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UKAEL Essay Competition 2018

William Spence

The future EU-UK relationship will be like no other – a bold and bespoke new model is therefore needed

In her Florence speech, Theresa May set out her government’s aims for the Brexit negotiations: the UK wants a “new, bold and ambitious” free trade agreement unlike any other the EU has negotiated before.1 A Norway-style deal was deemed unacceptable, since this would involve adopting the rules of the Single Market with no say over their formulation. Similarly, a relationship mirroring the deal reached between Canada and the EU was rejected, as this would place undue restriction on mutual market access. Thus, the UK seeks a relationship based on a CETA-plus (including services) or EEA-minus (excluding free movement) model. By contrast, the EU insists “it is not possible for a third country to have the same benefits as the Norwegian model but the limited obligations of the Canadian model”.2
This essay explores whether there is scope for compromise between these two seemingly irreconcilable positions. A first section compares the CETA and EEA arrangements, and explains why neither model would suit the future EU-UK relationship. The second outlines a proposal for a bespoke model which builds on the relationship shared by Norway and the EU. Finally, the third section considers how this legal relationship might be practically negotiated.

1. Unsuitability of existing models
The two most oft-discussed existing models reflect highly different approaches. While CETA is a free trade agreement negotiated under Article 218 TFEU, the EEA is an extensive agreement between the EU and three EFTA countries covering the Single Market’s Four Freedoms. The EEA option would provide the UK with the degree of Single Market access it seeks, like EEA member Norway avoiding disruptive non-tariff barriers to trading goods and services with the EU. At the same time, outside the Customs Union, the UK, like Norway, could forge independent trade policies and benefit from exceptions for fisheries and agriculture. Norway, in return, applies most of the Single Market’s rules. It accepts free movement of people and contributes to the EU budget.
Yet, without new restrictions on immigration, these would represent unacceptable concessions for the government, for immigration was a cardinal demand of Brexit voters in the referendum. A Canada-style model might therefore appear preferable. The UK would be able to conduct an independent trade policy without having to accept free movement of people and the jurisdiction of the ECJ. However, this would entail lower market access than is currently enjoyed by the UK,3 and the lack of a robust ‘passport’ regime would jeopardise the contribution made by financial services to its economy (constituting 7% of national GDP).4 Given the government’s negotiating objectives, it is thus clear why Theresa May has rejected the EEA and CETA models.
The main question for phase two of the Brexit negotiations will be whether these models may be modified to reflect the unique historical relationship shared by Europe and the UK, which – as the next section will show – represents more than just trade.

2. A bespoke new model
The political objectives of ‘Brexiteer’ cabinet members seem more compatible with the ‘Canada-plus’ option, though this would entail greater UK economic disruption. Moreover, even if the Canadian model were upgraded to include financial services, a key UK requirement, a deep trade deal drawn along these lines would omit other desirable aspects of the EU-UK relationship, such as security or foreign policy cooperation. A ‘bespoke’ model based on the Norway arrangements would seem the most preferable alternative to the UK’s current relationship with the EU, for it would effectively maintain membership of the Single Market.
Modelling Britain’s future relationship with the EU on an ameliorated form of EEA membership would involve three elements. First, it would require the UK to abide by the EU’s regulatory rulebook - the unavoidable price of maintaining single market access on terms similar to those the UK currently enjoys. Assuming the strategic importance of the UK to the EU, the UK government might seek greater influence than Norway has now over how those rules are made in order to retain security and foreign policy benefits. Norway might, however, object to the UK’s achievement of greater influence, and this would imply a separate challenge to the EU, perhaps involving parallel negotiations with EEA members. Second, the UK would be obliged to continue making contributions to the EU’s budget and accepting some form of free movement – both substantive refusals of Brexiteers. Yet, control over immigration could conceivably be gained by requiring EU nationals to leave after six months if they have not obtained employment, restricting access to benefits during this period, and only extending settlement rights to those who have been offered jobs (as envisaged by article 45(3) TFEU).
Third, the relationship would require EU agreement on institutional oversight from an impartial organisation, since freedom from the jurisdiction of the ECJ represents a ‘red-line’ for Brexiteers. Yet, good governance requires UK citizens to enjoy rights post—Brexit to appeal to an authoritative body to interpret the terms of any agreement. The EFTA Court President has helpfully explained how “Britain could try to dock to the EFTA pillar’s institutions – the EFTA Surveillance Authority and the EFTA Court”.5 That Brussels has previously suggested a similar solution to Switzerland suggests the Commission might be sympathetic towards this proposal.
This legal solution provides a normative framework, yet Britain would first have to re-join EFTA; not a foregone conclusion, since Article 56 of the EFTA Convention requires Iceland, Lichtenstein, Norway and Switzerland to approve such a bid. With their approval, the UK could accede into EFTA, and Britain could seek access to trade deals negotiated between EFTA and third countries. Participation in the EEA would then require the consent of all the parties to the EEA agreement. These processes would be procedurally complex. Norway, for example, has voiced reservations about the UK acceding to EFTA, arguing that this would disturb the existing balance of power.6 And watchful EFTA and EEA states would likely require new UK terms to be applied to them too. Nonetheless, deft British diplomacy might achieve a solution.
From a substantive point of view, it is important to note that the EEA is a free-trade agreement rather than a customs union. Future EU-UK trade would therefore require (potentially intrusive) rules of origin checks. A bespoke Norway arrangement could hypothetically incorporate a customs union, but this is again unlikely to be accepted by Brexiteers, because it would entail the indefinite application of the common commercial policy they wish to escape.
More realistic, perhaps, is the possibility that a bespoke EEA agreement could include a small number of exceptions (for example in fisheries). Meanwhile, post-Brexit Britain would continue applying virtually all other EU regulations, thereby streamlining any rules of origin checks. This option would give the UK the access to the Single Market it needs, while supporting the government’s promise to avoid a hard border in Ireland.
So far this essay has focused mainly on securing access to the Single Market. Indeed, given the difficulties that falling back on WTO rules would entail, this ought to be the primary goal.7 However, discussions on the future EU-UK relationship cannot stop at trade. A further component would involve UK participation in the area of freedom, security and justice (Title V TFEU) and the Common Foreign and Security Policy (CFSP). Britain and the EU face similar threats from organised crime, terrorism and migration, problems only effectively addressed collectively. So it is in the EU and UK’s mutual interest to continue cooperating in bodies such as Europol, Eurojust and Frontex, and likewise the European External Action Service and CFSP.
CFSP should not raise too many legal issues, since it operates under its own institutional architecture with strictly limited involvement from the ECJ, and Article 42 TFEU explicitly recognises that policy in this area “shall not prejudice the specific character of the security and defence policy of certain Member States”. As Dashwood argues, Britain is renowned for the quality of its security services, armed forces and universities.8 If a trade deal is to be but a first step towards a bespoke model allowing for a comprehensive partnership, the UK should use these advantages in a way that complements rather than abandons EU needs.

