LeaveHQ, 27/08/2017  

A modern trade agreement will set out a number of areas of mutual concern and cooperation. Even the most rudimentary ones will set up working groups and joint committees. They work on the assumption that there will be problems and problems need to be resolved through ongoing relationships. The new Japan-EU agreement is one such example. Larger and more comprehensive deals up-scale all of these things, often forming formal institutions.

The EEA agreement, however, is a different animal in that it is far more extensive in terms of regulatory harmonisation and cooperates through EU agencies and institutions. It is moderated by the EEA secretariat and the Efta court. It covers considerably more than an FTA.

What this government wants, oblivious of other concerns, is "frictionless trade" which in their minds means a comprehensive FTA. Some say this can be achieved by way of Mutual Recognition Agreements (MRAs).

MRAs have only ever been used as a precursor to full regulatory harmonisation. It is one thing to establish an MRA but you are then faced with the problem of maintaining an agreed level of convergence which means any new laws have to be put to a joint committee to ensure they fall under the MRA. This though does not fully allow for free passage of goods. Only full regulatory harmonisation can achieve this. The EU has made this clear. 

In this the EU is actually giving us a helping hand by closing down a few of these delusions. It should help progress the debate. But for the die-hards of Conservative Home, very few still uphold this misapprehension. 

The delusion held by Brexiteer MPs is that full separation from the single market gives us both frictionless trade and regulatory independence. But that is not even true of even the most basic EU FTAs. The latest EU-Japan agreement largely formalises the current trend in compelling Japan to fully comply with standards as defined by UNECE, Codex and ICH. Substantial trade deregulation is not going to happen.

Assuming we did achieve regulatory independence there would be no point. If you want to export to the EU you have to conform to EU standards and register goods within the internal market. Since that regime would offer the most export potential UK manufacturers would ignore the domestic standard. We would be forced to unilaterally recognise EU goods anyway. We could set up our own goods registration system but EU firms simply wouldn't bother with the expense when the EU standard gives them global reach. Put simply there is no deregulation potential even in a basic FTA worth speaking of.



Switzerland's meat export regime falls almost entirely under ECJ jurisdiction with zero say in the rules. That then ends up with mission creep where you end up with pretty much the same regulatory harmonisation as an EU member but no EEA firewall like Efta and no system of co-determination.


And this ultimately explains the recent intervention by Barnier. The EU knows full well how this plays out and does not want to devote ten years of runtime to this utterly pointless pursuit - not least when they have a system already; The EEA. In fact, we need to move past calling these things trade agreements when they are in fact treaty systems.

So what about using the EEA as an interim to full independence? Well, it should be noted that this in itself is a major legal undertaking. Why would the EU, or indeed Efta, want to go to the trouble for what would be a temporary and disruptive process? Answer: they wouldn't. More to the point, having done this, having given the UK a single market solution, it would not be obliged to invest any further energy in a bespoke FTA. Why bother?

But, like we say, the EEA agreement is not an FTA. It is a treaty system with country specific annexes so it can be tailored and the UK can register opt-outs and trigger safeguard clauses to reclaim those areas it wishes to exclude. To an extent, yes you can pick and choose parts of the single market - but only if you are in the single market framework. There are penalties for doing so but that is a matter for further negotiation.

So in effect, if we want the destination of Brexit to be a far looser trade relationship then the means to achieve that is to join the EEA from the other side of the agreement and then reverse engineer it as far as we can mutually agree. In that respect the EEA agreement is both the transition and the destination.

If, for some boneheaded reason, the UK chooses to avoid this path and tie the EU up in a pointless negotiation for a more basic FTA, the EU will rightly not be very accommodating. It will offer us a threadbare agreement and there will be no offer of a transition and no "frictionless trade". The only transitional status we will be allowed is to a remain a non-voting EU member. We then drop out into an inferior status where we lose a substantial part of our EU trade for no tangible gains.

This all rather points to the inevitability of the EEA. It would seem that the only other path is for the UK to storm out in a tantrum to end up with nothing. Only the nihilistic wreckers on the right of the Conservative Party think that's a good idea.

From our reading of the EEA agreement, for the UK, it is a superior arrangement to being an EU member. We see a lot of potential in it. We can take ownership of it, develop it and enhance it, possibly even expanding it. It works for the UK and is in the spirit of European cooperation. We see no value in reinventing the wheel.

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