In her speech of this week, Theresa May set out the objectives of the UK in the coming Article 50 negotiations and beyond. In doing so she has ruled out membership of the single market in a move that many people have suggested renders impossible a smooth transition from EU membership to the final desired position – a Free Trade Agreement. But is that an entirely accurate assumption?
During the campaign, the Flexciteers led by Dr Richard North, set out a first stage of transition of European Economic Area membership (and therefore single market participation) via renewed membership of EFTA, the European Free Trade Association . It is believed that the PM has ruled this out with her recent speech, but I’m not sure that this is entirely true.
Certainly she has said that we will not be ‘members’ of the single market at the point we leave the European Union – but she leaves the door ajar. Implementation suggests a move from the position that we currently hold to the one that we will agree to finalise. Therefore there must be a halfway house, a method of avoiding what some have described as a ‘cliff edge’, or at least a moment significant and sudden regulatory alteration. .
Implementation will almost certainly be in stages. Changes to customs arrangements, movement of goods, fisheries, agriculture, services. All will have to be picked apart. This is not likely to be attempted in one single move, but in separate phases. The first has been revealed already:
Repatriating the Aquis
Repatriating the aquis has been a key pillar of David Davis’ policy declarations in Parliament. Partly this has been to answer the reservations of opposition politicians that rights currently enjoyed domestically under EU directives will be preserved. But the less obvious reason is that it ensures we begin our life outside the EU in complete parity with EU law.
This is important for any potential transition, because it will be imperative that all our trade rules mirror that of the EU until we are outside and have alternative structures in place. These structures under a new FTA will still tend to follow the Union’s rules for conformity. But as we already know, this is something that is being heavily influenced by global bodies, and should be more so influenced as the WTO’s Technical Barriers to trade regulations begin to have a greater effect. Of course, there is still a competitive nature to regulation, but for the moment let’s set that fact aside.
To all intents and purposes, the UK will still at the point of leaving the EU, be operating in regulatory harmony with the EEA/ Single Market. This provides an opportunity to pursue, up to a point, an EEA based Brexit.
May proposes an implementation in parts for the FTA. One potential solution for this is to remain under EEA rules and participate in the single market through a mirror or shadow EEA solution. Each time a header is agreed under the FTA to be completed, that section of the EEA that can be supplanted by the new FTA moves to the new environment.
This however, presents a problem. The EEA must have an adjudicator – an arbiter for disputes. Presently for us, that is the ECJ. On 20th October 2016 the President of the EFTA court gave a lecture in the UK in which he observed that in bilateral Swiss – EU dealings, the EU had suggested that the EFTA court and Surveillance authority be used as the arbitration and enforcement authority. He similarly suggested that in any bilateral EU-UK agreement the same arrangement could be used.
This of course suggests that the EFTA court is quite willing and able to undertake this role, both as the arbiter of the current EEA based agreement at the moment of leaving the EU, but also of the bilateral agreement that would be reached and implemented in stages subsequently.
Exploration of the EEA annexes shows a myriad of directives which must be in force for the EEA agreement to be whole. These have been added since the introduction of the agreement to keep the EFTA nations which participate in regulatory harmony with the EU in the areas which they both agree are EEA relevant. Many of these are simply to regulate trade, but many are not. Remember that the task of the EEA was to ready the EFTA nations for EU membership, it was not simply to extend the single market to the EFTA nations. All of this regulation currently in force will have been domesticated.
But as each area of law under the annexes is no longer subject in the UK to EEA direct regulation, and becomes part of the Bilateral agreement area, or simply is no longer applicable because the Bilateral treaty no longer covers this area and is simply domestic law, then the EFTA court would no longer implement the EEA rules. Instead they would implement those clauses now in the FTA. In other words, the EFTA court can be contracted as an independent adjudicator for the duration of the process (and possibly beyond). Domesticated elements would revert to the UK courts.
Alternatively, the EFTA court could rule only on areas covered by the parts of the EEA agreement still in force between the EU and UK, and already active parts of the FTA could be enforced by a new authority – such as a bilateral EU UK committee, formulated specifically to permanently oversee the FTA. (For the UK this would certainly be politically preferable, simply because it would put the partners on a visibly equal footing).
As the areas of competence reach conclusion, all sectors of agreement eventually transfer to the new authority, or at least out of the EEA and into the FTA.
Fulfilling the objectives.
May stated that at the point of leaving the EU we would not be members of the single market, and we would not be subject to the ECJ. If the above route was chosen and agreed between the EU and UK then both those primary considerations would be fulfilled. (While some might disagree with this point, the ECJ influence would be indirect and for the purpose of transition only) .
At the same time, the EU would have had its way on sequencing, in that the FTA objectives would be set out in accordance with Article 50. However, we would still be following the EEA rules under the enforcement of the EFTA court until we had finalised the FTA under article 218, a political win for the EU in that the rules are still seen to be politically inseparable from the market. The economic issues of cliff edge for both sides would be negated, but the objectives set out by the PM would still be technically met – we would not be ‘members of the single market’ (we would not be in either EFTA or the EU so we could not be members), and therefore we would not be directly under the rule of the ECJ.
The EFTA court is very different from the ECJ in many ways. Its willingness to be part of a potential Brexit transition I think should be welcomed. I cannot say whether this is a solution that the government is considering as I have no more information than any other observer. However, I think if the detail could be made acceptable to both sides, it offers one potential avenue for both sides to achieve the objective of a smooth Brexit, while not damaging significantly the interests of either party.