No matter how many times the Government rejects it, the idea that the UK will remain a Single Market member after leaving the European Union refuses to wither and die.
Those against Brexit, or for reducing its risks, argue that the Referendum did not instruct the government to end Single Market participation. Their opponents, however, view that program as part and parcel of the European project.
Battle still rages over what was promised by whom during the campaign, with both sides making valid claims. While the official Vote Leave campaign said the UK would leave the Single Market, there were also prominent Leave campaigners who referred to Norway and Switzerland as models for an independent UK. But Norway has a version of Single Market membership and Switzerland is closely integrated, including participating in Schengen.
The debate comes to the fore again today in the House of Commons, where MPs will vote on Lords amendments to the EU Withdrawal Bill, including one that would make remaining in the European Economic Area (EEA) a negotiating aim.
Although there are good reasons for that, the nature and deficiencies of the EEA arrangement demonstrate why the Government is pursuing an alternative path.
As is now well known, the EEA is an extension of the EU Internal Market to Norway, Iceland and Liechtenstein, and is described as Single Market participation. That means being part of the EU’s evolving system of harmonised laws and regulations that facilitate the cross-border movement of goods, services, capital and people. In areas where there are not yet shared rules, national ones normally suffice because all members adhere to similar standards and are part of a uniform apparatus of surveillance and enforcement.
The three non-EU EEA nations are in the European Free Trade Association (EFTA) and its secretariat manages the agreement with its EU counterparts and member states.
While it abolishes tariffs on EU trade—except on agricultural products—the EEA is not a customs union, so EFTA nations set their own tariffs. To help create a level-playing field, wealthier parties fund programs to boost the competitiveness of poorer regions. Additionally, the highly regulated market has administrative costs, and members pay those.
The EEA operates through a Joint Committee deciding which new EU rules to incorporate into the accord according to a principle known as “dynamic homogeneity”; while the treaty’s annexes are regularly updated, the aim is always to ensure parity with the Union.
There appear to be two main drivers of the Conservative policy to terminate Single Market membership by eschewing the EEA. The first is ideological. The party’s Eurosceptic wing abhors the one-size-fits-all philosophy that it claims stifles enterprise and eliminates healthy regulatory competition.
In 2015, Open Europe argued that the 100 most burdensome EU-derived regulations cost the UK £33 billion a year to comply with, and 93 of those applied to the EEA.
The second is immigration, which academics have shown was a major factor in the Leave vote. Remaining in the EEA means respecting the freedom of movement of persons, and therefore possibly triggering a resurgent threat from the right.
Remainers, of course, see things differently. The prospect of interrupted supply chains and extra bureaucracy for exporters has also left much of the business community in a cold sweat. The result of this opposition and alarm is that many observers assume that the Government will eventually buckle and stay in the EEA.
As well as economic security, EEA advocates claim that the agreement provides a flexible version of the Internal Market that can be adapted to each party’s interest, and they reject the suggestion that EFTA states have little influence on EU law making.
But while the EEA would protect trade, such claims seem to rely on an optimistic interpretation of the agreement and the EU’s positioning on UK withdrawal. Although there are some ops-outs for special circumstances, like Liechtenstein’s partnership with Switzerland, appeals to be exempt from EEA laws are routinely rejected, according to an official from EFTA Secretariat. “The whole idea is to have a level playing field and have the same rules apply across the whole area. And if you start going down that road then you will fragment and it will not work,” they said.
In the case of Brexit, as has been apparent since Article 50 was triggered, the stance from Brussels is that the process must not threaten the autonomy of its decision-making and the UK must endure the consequences of withdrawal. This brings into serious doubt the UK’s ability to extract concessions.
“The Agreement as such is highly adaptive and can be tailored to reflect UK preferences, but it all depends on the UK being able to get the EU to agree to these,” said Halvard Haukeland Fredriksen, a lawyer who specializes in the EEA at the University of Bergen in Norway.
A vital area for the UK is the cornerstone Single Market principle of the freedom of movement of persons, which was also a critical challenge for “dynamic homogeneity” when the EU Citizenship Directive came into force in 2004. The new measures in the directive included, for example, residency rights after five years in a host state.
After three years of haggling with the EU, EFTA states had to accept the directive, but they were explicit that the concept of EU citizenship had no equivalent in EEA law, partly as they saw free movement rights as relating to economically active individuals only.
However, this was subsequently tested in EFTA Court cases and the judges generally ruled that the EEA agreement confers similar movement rights as the EU treaties, according to a 2017 paper by Christian N K Franklin, also from the University of Bergen.