Lord Owen says it's EEAsy pEEAsy

I noted in my piece How Do We Keep Airbus and BMW in the UK (30 June) that one way of steering our way through the Brexit mess was to join the European Economic Area (EEA). I also noted that Lord aka David Owen had been commending this solution for at least a year.  He still is, writing a column in last week's Sunday Times* in which he said he has been trying to persuade the PM since 23 November 2016 "of the merits of preparing a reserve position in the event of the EU refusing her ambitious and now sadly flawed bespoke option". He has been doing this in a series of letters which are available on his website. (No, I haven't been sad enough to read them).

Owen's suggestion is slightly different from mine as I assumed - as most do - that we would have to apply to join the EEA. Firstly, Owen takes the view that we are already in it, so all we have to do is assert our right to remain, though accepts that the legal position needs urgent clarification. Secondly, he says we should do so as part of the European Free Trade Association (EFTA) "pillar" as he calls it. EEA members are either in the EFTA pillar or the EU pillar. We are currently in the latter. Owen says it is clearly possible to transition from one to the other as Austria, Finland and Sweden transitioned smoothly in the other direction in 1995.

Owen says that public debate seems insufficiently aware that the currently proposed transition period would be implemented by us staying in the EEA but in the EU pillar where the EU institutions are sovereign. The advantage of being in the EFTA pillar would be that, while still being in the single market, it would be international law and international dispute resolution that would apply, not European Law and the ECJ. He says if anyone doubts this they should note that Norway recently seized and fined trawlers from the EU Baltic States licensed by the EU to fish in Norwegian waters of the island of Svalbard in a dispute over snow crab fishing rights. The EFTA surveillance authority was asked by the trawler owners, supported by the EU Commission, to take the matter to the EFTA court, which it refused to do "in no uncertain terms".

Owen says that this avoids being boxed in between "a bad bespoke deal or exiting on WTO rules". It would leave us free to immediately pursue our own agricultural and fishing policies. Further he sees this as a transitional step to negotiating a Canadian style trade agreement, avoiding the main problem I see with the EEA "solution", that we are out but still in the EU sphere of influence, paying into the budget and open for entirely free movement but with no say over the EU rules we would be subject to and potentially stuck in that limbo for ever. After all, we would have left the "EU pillar".

Owen says we can't afford to wait for the outcome of the sh*t or bust negotiations (sorry for my indelicate phrase, but what else are they?) So we ought to write now to the three non EU EEA members (Norway, Iceland and Lichtenstein) and the 27 EU members to ask if they are content for the UK to operate under the EEA as part of the EFTA pillar once we pull out of the EU. He doesn't say what we should do if they give us a raspberry, though he thinks it might take "some months" for us to establish our full EEA rights and we should not hesitate to fight for what he says are our existing rights using international law. He also thinks this option could win the support of a majority of MPs.

This all sounds pretty good to me, though Owen doesn't say what this would mean for freedom of movement during the transitional period or whether and how it would fix the Irish border issue, two problems I noted with the EEA fix in my blog referenced above.

Owen is also aggressive on the £39bn divorce payment "for a bespoke agreement that no longer exists".  Here he is pretty well barking up the wrong tree as the divorce payment isn't a bung in exchange for a free trade deal, it's stumping up to commitments we have made as part of the EU budget. Ages ago I saw a mildly funny joke on the lines of someone quitting a golf club and receiving a bill after leaving for refurbishment of the locker rooms. But the EU is not like an individual being in a members' club, it's more like a company being part of a joint venture. If that company was party to spending commitments made by the joint venture it could not expect to quit and walk away from them.

After many pundits have claimed the likelihood of no deal has increased (though Owen says some of this is politicians on all sides of the argument trying to frighten people) some are now saying they expect to see a form of compromise, though the UK would have to make yet further concessions. Others are still pessimistic about the chance of a deal being reached and are now panicking over the fact that, if there is no deal, the EU will not be in a position to make decisions very quickly or effectively (nothing new there then....) as its parliament is near the end of its term. In contrast the UK will be able to take prompt decisions, so some think that the short term impacts of no deal would be greater on the EU.

