Leaving the EU

Gerald Holtham

Leaving the EU seems to open a period of great uncertainty for the UK. There are many roads it might follow but you would have to be crazy, reckless or both to follow most of them. The range of sensible choices is in fact quite narrow.

Let’s get down to practicalities. The UK cannot close an adequate deal with the EU in two years. There are too many complicated matters to sort out including financial obligations, Ireland and a range of collaborations: in police matters, security, academic and industrial research, atomic energy and more. Specific trade deals in goods, services and agricultural products are more likely to take seven years than two.

Businesses are unanimous that a crash-out with no deal would be disastrous, disrupting heavily integrated supply chains in industries like motor cars and accessories. From airlines to merchant banks there is concern and the start of a movement out of the UK to the continent. A few economists and politicians contest that a move to WTO status would be ruinous but the evidence is against them. Anyway, why take the risk?

It follows that an interim arrangement is required. It cannot be too bespoke because that would just push the problem of complicated negotiation to a new place without resolving it. The interim arrangement can only be hand-me-down. The obvious, perhaps the only, possibility is remaining in the European Economic Area (EEA), preserving access to the single market. It would involve paying a sub and accepting the rulings of the European Court of Justice, albeit over a more restricted area than hitherto. Doing so for a limited period of two to five years worries no one except Theresa May and some neuralgic Conservative backbenchers. It would require some freedom of movement of Europeans with jobs in the UK but does not imply acceptance of benefit tourism, the bogeyman of the right-wing press. Other important collaborations would remain in place.

Being in the EEA does not entail membership of the common agricultural policy or the common fisheries policy.  In the long run being out of those might be a good thing but it makes urgent the need to negotiate trade agreements for agricultural produce before leaving the EU or as soon afterwards as possible.  If those negotiations cannot be concluded before leaving, keeping the Irish border open entails remaining in the EU customs union during the interim period, since the single market does not cover agricultural produce or services. In the longer run the UK might wish to leave the customs union to negotiate its own bilateral trade deals but that would be after the interim period was complete and specific trade agreements had been negotiated with the EU to resolve the issue of the Irish border.

Freedom of movement of people across that border would mean that control over immigration, so dear to many in the UK, could be only ex post – we don’t stop you coming in but we throw you out if we find you’re illegal. Control could not be exercised at the border itself – at least not the Irish border. That simply extends an existing situation. Estimates of the number of illegal migrants in the UK range from 400,000 to over a million, most of whom will have entered on a valid travel document and stayed on.

In the further, post-interim future, there are a few more options but it seems unlikely that the UK could achieve the same access to the single market without customs formalities and regulatory inspections unless remaining in it as part of the EEA. While membership of the customs union could be a temporary interim arrangement, EEA membership could turn out to be permanent. Some payments to the EU for administration of the single market would therefore be permanent but the UK would not contribute to common agricultural policy. EEA membership would facilitate freedom of movement of UK nationals within Europe. Current EU law permits the UK to exclude EU nationals without a job or means of support and that ability is likely to be strengthened not diluted in future.

The political downside of this settlement is that the UK would be presented as a “rule taker” bound by single market regulations but no longer party to making them. EEA members are consulted on policies now and, as an important participant in the single market, the UK would be able to make strong representations. It would be in the interests of other countries to take account of those, at least sometimes. The European Court of Justice would still have a locus in adjudicating on trade matters between the UK and EU but would lose the ability to rule on other matters in the UK or on trade between the UK and third countries. The UK would also have repatriated control over agricultural support and, to some extent, over fisheries, although it would need to reach agreement with neighbouring countries on the latter. Since the single market does not cover tourism we could allow our beaches to become filthy again if we so chose or a future government decided it was too expensive to do otherwise. Other internal regulations could be altered too.

The UK could also regain some control of trade relations with other non-EU countries, although it will be hard-pressed to improve on the EU arrangements which it will lose on leaving the customs union, at least for a long time.

Is such an outcome worth all the trouble of leaving the EU and preoccupying the British government for between two and seven years? Arguably it is not but the referendum has taken place, the milk has been spilt. There is no point in crying over it or worrying about sunk costs. The objective must be to select the best trade off and the best outcome available from here.

If further consolation is required it lies in the fact that EU countries within the Euro area may wish to resume the march to ever closer union as this is widely perceived to be necessary to support the single currency. Whatever the merits of that, it is hard to deny that it runs counter to the insular instincts of many people in the UK. Britain would always be the awkward member looking for exceptions, derogations and special treatment. The EU and the UK are better off without that friction and annoyance. Of course the corollary is a certain loss of British influence in world affairs but a period of decompression and retreat from the “Greeks and Romans” hubris of the British governing class may not be bad for the country. The rest of the world is likely to cope with the loss.

It is also possible that the tensions created by those centripetal forces in Europe will see the EU evolve into an  arrangement of plural tiers with a noyau dur of the original six, perhaps minus Italy and plus Spain (with or without Catalonia). That could create a continuum of European association in which the British position would look less anomalous.

The words sovereignty and democracy have not been mentioned in the argument so far. The preoccupation with sovereignty among British politicians is the result of our political culture conditioned by a first-past-the-post electoral system. Win an election in the UK and a compliant civil service will attempt to implement your programme while you can safely ignore the opinions of the opposition. Go to Brussels and you find that everything is contested, no one does as they are told and everything has to be negotiated – a familiar situation to continental politicians used to the horse-trading of permanent coalition. What they regard as normal strikes our chaps as an unpleasant restriction on their freedom of action – and therefore an infraction of national sovereignty. Yet any international agreement is restrictive to some extent and necessitates supra-national methods of adjudication of disputes. A country can be sued under the rules of the World Trade Organisation. I am prepared to bet that no one in the British public will feel an iota more control when their “sovereignty” is returned in whole or in part.

As for democracy, the constituency of my birth routinely returns a Labour MP with a majority approaching 20,000. No one living there has had any influence on who forms a government at Westminster for over a century. They have the same influence over the composition of the House of Commons as they do over that of the House of Lords. Since they are mainly Welsh they also have not enjoyed national sovereignty for about 800 years. They mostly don’t miss it and much good it did them anyway under a quasi-feudal system. Yes, the EU would benefit from greater transparency and devolution of power but no more than the UK where local government has been eviscerated. Democracy and sovereignty are abused words. I have yet to hear an argument deploying them in the context of Brexit that has any merit. Surely circumstances should compel us to concentrate on real things not to reify ill-defined notions.

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