legally binding on the EEA EFTA states and cannot be imposed. The UK would have one-in-four of the judges on the EFTA court (and would likely hear every case) in contrast to one-in-28 on the ECJ. Unlike ECJ rulings, the EEA EFTA court respects national sovereignty and the legal supremacy of the EEA EFTA states.

The EFTA Court’s Statute and its Rules of Procedure are modelled on those of the ECJ. The EFTA Surveillance Authority (performing an equivalent role here to the European Commission in the EU system) may bring an action for breach of EEA law before the EFTA Court. If the Court finds that an obligation has not been fulfilled, the EFTA State concerned must terminate the breach without delay.

The EFTA Court is competent for the settlement of disputes between EFTA States regarding the interpretation or application of the EEA Agreement. Judgments in direct actions are final and binding, and the parties to the dispute are required to comply with them. Like the ECJ, it also has jurisdiction to give judgment in the form of an advisory opinion on the interpretation of the EEA Agreement upon a request of a national court of an EEA/EFTA State. The referring national court will then decide the case before it based on the EFTA Court’s answer. Judgments in the form of an advisory opinion are not legally binding on the national court, but in practice they carry the same force as the preliminary rulings rendered by the European Court of Justice under Article 267 TFEU.

Voice, Vote and a right of refusal

Firstly, outside the EU and under Common Market 2.0 we would restore policy-making power in vast areas including agriculture (but given how important our exports to the EU are in this sector, we’d have to follow the EU’s phytosanitary rules, consumer protection standards, and agree on an identical or similar system of subsidies – as a higher level would be deemed to be unfair competition and a lower level would mean our farmers can’t compete), fisheries (similar, as we export nearly 80% of the fish we catch, mostly to the EU), foreign and security affairs (where unanimity applies in the EU anyway, so unclear what you mean by “restoring power”),
justice and home affairs (where what matters is not so much policy-making, but access to the cross-border law enforcement instruments such as Eurojust, Europol and the European Arrest Warrant, helping us enforce our own laws) and taxation (where unanimity applies in the EU anyway, so unclear what you mean by “restoring power”).
This would mean for example that we would leave the Common Fisheries (not so simple, read more here) and Agricultural Policies. (Not so simple, read more here.

A genuine voice

Secondly, we will have considerable influence over the initial shape of new EEA legislative proposals because the EU is obliged to consult all EEA EFTA states on any new legislation. EEA EFTA state experts participate in the Commission’s preparatory work and have representatives on policy-shaping committees as well as having observer status in the EU’s various institutions. (But these are all advisory – there will be no UK vote where the legislation is actually amended and adopted: the Council of ministers and the European Parliament.) Furthermore, the UK would regain its seat at global bodies such as the WTO. This means we will actively be able to shape global standards that are the basis for many EU and EEA laws (but with less influence: the EU, with its clout as the world’s largest market, has much more influence around the WTO table).

A genuine vote

Thirdly, if an EEA EFTA state is not satisfied with a proposed Single Market law they can contest the relevance of new EEA law to the functioning of the Single Market and seek to secure changes, adaptations or derogations. This occurs through the EEA Joint Committee where representatives from the EU and EEA3 meet to “decide” on whether to ratify the proposed new EEA law. New EEA law is only incorporated into the EEA Agreement with the unanimous agreement of the EU and the EEA EFTA states (unlike in the EU Council where voting is on the basis of a qualified majority) which mean that the UK would have genuine influence over new EEA law. This process yields results. For example, Norway obtained derogations from 55 legal acts and Iceland from 349 acts up until June 2011.

A genuine right of refusal

Finally, we would no longer be committed to ‘ever closer union’ (see above why that is a red herring) and the imposition of EU law (a loaded term for legislation we participate in adopting. Do you refer to the “imposition” of UK law on, say, Yorkshire?) into UK law through ‘direct effect’, and ‘direct applicability’ would end. Indeed, because of this, the UK Parliament would actually be required to incorporate EEA law into British law meaning genuine democratic oversight of the proposed new EEA law is achieved by the EFTA states’ own Parliaments. 

EU single market law is usually in the form of “directives” which similarly need transposition into national law through national legislation or Statutory Instruments. And before any EU directive is even adopted, there is an 8-week period for national parliaments to examine a proposal before the Council begins deliberation on it: it’s the UK’s fault that it doesn’t do what some other national parliaments do and mandate their ministers ahead of the Council meetings.

