Thursday, 22 September 2016

Can Britain survive without access to the European Single Market?

By September 2016, Remainiacs continued to demonstrate their on-going ignorance of the real world and, in most cases, their desperate desire to have a second referendum to reverse the actual referendum of 23Jun2016.  Remainiacs’ preferred strategy is ‘deliberate over-complication’, a rather sinister way of deliberately confusing choices with consequences to perpetuate Project Fear.

In turns out that Project Fear did have an effect.  Precisely the opposite effect as intended, as it turns out.  In a speech to his party’s conference on 20Sep2016, Liberal Democrat leader Tim Farron (who?) admitted that amongst his ‘undecided’ friends, the turning point was when Obso announced his ‘punishment budget’.  At this point, his ‘undecided’ friends chose to vote leave.

Sadly, Remainiacs show no sign of understanding this.  Their current polemic is to perpetuate Project Smear by stating explicitly that Britain cannot survive without access to the Single Market.  So, because this assertion comes from Remainiacs, it’s worth asking the question: really?

The media show presents the usual idiotic binary choice:

A good place to see such ‘debate’ amongst Brexiteers (and realistic ex-remainers) is the new forum,

On 14Sep2016, Douglas Carswell MP - whose credibility has always been easy to challenge, especially when he recently waded into a non-argument about whether the sun or moon causes tides - started the debate off by suggesting a distinction between being a member of the Single Market or merely having access to the Single Market.

Access clearly doesn’t require membership. Countries around the world trade with the single market. Many do so freely, with no tariff barriers, via bilateral free-trade agreements. Britain can do the same. We don’t need to be part of the single market to trade freely with it.

On 15Sep2016, Tory remaino-realist Iain Anderson responded.  The sum of his contribution is a deviation the Remainaic/Project Fear script.  He accepts that Carswell’s division between “membership” and “access” has merit, but doesn’t appear to recognise that it is an artificial distinction in the current narrative of the European Union/Remainiacs.  However, he wants some sort of access to the Single Market.  His key example is the passporting rules relating to financial services.  He cautions that there is no simple, easy answer, citing the example of the unfinished Canada-EU deal (“CETA”).  In particular, CETA offers a lower level to access to the Single Market than the UK’s current access via membership of the European Union.  His conclusion is to carry on negotiating: with elections pending elsewhere in Europe in 2017, now is not the time for conclusions.

On 16Sep2016, business Brexiteer - and clearly one of the Brexiteer establishment - Richard Patient waded in.  Nonsense, says Patient of Anderson.  Wanting access to the Single Market is “groupthink”.  Patient wrote:

First of all, there are plenty of businesses whose owners voted Leave to get out of the single market. Dyson volubly complained when single market regulations imposed a power output for vacuum cleaners that helped his German competitors and didn’t do anything to help consumers. The tech firm Ghost voted with their feet, and moved to Singapore, as a direct result of the new single market VATMOSS regulation. And all the SMEs who waded through (or more than likely just ignored and got caught later) the 2,500 single market regulations every year will tell you that the single market is neither ‘highly desirable’ nor ‘utterly vital’.

In truth, the single market was always a misnomer. It should have been called the Single Protectionist Zone or the Single Regulatory Regime. The single market was never about opening up markets, it was always about imposing rigid common, anti-competitive, standards.

And in the services sector, the single market was unfinished at best, and not really helpful at worst.

Take the City. [...]  The EU already has ‘regulatory equivalence regimes’ to allow non-EU financial services firms to trade in the UK, similar to the passport mechanism. This is set to be expanded under the new MiFID II regulation, due to come in at the start of 2018. Given the UK already complies with EU financial regulations, ‘regulatory equivalence’ should be all but automatic for Britain. And that’s before taking into account the EU requiring access to markets in the City as well.

(my emphasis)

Patient’s comment echoes my own thoughts about the purpose of “solidarity” within the European Union, in particular the game-theory/prisoners’-dilemma/red-blue-game feature of such solidarity.  So I’m drawn to Patient’s comments.  But, as Patient also says, “The search for evidence starts now.”