This week David Smith completely pooh poohed the idea that no deal would be anything other than traumatic, saying the idea we should not fear a no deal exit next March isn't silly season, it's stupid. He notes that many are wilfully or ignorantly misreading the relevant WTO rules when they say trade would continue unhampered. For example, under WTO rules Britain could abolish all tariffs on EU imports on the post apocalyptic day one. But the UK would also have to abolish tariffs on goods from everywhere else, for example China, because WTO rules require equality of treatment if there is no specific "most favoured nation" trade deal in place. The mirror image applies - if the EU accepted UK goods as compliant with EU rules without checking (on the basis that the day before they were compliant) then they would have to extend the same privilege to other countries outside the EU 28 states. There are some real obstacles to "frictionless trade" in the absence of a deal.

Oo-er. This all makes Owen's beguiling solution look better by the minute.

Meanwhile several newspapers ran the story that the US is turning up the pressure on the UK  over Iran sanctions and wants us to split from the EU line and back the US. Woody Johnson, the US ambassador, told The Sunday Telegraph: “America is turning up the pressure and we want the UK by our side. We are asking global Britain to use its considerable diplomatic power and influence and join us.”  'Asking' is an interesting word here as there was a hint that we can forget a trade deal with the US if we don't choose the US bully rather than the EU bully. Having to choose between the US and the EU at this particular juncture is the stuff of nightmares for Theresa May's government.

Nobody said it was easy
It's such a shame for us to part
Nobody said it was easy
No one ever said it would be this hard
Oh take me back to the start

sang Coldplay on The Scientist. Well some people claimed it was easy and could be all be done very quickly, like some kind of omelette without breaking any eggs conjuring trick. I didn't ever think it would be easy, indeed that was the entire basis of my Remain vote (I must have been just about the least enthusiastic Remain voter out of 16.1 million and not many could have held their nose more than me). 

David Owen's suggestion has had a decent amount of coverage but little critical analysis: I've seen one commentary in the Spectator***where Rupert Darwall noted that the PM replied to Owen in February saying that she wanted to agree the interim period through the withdrawal agreement, not the EEA. Remember at that time the government was saying we must leave the single market straight away, so the EEA was not an attractive option. Darwall describes this as a "bad call".  Worse, May replied that we are only in the EEA through our membership of the EU, which Darwall says is plain wrong. As Owen has been saying the UK is a contracting party to the agreement establishing the EEA in its own right. Darwall goes further than Owen in suggesting that we need only get the approval of EFTA members to borrow the EFTA governance pillar of the EEA, so it cuts the Commission out of the loop, enabling the UK to regain its negotiating freedom. 

Many Brexiteers say being in the EEA means we have to pay into the EU budget (I've probably said this myself) but EEA membership does not entail Britain paying a penny into the EU budget. The EEA Financial Mechanism provides for direct payments to EU member states in Central and Eastern Europe, bypassing Brussels altogether and strengthening the UK’s negotiating hand in any Phase 2 negotiations. According to calculations by Oxford economics professor George Yarrow, Britain’s annual payments under the Financial Mechanism would be of the order of £1.5bn: a trivial amount in the scheme of things.

The EEA option does mean continued freedom of movement but the Chequered Compromise implies that during the transition period anyway, so there is no difference there.

Darwall concludes that the only real obstacle to using the EEA as the first and definitive step out of the EU is that it would put the Prime Minister in the uncomfortable position of admitting that a superior strategy had always been available. For her to accept it would be tantamount to a catastrophic admission that her whole Brexit strategy had failed. Darwall notes that loyal Tory remainers would grab the EEA option like "a port in a storm". So all it needs is for the Brexit wing of the Tory party to conclude that it could be the best way to save Brexit for Owen's idea to become the main strategy. And I guess it would be the end for Theresa.  Which, given that there have been reports of him canvassing the "EEA option" might mean we get Mr Sarah Vine, aka Michael Gove.



* Norway's snow crab can lead us to a smooth Brexit that preserves national sovereignty. David Owen, Sunday Times 5 August
** No-deal Brexit: the silliest of silly season ideas. David Smith, Sunday Times 12 August.
*** https://blogs.spectator.co.uk/2018/07/how-brexiteers-can-still-save-brexit/ 30 July