Brexit Brief: EEA Back in the Spotlight

Posted on 17th May 2018

The State of the Union

The UK is on the verge of a constitutional crisis after Holyrood poured scorn on the government’s EU withdrawal bill by rejecting the legislation 93 votes to 30. The ongoing dispute between the Scottish and UK governments centres on the management of EU powers that will return to the UK after Brexit. Nicola Sturgeon, First Minister and Scottish National Party (SNP) leader, wants powers concerning devolution to be passed entirely to the Scottish Parliament but the UK wishes to maintain some element of control. While the vote is not legally binding, it will force Theresa May to take a position on the outcome which could risk exacerbating an already strained relationship. May will have to decide whether to cede to Holyrood’s demands and grant concessions on returning powers or impose power-sharing plans on Scotland. The latter is likely to intensify Ms. Sturgeon’s ambition for a second Scottish independence referendum.

The situation has been further aggravated by recent developments in Northern Ireland. According to recent polling, the ongoing standoff between the UK and EU regarding the Northern Irish border has galvanised support for a united Ireland. This week, Theresa May responded to Tory MP Jacob Rees-Mogg’s assumption that the UK would win a border poll by warning him that it wold be risky to take the politics of Northern Ireland for granted. The exchange prompted Sinn Féin, which aims to unify Northern Ireland with the Republic of Ireland, to propose its own referendum on leaving the UK. On the bright side, at least Mrs. May has not incurred the wrath of Wales. After months of talks, the Welsh assembly has finally voted in favour of the EU Withdrawal bill.

Brexit white paper to lay out future of UK-EU relationship but omits key issue

Brexit Secretary David Davis has announced the publication of a Brexit white paper that will provide a comprehensive overview of the government’s desired partnership with the European Union post-Brexit. Released ahead of June’s European Council summit, Davis described it as “our most significant publication on the EU since the referendum”. The announcement of the white paper will be a welcome development in the Brexit process, particularly for Brussels, which has complained throughout the negotiations of a frustrating lack of detail on the part of the UK.

However, any hopes that the white paper will provide a meaningful solution to the Northern Irish border are misplaced. There is still tension amongst Theresa May’s cabinet and her Brexit sub-committee concerning a preferred customs arrangement. Criticisms of both the proposed customs models are continuing to stifle progress and the models are consequently unlikely to feature in the report. David Lidington, the Cabinet Office minister, has admitted that it could take weeks to reach a consensus on a customs agreement.

Currently there are two workable solutions for a future trading relationship with the EU – the “max fac” model, which involves using technology to police the border, and Mrs. May’s favoured option, the customs partnership model, which would see the UK collect taxes on behalf of the EU. The process has been further slowed down as the government seeks to obtain legal advice on both models, sparking fears that the customs battle will run and run.

The third way: EEA back in the spotlight

While the government squabbles over its preferred customs plan, pro-European politicians are making a case to remain in the European Economic Area (EEA). The UK government is of the view that once the UK leaves the EU, it will automatically leave the EEA, a position that is still subject to legal dispute. Last week however, The House of Lords voted in favour of British membership of the EEA once the UK leaves the EU, and more recently, former Labour politician David Miliband has made the case to remain part of the EEA as a “safe harbour” option.

Mr. Miliband believes that the so-called “Norway” option would provide the UK with a structured trading relationship with the EU in goods and services. Norway has already indicated that it remains “open” to the possibility of the UK’s EEA membership after Brexit, highlighting that it would provide the ancillary trading bloc, which also includes Liechtenstein and Iceland, with greater bargaining power and greater access to UK markets. Yet retention of EEA membership has been criticised by both Theresa May and Labour leader, Jeremy Corbyn. Both have argued that EEA membership will leave the UK in a weak trading position because it would have to make financial contributions and accept EU laws without influence. It would also mean that freedom of movement still applies, which the May government strongly opposes. While the EEA option seems like a non-starter, many feel that the deadlock over the government’s current customs suggestions may ignite public interest in the proposal.

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