In the Flexcit book, we look at the pros and cons of the different options for leaving. We reject the “Swiss” and the WTO options and conclude that the “Norway option” is the easiest and best-established “off-the-shelf ” solution. It allows us to meet the two-year deadline imposed by Article 50 and ensures continued participation in the Single Market.
However, there is a possibility that the “Norway option” option could be blocked, so we have devised a number of fallbacks. Collectively, they all have in common continued participation in the Single Market. The “Norway option” requires us to rejoin the European Free Trade Association (EFTA) and to continue the European Economic Area (EEA) Agreement. If membership is blocked for any reason, one alternative is to retain the EEA component of EU law, including the four freedoms, creating a “shadow EEA”. We would not benefit from EFTA’s consultation arrangements, so provision would have to be made for bilateral consultations on new legislation.
There is a further possibility that, in the process of agreeing a new EU treaty sometime after 2017, current EFTA states would be offered associate membership of the EU. In that case, the “Norway Option” might disappear. There is also a theoretical possibility that EU negotiators could refuse to agree an EEA-based solution. Either event requires a fallback.
For this, we could adopt the processes and strategies used by the Australian government in securing its trade relations with the EU. In 1997, it signed a joint declaration on EU-Australian relations, followed two years later by a Mutual Recognition Agreement (MRA) on conformity assessment. Thus, an informal, unilateral declaration was anchored by the MRA, as a formal treaty. The combination permitted trade to be undertaken on terms favourable to both parties. The scope exists for the UK to do likewise, agreeing to match EU trade harmonisation laws by way of a unilateral declaration, based on the current EEA acquis. This does not need the approval of EU member states.
As we would be maintaining the all-important regulatory convergence, we can insist on access to Single Market, invoking WTO non-discrimination rules. Completing the process, the UK would then negotiate an MRA on conformity assessment. To this could be added agreements on tariffs and programme participation, replicating core elements of the EEA Agreement. Then, working all these into the Article 50 negotiations would provide the formal framework. As long as the UK did not seek access to the market on better terms than those on offer to full members, there could be no serious obstacles to concluding an agreement.
In terms of programme participation, there will be many areas of administrative and technical cooperation which parties will want to continue. These might include the European Defence Agency (which is managing the A-400M military freighter programme) and Eurocontrol, the latter taking in the development of the Single European Sky. We also need to think about staying in intergovernmental bodies such as the European Space Agency. Then there are projects such as the Galileo global positioning system, in which we have a heavy financial investment. Other areas include the Erasmus student exchange programme, and the framework research programme (Horizon 2020), together with the European Research Area. Even outside the EU we can stay in these programmes. But there is a price tag.
EFTA states pay dues and the Norwegians also pay “Norway Grants” which help post-Communist members to catch up with their richer neighbours. Additionally, the EFTA states pay EEA grants. The UK would also have to contribute. But we would also get some money back. According to the Norwegian government’s figures, its total EU mandated payments (gross) are approximately £435m (€600m) per annum. With a population of five million, that is approximately £86 (€120) per capita (gross). Net payments are about £340m (€470m) per annum, or about £68 (€94) per capita.
In 2014, the UK gross contributions to the EU were £19.2bn, less £4.9bn rebate. That gives an equivalent gross payment of £14.3bn. After CAP and other receipts, our net contribution was £9.8 bn. A population of 64 million puts our annual equivalent gross and net payments respectively at £223 and £153 per capita. Outside the EU but paying on the same basis as Norway, our annual contributions would be more than halved.
Another important issue to deal with is the continuity of third country treaties agreed under the aegis of the EU. Currently the EU lists 787 bilateral treaties, together with 243 multilateral agreements. They cover a vast range of subjects, many of which are essential to the conduct of Britain’s trade and international relations. Without continuity, the UK would have to renegotiate or renew hundreds of treaties with third countries. Fortunately, under international law, there is a “general presumption of continuity”. In relying on this, the UK will no doubt be guided by the Vienna Convention on Succession of States in respect of Treaties, even though we have not signed up to it. This allows for a newly independent State – in this case the UK – to keep most treaties in place. All it has to do is tell all the parties and get their formal agreement to continuation. Renegotiation is not needed.
Another option is for the UK to negotiate an arrangement with the EU, giving Britain notional membership status solely for the purpose of taking advantage of the third country treaties. This would most certainly be of limited duration, giving time for selective renegotiation with the original parties to the third country treaties.
Once out of the EU, we will be able to resume our seats and cast our own votes on global standards bodies. Much of the law governing the conduct of the single market now originates at global level. Through the WTO Agreement on Technical Barriers to Trade (TBT) and related agreements, international standards are now progressively replacing EU rules. Thus the UK will be ideally positioned to help make the laws which will govern the EU. They are processed by Brussels for implementation by national bodies, but they do not originate in the EU.
If we work with EFTA/EEA, we will still receive laws from Brussels, but we will have shaped them long before they become EU law.