Brexit: Balancing Scotland, the UK and the EU
Yesterday morning I went along to the IPPR-hosted Brexit event featuring a keynote speech from the First Minister. More on that later. First, and to set the scene, it is worth thinking a bit about the options to be negotiated.
The Institute of Government last week published a helpful briefing paper called Negotiating Brexit, by Robyn Munro. The paper, from a wholly UK perspective, does three useful things: it sets out what will be negotiated, considers the options for the ‘terms of the divorce’ and, third, discusses the negotiation over the longer term UK-EU relationship thereafter.
Munro (p.3) identifies three sets of critical longer-term questions post withdrawal that will need to be resolved:
- What would be the UK’s degree of access to the single market in terms of goods, services and free movement of labour?
- What, if any, financial requirements would remain in terms of funds going to the EU (in return for different degrees of access), and what would be the extent of adherence to EU laws, and what if any influence would the UK have over EU rules and regulations?
- To what extent will the UK continue to participate in other beneficial programmes e.g. Horizon 2020, European structural Funding and the European Arrest Warrant?
While it is recognised and indeed perhaps likely (because there is no precedent) that the UK will end up with a bespoke negotiated deal, there are four widely discussed models commonly raised when discussing the UK exit from the EU. These are summarised by Munro (p.4). To paraphrase:
- Placing the UK within the European Economic Area (or the Norway model) – this would mean almost complete access to the single market [with restrictions on agriculture and fisheries] but in return free movement of people, budget contributions and acceptance of EU rules and regulations with minimal ability to influence those rules.
- The UK as a member of the European Free Trade Area, plus bilateral arrangements relating to specific services (the Swiss model) – this would entail access to single market for all non-agricultural goods, plus bilateral agreements for trade in specific services. The Swiss have also accepted free movement of people, an annual EU budget contribution and adaptation of relevant national legislation to those of the EU (but no influence).
- The UK could operate a bilateral free trade agreement with the EU (similar to that proposed for the EU with Canada and Singapore) – when these are ratified they will not involve free movement of people but will offer access to the single market in goods, less so in terms of services. They must follow EU rules and regulations but again cannot influence them.
- The UK operating through the World Trade Organisation (the least EU-based solution). This would involve the right to negotiated free trade agreements with other WTO members including the EU but prior to ratification the UK would need to offer favourable conditions to all those it sought to trade with. UK exports would also face the EU external tariff. Completely outside the single market, there would be no free movement of people.
These are all tricky options, even if we consider the UK as a coherent single voice in negotiations. The EU has its own interests and a range of internal voices chipping in to help form their negotiating position e.g. the opposing pressures that on the one hand seek to resolve the main issues quickly to end uncertainty versus specific domestic pressures to take a tough line pour encourager les autres. Second, there is the fundamental difficulty of the multi-dimensional nature of what is at stake – the single market, freedom of movement, the rights of non-members with access to the single market the non-trade aspects, and the procedures for dismantling existing laws, rules and regulations.
The third degree of difficulty is that the UK does not have a single voice, neither within the UK government, or, more to the point, across the UK. Scotland is in the vanguard in this respect, which was why it was so interesting to be at the meeting in Edinburgh and hear the FM’s current thinking.
There is of course actually a fifth model available to discuss once we consider Scotland – the so-called Reverse Greenland. Denmark is a member of the EU but it does not apply membership to its territory of Greenland. Could this principle be reversed with the UK outside of the EU but places like Scotland, Northern Ireland and Gibraltar either wholly within or partially remaining? At first sight, this seems difficult and not symmetric at all in terms of consequences and requirements to make it work.
The First Minister focused on the interests of Scotland – economic (including the demographic necessity of freedom of movement), democratic interests (reflecting the clear position of Scotland on the EU), social protection interests (defending workers’ rights), solidarity interests (global challenges and the necessity of international collaboration) and influencing interests (e.g something we lose if we only have associate access to the single market and the infrastructure of rules and regulations supporting it). These are the tests or areas she hopes to protect in the negotiations, recognising that ‘all options’ including a second independence referendum remain as possible outcomes to the negotiation. But can we reach a UK-wide agreement on the negotiating position before Article 50 is activated?
I found one of the most interesting things she had to say was the focus on the opportunities created by uncertainty. Apart from a few terse sentences that make up article 50 of the Lisbon treaty – there is really very little known about what might and can potentially happen next. This is why many people are coming up with new ideas and plans – some of which may not pan out or may be undesirable. But this surely is a time to be creative and innovative (and inclusive).
The other interesting thing was the stress on the need to understand why 17 million across the UK and more than one million Scots voted to leave – to understand the lack of trust and confidence in government. While this may be argued to be less of an issue in Scotland where trust seems to be higher than for Westminster government, it is the case that the FM sits at the top of an insurgency movement herself that reflects, in part, far wider forces at play (and not just in Scotland/UK and the EU). Political (and societal) norms appear to be in unprecedented flux.
Opponents argue that this is all about another independence referendum. True or not, a second independence referendum is far from straightforward. A referendum will only be proposed in the best expected circumstances and there is much work to do to overcome weaknesses in the 2014 platform, especially on economic issues; and this will be done in an increasingly hostile, uncertain economic environment. The medium term future looks much less promising if the Scottish Government’s record of economic competency is to be maintained (without at least risking more unpalatable political choices over scarce public resources). Even if new Chancellor Phillip Hammond relaxes the austerity straitjacket, any short run economic slow down or recession matters much more acutely to Scotland’s public finances than was the case before the 2016 Act. Seeking to simply govern well without mishap through this momentous period may be the best strategy. But who is to say what further bear traps await our politicians in the weeks and months ahead?