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Offline the leveller

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« on: January 24, 2016, 07:08:55 PM »


Being more interested and engaged than the average person in the EU Referendum debate, I tend to read anything about the topic in newspapers / magazines, publications by both sides in the debate, on-line articles / blogs etc  (yes, I'm that sad).  I've learnt a lot of this is mis-informed or biased (from both sides) and cannot be taken at face value, but a simple clear message keeps coming through. The only substantial benefit the REMAIN camp can point to is the Single Market; the biggest problem the LEAVE camp has is "fear of the unknown" and associated economic risk.

 This seems to lead to a very simple message for a LEAVE campaign:

Leave the EU, Keep the Single Market.

Moreover, this message is being echoed by pro-EU voices :

The only way to continue to have full access to the Single Market without staying in the EU would be to join Norway, Iceland and Lichtenstein in the European Free Trade Association (EFTA), an intergovernmental organisation promoting free trade, and signing the European Economic Area (EEA) Agreement. CBI - Our Global future

only the Norwegian option would give Britain full access to the single market   David Smith, Economics Editor of The Sunday Times  in his article with the doom-laden title "Leave the EU and we will lose the single market"

 we have access to a single market of 500 million consumers. It would be possible to maintain that access if, like Norway, we were part of the European Economic Area but outside the EU.  Oliver Kamm, The Times in his article entitled "Brexit is a big risk to Britain’s fortunes as an open, trading economy"

 The UK joins the European Economic Area and maintains full access to the single market  Global Counsel: BREXIT: the impact on the UK and the EU

EEA membership: if Britain joined the European Economic Area (EEA), British firms would have unimpeded access to the single market and would continue to benefit from the EU’s trade deals with other countries.  The Great British trade-off - John Springford and Simon Tilford - Centre for European Reform

Last week, we had representatives of the Banking community recommending a "soft exit" :

Appearing before the Treasury Select Committee, two senior bankers, one from HSBC and one from Barclays, noted that there are two possible options: a hard exit and a soft exit. The latter probably wouldn’t damage the City of London too much, because the UK would remain as a member of the European Economic Area (EEA).

In short, the business community and pro-EU community are telling us that there is an economically feasible and safe exit option, i.e.  Leave the EU,  Keep the single market.

Predictably, the pro-EU commentators go on to repeat the familiar (and incorrect) mantra that "they pay, but have no say".  But just for the moment, lets examine the question the other way round - how much does the UK pay and how much say does the UK have ?


Payments to the EU

HM Treasury report on the 2014 EU budget indicates that in calendar year 2014, the gross UK contribution was £19.234 billion, before the UK rebate of £4.888 billion, i.e. £14.346 billion gross (after rebate). The UK received £4.539 billion back in EU funding (via Common Agricultural Policy, Common Fisheries Policy  and Regional Development funds), leading to a net figure for UK contributions of £9.458 billion.

 The net contribution is a relatively small sum of money, amounting to approx. 0.5% of GDP, or approx. 1.3% of  Government spending. Pro-EU commentators are quick to describe this as good value in return for full access to the Single Market. Which begs the question why would this not be good value for Norway when they pay for full access to the single market ? Particularly given that Norway's payments are approx. 50% of UK's payments per head.

Influence in the EU

It has long been claimed that Norway has "no say" and is "not at the negotiating table" in the EU.  In fact, the EEA agreement provides for consultation with the EU and observer status in committees during the formation and approval of EU legislation.  Article 102 of the EEA Agreement also provides a veto (or "right of reservation")  - Norway used this veto to reject the EU's postal directive.

 As Norways influence in forming EU law becomes more widely appreciated, pro-EU commentators have instead begun to point to the UK's voting rights within the EU, which Norway does not have. But the UK's voting rights are hardly substantial or influential: 12.6% Qualified Majority Vote in Council of Ministers; 73 out of 751 MEP’s in the EU Parliament.  The UK can be and is consistently outvoted - it is now common knowledge that between 1996 and 2014, UK tried to block 55 measures in the Council of Ministers and failed on every occasion.

 In truth, these voting rights are of little consequence as the power to propose EU laws and approve amendments rests entirely with the European Commission (the body of 28 un-elected bureaucrats headed up President Jean-Claude Juncker).  The council of Ministers and European Parliament can only propose amendments, which the European Commission can ignore or over-ride. In practice, the UK's voting rights in the EU appear to be of no value and I have not been able to find a single example of where UK's voting rights has changed an EU law to UK's advantage.

Political & Judicial Freedom via EFTA EEA

For full single market access, Norway pays less than the UK and has at least as much influence in EU law-making (arguably more given the EEA veto).

