Friday, June 22, 2018

A compromise for Brexit is possible

Published on the website of Chinese satellite broadcaster CGTN TV 
Journalists report that many people dealing with Brexit “really don’t know” how the European Union and Britain can agree. But there is no need to despair. In 1992, another country was somehow in a similar situation like Britain. That country is Switzerland, which wasn’t a member of the European Union. The Swiss had just rejected a proposal for its new relationship with the EU. The proposal was that Switzerland would enjoy full access to the EU's single market but to take over all of the EU's regulations in return. Norway, Iceland and Liechtenstein agreed with this and have been in this situation ever since. The initial EU stance had been that not taking over the EU's regulations would cause a loss of market access, which is similar to the EU’s stance vis-à-vis Britain today. Of course, the EU moderated this position and in the following years a fudge was agreed, whereby Switzerland would not automatically take over EU regulations but would only take over regulations in selected sectors, voluntarily. If the Swiss disagreed with a certain EU rule, the sanction would be to lose market access in a the relevant economic sector.
At the moment, the EU is refusing to accept solutions for Brexit that would safeguard British access to the EU market in certain sectors where it is willing to take over EU rules while losing market access in others. The EU is claiming that such an arrangement would endanger the single market. One can only wonder why they agreed it then for the Swiss.
Of course, it must be said that an important condition was for Switzerland to also accept freedom of movement of persons.  Would the UK accept freedom of movement of persons in return for some flexibility from the EU's side? Perhaps to a certain degree.  With Open Europe, we conducted a poll showing that the British public isn't all that hostile to migration at all. And the EU has agreed in its relationship with non-EU member states that enjoy access to its single market that they are able to impose restrictions on freedom of movement, which tiny Liechtenstein has once applied, so this is a precedent.
With Open Europe, we have proposed that Britain could voluntarily align with EU rules on goods so to keep access to the EU market for goods, something that the UK government may support, according to some rumours. Many big companies would take EU rules over anyway and the UK economy is composed for 80% of services so this is a relatively reasonable concession for Britain to avoid damage while keeping the sovereignty to diverge with regards to regulations on services. This approach would also be in the interest of EU27 countries as many of their major producers, like BMW, have production plants in the UK. They would not like to see their supply chains disrupted. Imagine what BMW would think if the EU would tell them they have refused the UK's offer to align its rules for goods with those of the EU simply because it also wants Britain to become a “rule-taker” for all other regulations. Surely BMW would think the EU is living in cloud-cuckoo land. Ivan Rogers, a former British Ambassador to the EU, has pointed out that such a solution might appeal to some EU states as it grants continued frictionless trade in goods trade, where they enjoy a surplus, whilst making trade in services, an area where the UK is exporting more to the Continent than the other way around, far harder.
The idea foreseen in the draft withdrawal agreement which needs to be negotiated by October is that Britain would remain a rule-taker for all sectors until the end of 2020. So there is time until then to negotiate this fudge, you may think? Perhaps not. In that “exit deal”, which really needs to be agreed by November of this year so to leave time for parliamentary ratification in London and Brussels, there is a so-called “backstop” for the Northern Irish border foreseen. This is an arrangement to prevent that a disruptive border in Northern Ireland would endanger the peace process if there is no deal when the UK moves to its new status on 1 January 2021.
Also here, the grand Swiss fudge could be a solution. It would mean that Britain would align with EU rules for goods and maybe – unlike the Swiss – with the EU’s agrifood standards, as a lot of border checks relate to agricultural produce. The EU doesn’t like this, as it considers this to be extending the privilege of a special deal for Northern Ireland to the whole EU. Also, it wouldn’t deal with customs checks, for which the UK would then point at solutions existing at the EU’s customs borders with Norway and Switzerland, which are not perfectly but relatively smooth.
In any case, a grand deal for Brexit that doesn't only cover the Irish border but also the future EU-relationship may need to be agreed by November. It may well open up a debate on freedom of movement, but as I've written, both sides could make very sensible concessions so to make sure Brexit's effects hit citizens and business as little as possible.
Pieter Cleppe represents independent think tank Open Europe in Brussels

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