Crucially these new EEA laws will only take effect if they are incorporated into UK law by Parliament precisely because the ability of the EU to impose law on the UK ends at Brexit and the EEA Agreement “ringfences” the national sovereignty of non-EU signatory states. This means the EFTA states maintain (and have used) a domestic right of refusal. For example, Norway took five years to implement the EU ‘hygiene package’ of regulations and nine years to implement the ‘Third Energy Package’. Iceland is yet to do so. For example, Norway’s refusal to implement the ‘Third Postal Service’ in 2011. This is an extreme measure and rarely used because the purpose of the EEA legislative process is to achieve legislation by consent and not imposition and generally speaking, it does so. But it also means the UK would gain a ‘right of reservation’ over any new EEA laws it currently lacks as a member state of the EU. Under Article 102 of the EEA Agreement the EU may take reasonable countermeasures including suspending that particular part of the EEA, but an EFTA country can still refuse to implement a piece of EEA law because its sovereign right to do so is “ring-fenced” by the EEA Agreement.

A few cases of delay (as also happens in the EU for the transposition of directives into national law) or even fewer of outright refusals risking counter-measures (very rare, even within the EEA) are not in practice very significant. And if they became numerous, there would be a major problem – for us too – in the operation of the system.

UK payments would reduce significantly

It is widely stated that the UK would pay around 64% of our current contribution to EU budgets under an EEA/EFTA-based Brexit (based on the fact that Norway pays £140 per capita per annum vs. the UK’s current £220 post-rebate). Yet this is misleading. Norway makes annual contributions of €450m to cover the cost of Norwegian participation in joint programmes, schemes and agencies, and pays a €50m membership fee to EFTA. But it also makes €390m in voluntary grants via EEA Grants Scheme. What is most notable about this EEA Grants Scheme – other than it being a voluntary “goodwill” scheme – is that it is calculated on the basis of the Norway’s per capita GDP. If the UK decided to follow a similar scheme, Norway’s per capita GDP is about $76,000 per year whereas the UK current GDP is $39,000 per capita, meaning the UK would pay close to half of that figure.

It is therefore reasonable to expect that the UK could negotiate a figure that is considerably lower than 64% (and maybe as low as 50%), bringing our annual contributions well south of £5bn per annum.

Put this into perspective: only some 2% of public spending is done jointly at European level and it includes many things where spending jointly saves money: research programmes, joint technical agencies (such as the medicines agency, the air safety agency etc), space (Galileo) and much more that we will have to duplicate and finance separately if Brexit goes ahead. It in any case comes to much less than the economic costs of Brexit. So, to quote “savings” on our budgetary contribution as an advantage is uncomfortably close to what was on the side of a certain red bus. We should not play that card!

A negotiated customs arrangement would mean the Irish backstop would not need to be activated

The biggest concern for all MPs (all? really?) regarding Theresa May’s Withdrawal Agreement is the Irish border backstop proposal, due to the fact that the UK cannot exit the arrangement – should it be required – unilaterally. This is an unprecedented surrender of sovereignty. (Only if you object to us respecting the Good Friday Agreement, which we entered into as a sovereign country!)

EFTA countries are not in the EU customs union (customs remain a domestic issue for the EFTA states) and are therefore able to negotiate their own trade deals. This should be the long-term aim of the UK. (Really? Why? See earlier criticism.)

But to ensure a frictionless Irish border – and therefore remove the need for the Irish backstop– the UK would also need a derogation from the EFTA agreement in order to secure a customs arrangement.

Leading QC George Peretz makes clear that:

There is no reason in principle why the UK could not combine a hybrid “Norway” solution (membership of the EEA through EFTA) with a customs union with the EU. The customs union means that the UK would continue to benefit from the EU’s 50 or so free trade agreements. It would be necessary to negotiate a derogation from the obligations arising under Article 56(3) of the EFTA Convention (i.e. the requirement that a new EFTA member to apply to join EFTA/third country trade agreements). But given the wording on 56(1) there is no reason why that should be problematic from the point of view of the EFTA States who would have to agree that.

It just adds to the list of things we’d have to negotiate with other countries, including the EEA countries, at our peril.

