Wednesday, 29 June 2016

Brexit process - next steps

After sharing some observations on future negotiations, freedom of movement and trade agreements in my previous post, it's time to turn to what needs to happen next.

Article 50
Media reports in recent days have shown that a long recommended prelimary action to commencing the Brexit journey, namely holding informal withdrawal discussions with individual member states prior to making a formal withdrawal notification to the European Council in keeping with Article 50 of the treaties, has been ruled out by Angela Merkel.

Therefore David Cameron's replacement as Prime Minister, who should be announced on 9th September after the Conservative party leadership election, should issue the formal notification of withdrawal from the EU before the end of September. The only good reason for a delay in the Article 50 notification was to prepare the UK's position and establish a foundation for the formal negotiation. With that off the table, we should be looking to begin the process as soon as possible. Article 50 must not be delayed.

It isn't ideal, but given the circumstances it is the approach we need to take. However we need to remain mindful that some of the current people on the EU side who will need to approve any deal between Britain and the EU, may not be in place by October next year thanks to the forthcoming French presidential election and the German federal elections. It may be that any newcomers prove to be more amenable than the current people to the deal that may be negotiated. But there is a risk the opposite may be true and that negotiations might need to revisit some areas previously hammered out.

Because of this it would seem Britain has a reasonable case for requesting a unanimous agreement to extend the two-year negotiation period at an early stage, to account for any possible changes to the members of the Council. Both sides stand to benefit from a deal so there would mutual interest in an amicable approach to extending the negotiation period. But to reiterate, Article 50 must not now be delayed.

A word on freedom of movement
While one third of people who voted to leave said ending freedom of movement was their priority, the national priority is protecting jobs in this country, maintaining existing unrestricted trade and financial services passporting with European Economic Area (EEA) countries and safeguarding our economy. Freedom of movement should not be put before such fundamental matters, rather it can be addressed once Britain has secured continued participation in the EEA. We must not put the cart before the horse.

There was far more to EU governance over Britain than just trade. But it remains a hugely important aspect. If we leave the EU without a deal, simply to achieve an end to freedom of movement, the consequences for the economy will be severe and long lasting. By just having a gap period between Brexit and a formal agreement with the EU, exporters will find there is nothing in place that confirms their conformity to regulations. They will also find that usual shipping routes for goods no longer have customs facilities or the staff needed where the EU's inspection of goods can be carried out before passage can continue.

There would be many more damaging issues besides, impacting timely delivery of goods and the costs to exporters. As such some things, like freedom of movement, need to wait until we have resolved essential commercial considerations like these. It is why freedom of movement comes in a later stage of the Brexit journey. Resolution won't come immediately, but it will come. We just need to priortise as we unpick 43 years of EU entanglement.

It needs to be stated that becoming signatory to the EEA agreement as a non-EU country brings with it unilateral ability to act in the national interest, courtesy of Articles 12-113. It gives Britain the scope to put restrictions on free movement. One EEA signatory, Liechtenstein, has negotiated a defacto end to free movement and instead applies a quota to EU nationals becoming resident in the country. While their circumstances are unique, it demonstrates there is a flexibilty in the application of the agreement that Britain can pursue.

EFTA (section updated at 15:30 on 29/06)
The first step to maintaining continued participation in the EEA is to join the European Free Trade Area (EFTA). The only countries that can participate in the EEA are the members of the EU, and the EFTA countries that join on an individual basis. Not only is EFTA the key that opens up the door of possibility of continued EEA participation, but it is one of the largest trade blocs in the world. So the government should be preparing an application to join right away.

Iceland will be heading EFTA from next month and will also be taking its turn in the rotating leadership of the EEA too, and they have stated the Icelandic leadership will place a particular emphasis on EFTA relations with the UK. Reports in the Norwegian press from this week's EFTA meeting, say that the Swiss Federal President Johann Niklaus Schneider-Ammann and the Icelandic government are both in favour of inviting Britain to rejoin EFTA (which we left in 1973 to join the EEC). Liechtnestein's position is less clear. There is a bit of concern about upsetting the EU of course.

Norway however will need to be won over. Its pro-EU government (at odds with anti-EU Norwegian voters) has been disappointed by Brexit. Norway doesn't currently share Switzerland and Iceland's warmth for the additional strength British inclusion would bring, and it is concerned about the changed dynamic of EFTA in forging future agreements with third countries. Ironically for a government that is keen to join the EU, Norway's concern centres on losing its influence in EFTA if Britain joins! So there is work to do. But that should begin right away.

It is important to point out that most WTO member countries are part of a regional trade agreement of some kind, and after Brexit it makes sense that Britain should be too. EFTA would be a very good fit. Accession to EFTA would also make Britain party to EFTA's 25 free trade agreements covering 36 countries unless any of those raise an unlikely objection. Unlike the EU's member states, EFTA members are free to negotiate bilateral trade agreements with any country or bloc they want. This means Britain's rediscovered globalist view and desire to make new agreements without the EU's straitjacket would not be at odds with EFTA membership.

Domestic focus
What should give serious cause of concern is the Conservative party leadership contest. While most Tory MPs supported David Cameron's remain campaign, most members supported leaving the EU. The runners and riders to replace Cameron include MPs who are hostile to Brexit and MPs who support the very worst outcome for Britain, that of leaving the EEA completely and assuming WTO Most Favoured Nation (MFN) status. As such that doesn't leave much room for people who would promote the common sense vision of retaining EEA participation.

The Flexcit plan, and its scaled down version known as The Market Solution, for which an EEA-based option is 'shorthand', is already in the hands of some senior civil servants. But it would make sense for it to also find its way to more senior civil servants across all major departments, along with the the clerks and chairmen of various Parliamentary standing and select committes. By becoming acquainted with the plan and its rationale, and understanding why it bears the least risk to Britain after Brexit, we may be able to help guide senior MPs into make it the roadmap for the post Brexit settlement.

Now the electorate has spoken, the government and the civil service have a duty to fight for the best possible settlement for Britain. That, by far and away, is an agreement that maintains EEA participation, as set out in the section above on freedom of movement. Many on the remain side already acknowledge this and have been explaining why in various blogs and newspaper articles. This is very welcome and demonstrates there are cooler heads looking ahead to making our future successful.

So that is a summary of the next steps we need to take. If we are to de-risk Brexit and do the best for our country, this is the approach needed.