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September 26, 2017

Brexit is a binary choice between EEA or third-country status

If you follow the UK debates about Brexit from a pro-European perspective like ours, you come to realise pretty quickly why the country is leaving. When we listened to the speeches from the Labour Party conference in Brighton last night, we were quite surprised to hear Keir Starmer, the Labour Brexit spokesman, going through his own having-your-cake-and-eating-it phase. No, Labour does not want to join the EEA, which would involve an official change in the Brexit mandate. Yes, Labour wants the UK to adopt its own immigration regime to protect workers. This version of Brexit will not be on offer by the EU.

We felt that Theresa May herself failed to make progress on that front when she delivered her speech in Florence. We noted back in March that the decision to leave the single market and the customs union is profound. This means that the UK will have third-country status, plus an FTA with the EU. This FTA will include zero-tariff rules, rules of origin regulations, and services chapters, only to the extent that they are mutually beneficial. Since the FTA will have to be ratified by everybody, we are not expecting this to be a very long list. If the UK adopts its own immigration regime to the effect that access by EU citizens to the UK is constrained in any way, we see no chance whatsoever of any services components in the FTA. Freedom for nukes but not for people - you must be kidding! 

The Brexit options are thus far more binary than many people in the UK realise. There are no creative options. And as Michel Barnier noted yesterday, the same is true for the transitional period. He said that the transition was not part of his mandate, but the conditions for it are exactly the same binary choice as for Brexit itself. First of all, the EU itself has to decide whether it wants a transition. We assume it does. But any transition will come with all the obligations of membership - regulatory, budgetary, supervisory, and judiciary - with the corresponding enforcement instruments. There will be no immigration regime in that transition. This is Brexit postponed, with the sole exception that Brexit is no longer reversible at that point. 

The talks yesterday made no progress on this front. The EU is still waiting for the UK to clarify its position before it unlocks the second phase of the Brexit talks - about trade. We are sceptical that this will happen in October.

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