Leading Brexit campaigners supported an EFTA-based Brexit ahead of the referendum campaign

Support for Common Market 2.0, under its various banners, has come from across the House of Commons and across the Brexit divide. Conservatives and Labour politicians are working together in the Norway Plus group, and 76 Labour backbenchers defied the whip in June 2018 to back an EEA-based Brexit in what was the largest rebellion in the history of the Parliamentary Labour Party.

And a number of prominent Leave campaigners – including Daniel Hannan, Nigel Farage and Owen Paterson MP – all consistently advocated staying in the Single Market during the campaign.13

Daniel Hannan MEP said:

Norway and Switzerland, all of these countries have completely free trade with the EU, and by the way, I can’t help noticing they’re doing pretty well.

Absolutely nobody is threatening our place in the Single Market.”

Nigel Farage MEP said:

I hear people say “Wouldn’t it be terrible if we were like Norway and Switzerland? Really? They are rich, they’re happy and they’re self-governing countries.

Norway, Iceland and Switzerland do pretty well.” “Norway’s have no ties in terms of their foreign policy, with their fishing industry… They are opted out and exempted from all of the things that make the British mad.

Owen Paterson MP said:

Only a madman would actually leave the market.

It’s true that various Leave campaigners offered a range of different views on what Brexit entailed, but that’s more a reason to question Brexit than to endorse the view of discredited Brexiters.

3. A prosperous future for the UK

Trade

Common Market 2.0 would secure the prosperity of the UK through continued membership of the Single Market and a continued customs union arrangement with the EU. This option is the only one that can maintain frictionless trade with our largest trading partner. Any other option, at least until technological solutions can be found, involves an increase in trade barriers and would likely harm our economy, putting jobs at risk.

Continued membership of the Single Market ensures tariff-free access to the EU and the other EEA EFTA states. The government’s proposal by comparison only includes an aspiration for tariff-free access. This option would guarantee it as a treaty right under the EEA Agreement.

Membership of the Single Market would, along with some form of continued customs arrangement and no tariffs, ensure that there are no additional border checks. This is vital given the volume of UK trade with the EU. For example, 2.6 million freight trucks passed through Dover in 2016. Any additional paperwork such as Rules of Origin Declarations will be costly for firms and any additional checks could lead to disruptive and costly delays. Additional costs could put jobs at risk.

It is essential we maintain full participation in the Single Market in order to protect Services, which make up about 80% of the UK economy. Common Market 2.0 delivers on this. Any additional barriers will raise costs and put jobs at risk. For example, the UK’s highly successful Financial Services industry relies on its financial passports which ensures that they can operate across Europe from the UK. The current Political Declaration is unlikely to maintain current trading terms in services as it points towards leaving the Single Market, which would risk businesses moving to other parts of Europe.

Finally, once we have agreed new frictionless customs arrangements with the EU, we will be able to explore the potential for greater flexibility in VAT rules and rates.

Yes. If we go ahead with Brexit and want to attenuate the economic damage, then staying in a customs union and participating in the single market will help. But it does mean following rules that we no longer shape, losing influence and sovereignty.

Workers’ rights

A No-deal Brexit and the current Prime Minister’s deal put British workers’ rights at serious risk. The commitments within the Prime Minister’s deal to protect employment law are unenforceable and weak, and are excluded from the legal measures that bind the rest of the agreement.14 Those arguing for a No-deal Brexit have spoken openly of the desire to see wholesale deregulation, which would include watering down labour standards.

Common Market 2.0 leaves us open to maintaining the current rights and protections we enjoy, as per the high EU labour standards currently in place. It is these rights, such as the working time directive, rights on annual leave, equal pay, maternity and parental leave, anti-discrimination and even health safety laws, that British workers rely on to live a good quality of life. Remaining a member of the EEA would allow for the implementation of EU employment-related regulations into UK law, ensuring British people could still benefit from
these protections.

Common Market 2.0 allows us to leave the EU as the British people have directed, but maintain essential employment protection ordinary working Briton’s rely on.

Citizenship Rights

There is no concept of “citizenship” in the EEA Agreement and the EU Charter does not apply. The EEA Agreement is an economic treaty, and not political one. However, Annex V obliges EFTA state contracting parties to respect the Citizenship Directive rights of EU citizens, and also to extend equivalent rights to their own subjects and other EFTA state citizens even though they are not themselves citizens of the EU. While this would not equate to the continuation of EU citizenship, which will end at Brexit, it should be of considerable comfort to UK citizens anxious about losing key citizenship rights such as free movement, residence and healthcare.