 Even within the terms of debate set by pro-EU commentators, the EFTA EEA / Norway option provides a "trade & co-operation" relationship with the EU, free from any entanglement with political union, given the political & judicial freedom it enjoys compared with the UK:

•Not subject to EU Commission, Court of Justice, Charter of Fundamental Rights
•Exempt from Stages 1/2 of Economic & Monetary Union
•National control of Foreign & Defence, Justice & Home Affairs, Trade Policies
•Outside the Custom Union, exempt from Common External Tariff  & EU's VAT rules
•Able to sign own Free Trade Deals
•Outside Common Agricultural Policy & Common Fisheries Policy

Single Market Regulations

Within EFTA/EEA, Norway is subject to Single Market Regulations (~21% of EU law currently in force) but is exempt from all other EU laws currently in force (i.e. almost 4 in every 5 EU laws).

 Business has extolled the virtues of having 1 set of Single Market rules to cover all 31 states (28 EU member & 3 EFTA EEA states):
 - enables free movement of goods without time consuming customs checks;
 - supports complex international supply chains that feed modern "just-in-time" manufacturing;
 - provides consistent product quality & safety across the market.
 - "levels the playing field", i.e. competitors have equal cost of regulatory compliance
 Nor should too much attention be paid to lurid tabloid stories of "mad Brussels regulations".  The truth that Single Market regulations have a positive effect on trade, product quality & safety, or have sensible exemptions, is not allowed to get in the way of a good story.

 Given this positive view of operating with 1 set of trading regulations, perhaps we should ask why not have 1 set of regulations that extends beyond the 31 states in the European Single Market ?  Well, here is the really interesting point - we already have.  The WTO agreement on Technical Barriers to Trade was signed in 1994.  Article 2.4 obliges signatories (which includes the EU) to use international standards where they exist in place of their own trade regulations.

 As more and more international standards have been  agreed (in bodies such as UNECE, Codex Alimentarius, ILO, WHO, FAO, ICAO, Basel2 etc) the proportion of Single Market rules originating in the EU has  declined.  It has been estimated that approximately 90% of Single Market regulations are now covered by international bodies.  The EU has been reduced to a law-taker, not a law-maker. In terms of Single Market Regulations the EU is largely a redundant middleman.

 Here is where we see the truth regarding influence over Single Market rules.  Norway has a seat and a veto on these international bodies.  The UK however, is bound by the EU's Common Commercial Policy (agreed by Qualified Majority Voting) - in effect the UK's voice and veto has been surrendered to the EU.  In these international forums, the UK is mute, while Norway is at these top tables as an equal to the EU.

The Market Solution

Building on this understanding, a comprehensive exit plan, provisionally entitled "The Market Solution" has been devised by Dr RAE North (and is expected to be published shortly). It proposes EFTA EEA as an interim arrangement in order to safely exit the EU within the 2 year timeframe imposed by Article 50  of the Treaty of the European Union. Having secured a "soft" exit, a new Single Market settlement would be sought, potentially in alliance with the current EFTA states (EFTA + UK would be worlds 4th largest trade group):
•A true European Single Market of equals with common decision-making for all members
•Integrated into the international and global rule making bodies (recognising the truth that the EU has become a law-taker).

A key point of this plan is that the existing Free Movement of People rules are retained in the short-term (in interim EFTA EEA phase) in order to secure the "soft" exit from the EU.   This will be contentious for those who envisage ending Free Movement as the way to address their primary concern, i.e. immigration.  Many however (including myself), see Free Movement as a positive, albeit understanding the need to mitigate/manage mass immigration (through other more effective means). In the longer term, UK immigration policy should be returned to the democratic control of the UK public.  The whole immigration issue is highly charged, but I trust the UK public and I trust democracy, so I believe that given the democratic choice on immigration, the UK public will choose a "balanced" immigration policy.

 As well as regaining control of a whole swathe of domestic policy, perhaps the most important aspect of this plan is the restoration of UK control of Foreign, Defence & Trade policy.  An independent UK would regain its voice and veto in international forums; be free to form coalitions with allies wherever it finds them; be free to negotiate its own free trade agreements. Like Norway and Switzerland do. Like USA and Japan do. Like Australia, Canada, New Zealand do. Like every other country in the world outside of the EU does.

 The Market Solution provides a credible plan to create an outward-looking, globally engaged UK independent of the EU.  It starts with a safe exit based on a very simple premise:

Leave the EU, Keep the Single Market

The EU Referendum just got a whole lot more interesting !

« Last Edit: January 24, 2016, 07:10:58 PM by the leveller »

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