Actually, shouldn’t the search for evidence have started prior to the referendum being declared?

Well, yes. It should have started years ago.  And so I turn once again to Dr Richard North and the Leave Alliance.

Following the Flexcit plan, North has started to publish a series of monographs for the Leave Alliance, the first one entitled “Single Market participation and free movement of persons”.  North prefers the European Economic Area over alternatives (i.e. the Swiss model, the WTO model or the Australian process).  North recognises the imperfections in the EEA (see Flexcit plan “phase three: a genuine Single Market’), yet sees it as the best short-term position for UKGov.  For North, the EEA is not a take-it-or-leave-it option as both Extreme Brexiteers and Remainiacs want to present via the blogosfear.  The opening paragraph of the monograph:

“This note sets out possibilities for a solution to the conflict between post-exit participation in the Single Market and limitations on freedom of movement. It shows that, contrary to claims by the Commission and a widespread belief, freedom of movement provisions are negotiable, and that a legal base within the EEA Agreement exists for a settlement.”

The Leave Alliance declares that “Opposition to the EEA is wholly irrational.”  In a nutshell:

What critics of the EEA miss is that the EEA agreement is not just an agreement on single market participation. It is an interface mechanism with its own infrastructure for constant review and reform for the purposes of entering special conditions, exemptions and reservations. And so though we may be adopting an agreement that someone else has, there are mechanisms to tailor the agreement to the needs of the UK, be that enhanced controls over freedom of movement or better consultation on regulations.

How to reconcile North from the sceptics of the EEA/Single Market?

I think the truth lies in between Patient and North and, in any event, I think there are multiple ways to the same broad range of objectives for both UKGov and EU.  North offers ‘in-scope’ lines of negotiation; Patient offers ‘beyond scope’ positions if the ‘in-scope’ lines fail to produce fruit.

The Leave Alliance sets out how ‘in-scope’ could work, and it all sounds politically realistic to me as at today (ignoring the stupid polemics, of course):

Moreover there is a structured means of reviewing the EEA agreement. Entering some custom final agreement means we have to persuade the EU to open it up for review in the future. The EEA already has review systems in place so we can revisit things we get wrong.

As to immigration, the EEA does have safeguard measures on freedom of movement and we can leverage them into a more formal quota system within the EEA framework. That would be a strong start to immigration reform. This would be sufficient if we use the opportunity to also tackle non-EU immigration issues. We will still need a fairly high turnover of EU people and we do not want to close down opportunities for UK citizens living in the EU. One thing the UK does not want to do is cut its nose off to spite its face. Full control is neither necessary or desirable and the advantages are slender.

There is every reason to believe the EU would be amenable to EEA membership. Firstly a messy Brexit is damaging to the EU economy as a whole. Secondly, as discussed, a bespoke system is time consuming and will require ongoing use of diplomatic runtime for the next decade. Using that which is already in place requires only a marginal increase in resource. The alternatives to the EU require a gargantuan commitment of intellectual resources right about the time the EU needs to be directing its trade expertise elsewhere. Not least with the alleged imminent failure of TTIP and CETA.

The EU can either concede on Freedom of Movement for the sake of a cost effective Brexit or we can create risks and complications that serve nobody. There is no reason why we should accept freedom of movement as an EU red line since every other member wants similar concessions and at some point in the future the EU, if it wants to survive, it will have to bend to this dynamic. Nobody is happy with freedom of movement as it stands and a refusal to reform it is more likely to see others moving toward exit than any special concession for the UK.

(my emphasis added)

I believe that UK can survive without access to the Single Market, but that the short-term costs of a “quick hard Brexit” are greater than a more pragmatic alternative that is within scope of existing treaties.  Both UK & EU need more useful, less polemic, negotiations before we get the point of questioning whether UK can survive without access to the European Single Market.

That said, UKGov needs to be ready to consider the “quick hard Brexit” in the event that the EU goes down the route of economic and political suicide, which is the polemic that some European politicians are happy to consider.

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