3. Political negotiability
The proposals outlined above might be though to ignore key realities of the Brexit negotiations. A ‘bespoke Norway’ option that restricts immigration might be theoretically enticing, but the EU has repeatedly emphasised the indivisibility of the four freedoms in practice. Equally, hard- Brexiteers will be loath to accept a model largely replicating the UK’s current relationship with the EU. Yet, as this essay now shows, neither the views of hard-Brexiteers in the UK nor those of staunch federalists in the EU necessarily present insurmountable obstacles to a ‘good deal’.
The EU has frequently alerted the UK to its policy of no ‘cherry picking’. Yet, it is interesting to note that the Commission has allowed countries (e.g. Ukraine and Switzerland) to participate in some aspects of the single market - and not others. The EU’s recent association agreement with Ukraine, for example, grants Single Market access for goods and services where EU rules are applied without requiring free movement of people. The intransigence of Michel Barnier may thus reflect a desire to make an example of the UK more than any technical impossibility.
If this is the case, it is worth emphasising that the UK is bound to accept a worse deal than it currently enjoys. The UK would lose influence in EU institutions relative to what it wielded as a full member, and would have to accept the EU’s regulatory rulebook – yet without representation. Moreover, the essay’s proposal would result in barrier-free trade for EU exporters selling into the UK and continued financial contributions by the British government.
One might wonder how this proposed ‘deal’ could ever be sold domestically. Yet, there are two reasons for optimism. First, hard-Brexiteers constitute a minority in the UK Parliament. The majority of MPs supported remain, and may be amenable to an arrangement that retains access to the Single Market while regaining a degree of control over immigration. Second, the government’s acknowledgement that avoiding a hard border with Ireland could entail maintaining “full alignment” with the rules of the Internal Market and Customs Union points to a softer Brexit.9 The EU’s statement that it will contemplate a “unique” solution for Ireland owing to its special circumstances suggests a softening of attitudes is possible on both sides.10

Conclusion
Heightened expectations abound over what Brexit might deliver in terms of economic possibilities and immigration control. At the same time, appeals to the strategy of blaming the EU for domestic problems will lack credibility. It is thus incumbent on British negotiators to acknowledge that there is no way of enjoying all the benefits of the EU without accepting some of its obligations. Securing a bespoke new model requires the future relationship to benefit the EU’s interests as much as the UK’s. This essay forms a bold proposal for a legally defensible way of doing so, making a tough negotiating actor a close partner in a new cooperative venture.

 

1 PM’s Florence speech: a new era of cooperation and partnership between the UK and the EU, 22 September 2017.
2 Speech by Michel Barnier in front of the Committees of Foreign Affairs and the Committees of European Affairs of the Italian Parliament, 21 September 2017.
3 Neuwahl Nanette, ‘CETA as a Potential Model for UK-EU Relations’ (2017) 22 (3) EFAR 279, 285.
4 Bar Council, Financial Services (Brexit Paper No 3, 2017), para 1.
5 Prospect interview with Carl Baudenbacher, 15 October 2017.
6 Patrick Wintour, Norway May Block UK Return to European Free Trade Area (Guardian, 9 August 2016), https://www.theguardian.com/world/2016/aug/09/norway-may-block-uk-return-to-european- free-trade-association (accessed 27 December 2017).
7 Bar Council, Impact of ‘No Deal’ (Brexit Paper No 20, 2017), para 3.
8 Alan Dashwood, ‘After the Deluge’ (2016) 41 ELR 469.
9 Joint report from the negotiators of the European Union and the United Kingdom Government on progress during phase 1 of negotiations under Article 50 TEU, 8 December 2017, para 49.
10 Guiding principles transmitted to EU27 for the Dialogue on Ireland, 6 September 2017, para 1.

 

 

 

 

 

 

 

 

 

 


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