Standards and regulations

Those backing a No deal Brexit have spoken openly about their desire to remove the UK from European standards and regulations. This mean chlorinated chicken from the USA, and unsafe appliances and toys from elsewhere.

Common Market 2.0 is the only plan that can ensure frictionless access to European markets, maintaining the standards that British consumers expect. It will keep identical or equivalent regulations meaning no additional costs to business and no additional paperwork. This is vital for the around 2.6million freight trucks passing through Dover.

This plan would also mean that the UK would regain its seat at global bodies such as the WTO. This means we will actively be able to shape global standards that are the basis for many EU and EEA laws.

Common Market 2.0 would give the UK more control, deciding what is best for the UK.

Participating in EU agencies

The EEA3 States participate in the agencies below through decisions of the EEA Joint Committee. In addition, bilateral agreements with the EU ensure the participation of individual EEA3 States in several other EU agencies. The EEA3 participate in numerous agencies and programmes, including REACH (Chemicals), EMA (medicines and pharmaceuticals, environment, food safety, pensions, securities and markets, network and information security, railway, maritime and aviation safety). The EEA3 also have the option of joining programmes like Erasmus, Horizon 20/20, Copernicus (environment), European satellite navigation systems (Galileo), Connecting Europe Facility (CEF) dealing with telecoms and broadband.

This means, the UK would have the option of remaining in the agencies and programmes that we want to. This would include areas that the Prime Minister’s current deal fails to secure continued engagement in – Galileo being the most obvious example.

No. The term “participation in” agencies and programmes is not the same as “membership of”. We could ask to participate, but have no say in running them, and UK firms may not get the ability to tender for their contracts.

Environmental

Current members of the EEA have agreed their ‘determination to preserve, protect and improve the quality of the environment and to ensure the prudent and rational utilisation of natural resources on the basis of the principle of sustainable development’.

In practice, this means all EFTA EEA states commit to agreements on water, air, chemicals and waste, and the equivalent environmental protections as EU membership (while no longer adopting those rules).

Industry and procurement

The EEA states come under the same state aid rules as EU members. (Indeed!) These state aid rules prevent governments giving any business an unfair advantage that would distort trade. Such rules do not prevent governments from nationalising already privatised industries or prevent the state from setting up government backed alternatives to privatized industries. (Correct.) There are no policies in any of the major parties manifestos from the last election that current state aid rules would in any way curtail. True inside the EU too – we do not need to leave to achieve this!

As Norway has shown, it is possible under existing rules of the EEA for the state to play a greater role in the delivery of services. For example, the Norwegian government operates its domestic railways (and the Austrian Federal government operate the one railway line in Liechtenstein). The Norges Statsbaner AS, the Norwegian State Railway company, the government owned operator of the railways, was established in 1996, after Norway entered into the EEA Agreement (when a larger railway company was split into separate state-owned operation, administration and inspectorate bodies).

In the EEA, state aid is monitored by the EFTA Surveillance Authority, meaning determinations are made by EEA members through a separate, parallel structure to that which monitors state aid in the EU (applying the same basic rules). The EFTA working group on state aid meets when required to determine the specifics of how it will be interpreted within the EEA, and is the means by which discussions on state aid between the EEA and the EU are conducted.

Digital

British business, not least our vital services industries, rely on the free flow of data across national borders. Data flows freely within the EEA and EU, and both the EEA and EU grant ‘adequacy’ agreements with third countries to allow the international transfer of personal data to countries outside of these areas. As a member of the EEA, the UK would be covered by the existing data agreements and there would be no need for a separate agreement, meaning frictionless data flows, benefiting British business.

Yes, but it’s another case of us ultimately having to follow EU rules whilst no longer having a say on them. Far better to remain and have a say!


The original Common Market 2.0 document is available here

One Comment

  1. Well done Richard.
    The only serious policy after a no-deal Brexit is not the Brexiteers’ fantasy free trade but a really tough protectionist policy to rebuild industries and agriculture at home (less efficiently than importing from abroad, of course). It would require severe rationing of essentials, especially food.

    North Korea could advise. The population will start to fall sharply anyway after Brexit owing to the sudden disruption of current supply chains (cf the CIS after 1991). That’s what the Brexiteers are hoping for, of course.

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