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Prime Minister Theresa May’s speech in Florence was long on rhetoric and short on substance. It did confirm what Free Lunch had for some time argued was the obvious short-term plan: a “standstill” period of a few years after the UK leaves the EU but all the rules remain in place (except for British votes and representation at EU tables). It made a bit of progress (but far from enough) towards tabling serious proposals for sorting out the immediate problems the UK causes by its departure (on financial commitments and protecting the rights of citizens, but not on Ireland).
On the biggest issue — the shape of the future permanent relationship — there was nothing new. It is, the PM told us again, going to be special, deep and comprehensive, yet still involve Britain having left both the single market and the customs union, as she had set out in her Lancaster House speech. What was informative, if not exactly new, however, was the emphasis on rejecting both the “Norway model” of European Economic Area membership and the “Canada model” of a conventional free-trade agreement involving little more than zero tariffs on goods. “We can do so much better than this,” May insisted, “let us be creative as well as practical in designing an ambitious economic partnership which respects the freedoms and principles of the EU, and the wishes of the British people.”
Well, then, one looks forward to creative practical suggestions from the UK side on what this could look like. But while waiting, we should note how this rhetoric echoes May’s earlier talking points about customs union: “it’s not binary”. Similarly, after the speech, some commentators argue that there is a spectrum of solutions between the EEA model and the FTA model. If that is so, of course one should not go for an existing model but identify the best place on the spectrum.
But this is a misunderstanding. There are reasons why it is hard to sustain a model “in between” the high-access/low-autonomy EEA model or the low-access/high-autonomy FTA model. To see why, consider the various dimensions along which one might imagine there is a smooth spectrum.
The first is what Brexiters have long done: divide up the single market by its pillars (goods, capital, services and labour) and claim that they can be combined in whatever way one may wish. We have previously pointed out the error in this view. Briefly put: the free movement of services is logically tied to the free movement of labour. Why should the City of London be able to offer its financial services throughout Europe but Polish builders unable to offer their construction services in the UK? And if the City is competitive enough to provide most of the financial services needed by Europe’s economies, why should EU27 governments accept that their citizens be excluded relative to British ones from what are European jobs located in Britain?
The second is to divide up the European economy by sector, and contemplate a sector-by-sector status for the UK in the single market and the customs union — inside for some, outside for others. This, too, we have addressed before. At the level of overarching economic sectors, it is not just possible but practised: the EEA countries are not part of the single market as far as primary products are concerned (unprocessed agriculture and fish), and being outside the customs union, tariffs can apply. It is much harder, though not impossible, to do this for subsectors of manufacturing.
But the big question is why, if the UK accepted single market or customs union constraints in some sectors, it would still want to keep other sectors out. The benefits of leaving either structure are themselves of a largely binary nature, even if membership could be finessed so as not to be.
In the eyes of Brexiters, the problem of the single market is common rules and a common judicial order through the European Court of Justice. If you oppose these in principle, that principle is a binary matter. In other words, if you accept ECJ jurisdiction and “rules from Brussels” in some sectors, what is the point of escaping them (at an economic cost) in others?
Similarly, the point of being outside a customs union is to strike free-trade agreements with other countries. But if the key sectors of the UK economy were to remain within a customs union with the UK, how realistic is it for “global Britain” to tell potential trading partners that it would like to strike a deal, but only for individual sectors in which it does not already have one with the EU?
There is one more dimension along which there seems to be a UK desire for a bespoke arrangement. The government’s policy paper on enforcement and dispute resolution made few concrete commitments but demonstrated maturity in the sense that it accepted the need for shared supranational authority in any future settlement with the EU. May’s Florence speech echoed this. The problem, then, seems to be more with the ECJ itself than with the principle of not having full national control over legal outcomes. In particular, the UK seems more comfortable with a bilateral arrangement such as a “joint committee” or a bilateral arbitration panel.
The most thought-out plan along these lines was presented by five senior European policymakers and scholars last August, which proposed a “continental partnership” between the EU and the UK that would regulate single market issues but not include free movement of labour. Put aside the free movement aspect (the proposal suffers from a common misperception that other countries have the same deep aversion to free movement as Britain). The proposed governance model hints at what may be acceptable to the British public and political class: a system in which the UK is more or less the equal of “Europe”, in terms of influence on decision-making and its representation in whatever judiciary body would adjudicate the arrangement.
The problem with this should be obvious. The UK is one-seventh the economic size of the rest of the EU; even smaller by population; and it is one country among dozens. The unsustainability of a deep and special relationship in which the UK was more than a junior rule-taking partner should be clear if we ask what would happen if other countries wanted to leave the EU to achieve the UK’s status in such a deal. The answer is that it would dilute the UK’s privileged status until it was equal among many rather than equal to all the rest put together.
To sum up: there are deep reasons why there are poles of attraction on the EEA and the FTA end of any spectrum of the autonomy-integration access. And the biggest problem with May’s ambition for a bespoke arrangement is that for now, the “wishes of the British people” do not respect “the freedoms and principles of the EU”.
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