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There is a No Deal Option – Its Called the EEA

Brexit No Deal Option
Written by Rupert Darwall

We reproduce Rupert Darwall’s article from the Reaction website. Rupert was one of the first to argue that a time-limited continuation of the UK’s membership of the European Economic Area would be preferable to the Government’s proposed two-year transition period.

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Has a British prime minister given a more abject performance than Theresa May in her interview Andrew Marr (BBC1 July 15th)? One moment she was telling Marr that, of course, ‘no deal’ is still possible. Less than a minute later, she was explaining that she’d dumped David Davis’s firmer line and her own Mansion House speech because Michel Barnier had deemed it unnegotiable.

Sticking with that would have risked what the Prime Minister called a ‘chaotic leaving,’ thereby signalling that, in her mind, no deal is not possible. A PM heading a split Cabinet pursuing vicarage-style diplomacy of being nice to the EU and hoping they’ll be nice back, foolishly agreeing to the EU’s sequencing on the budget payments, giving the EU a unilateral security guarantee in return for nothing, someone who prefers cookery books to history books, has led Britain to the cusp of the most humiliating agreement since Henry Addington’s capitulation to Napoleon in the Treaty of Amiens in 1802. Much of the debate on the Chequers Plan has been on the dishonesty of the Parliamentary lock on changes to the Common EU Rule Book on goods.

Even more obnoxious is the Government’s proposal to give the EU a non-reciprocal treaty commitment of non-regression in UK social, labour market, consumer and environmental regulation. The EU wants to prevent the UK from embarking on supply side to boost its competitiveness and lift chronically poor growth. To my knowledge, no other country has so constrained itself this way in an international treaty. It would see a Foreign Office lawyer in every Whitehall discussion on any supply side reform warning that Brussels might blow the whistle under the terms of EU partnership treaty. If the UK had been subject to such foreign interference in domestic economic policy, much of the supply side reforms of the 1980s and 1990s, particularly of the labour market, would have been still born.

Even though the Chequers Plan has bombed with the public, Theresa May’s opponents still have a credibility problem. The clock is ticking and gambolling towards a cliff edge is politically problematic. In this, the Prime Minister’s strongest card is to play up the weakness of her position: Absent an agreed deal, the UK will crash out of the EU with unfathomable consequences. In fact, this is untrue. If Eurosceptic opponents of the Chequers Plan realised it, there is a temporary port in the storm. Its existence has been deliberately suppressed by the Government, as knowledge would remove the Prime Minister’s last remaining card against her Leaver critics.

In yesterday’s interview, Mrs. May said that the two options the EU had given her were a Canada-style deal and what she called EEA-plus. The Prime Minister was not being truthful. The UK is and will remain a Contracting Party to the European Economic Area (EEA) Agreement unless and until it gives 12-months’ notice of its intention to leave under Article 127 of the Agreement. The agreement itself would need only minor textual changes, but under international law, there is no basis for the EU to resist those adjustments. Were it to do so, it would expose its bad faith in the negotiations and show its contempt for international law.

Defaulting to the EEA as the no deal backstop has two big benefits. First, it hits the reset button on the Article 50 and future partnership negotiations. There is no need for a bespoke transition period tailored to the EU’s demands. The promised money the UK was going to pay comes off the table, as does the wretched paragraph 49 of the Interim Agreement on the Irish border. The EU’s negotiating leverage would evaporate. A decision to default to the EEA would be a ‘sod off Michel Barnier’ day.

The second advantage is it gives the UK unlimited breathing space to get its act together. It is just a few weeks since the Brexit secretary’s resignation, but it’s abundantly clear that this Prime Minister, this Cabinet and this House of Commons are incapable of getting anything resembling an acceptable permanent arrangement with the EU. Better to be sure to be out of the EU on 29 March next year than let Brexit paralysis take hold and conceivably see an

indefinite extension of Article 50. Prudence would suggest taking advantage of the EEA safe harbour, enabling the Tories to regroup under a new leader to fight another day – after the next election on the basis of a proper mandate with a properly thought out plan.

Generally, the EEA gets a bad rap from Eurosceptics. That’s understandable when the EEA is assessed as a possible endpoint for the UK. But as a temporary phase as Britain leaves the EU, the EEA cannot be bettered. It is far superior to the transition period negotiated by the Government. There is no ECJ, no CAP and no Common Fisheries Policy.  Britain would be out of the Customs Union and the Common Trade Policy. Whereas the EU’s governing principle in the Lisbon Treaty is promoting the ‘ever closer union of the peoples of Europe,’ the EEA Agreement stipulates the commercial objective of promoting a ‘continuous and balanced strengthening of trade and economic relations.’

In part, Eurosceptics are suspicious of the EEA as it’s seen as a glide path into the EU. Flip it  around, and the EEA can serve as a smooth glide path out of the EU. It’s true that the EEA does not solve the Irish border question as defined in the Interim Agreement. But then there is no solution that satisfies its terms. Defaulting to the EEA is the Gordian knot approach to the problem and gives Dublin a strong incentive to resume the search for pragmatic solutions.

But, for many, free movement is the EEA killer. Theresa May’s transition agreement will provide unrestricted free movement, so the EEA as a temporary phase should be compared to the open-ended migration required by the Lisbon treaty. This highlights the fundamental difference between the EU and the EEA. As Wolfgang Munchau explains in the FT (July 16th), for Brussels, freedom of movement is not based on economic reasoning and is not necessary for a customs union or frictionless trade. ‘Freedom of movement should be understood as an instrument of political integration,’ Muchau points out. This does not apply to the EEA as the EFTA court is governed by promotion of an economic objective, not a political one.

The Chequers Plan crafts a pro forma Brexit by repackaging EU control in a different guise. Defaulting to the EEA is not a betrayal of the referendum or the Brexit promises contained in the Conservative party manifesto. On the contrary, it provides the best path to delivering them. Every sentient voter can see that the turmoil in the Conservative party and the failure of the Chequers Plan to win public support mean that full Brexit won’t be achieved in a single step. A PM who has invested so much political capital in pursuit of a deep and special relationship will find it hard to concede that the whole effort has been an embarrassing waste of time. Chalk that up as another benefit of exercising Britain’s rights under the EEA Agreement.

This article was originally published on the REACTION website on July 16 2018

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About the author

Rupert Darwall

Rupert Darwall is a strategy consultant and author of Green Tyranny (2017).