Sunday 12 January 2020

Switzerland or Sweden?

There is a lot of speculation at the moment that the UK is headed towards a Swiss style relationship with the EU. This is a result of the very short 'transition' period in which to negotiate a bare-bones trade deal, which will then lead on to multiple agreements in future on other issues. It would suggest we will end up like Switzerland which has more than 100 bilateral agreements built up over twenty years or more. However, I would caution against the idea since it's well known the EU is not keen on repeating such an unwieldy arrangement.

The latest person to point to something like this is an anonymous, pro-Brexit 'senior economist' writing under a pseudonym at Briefings for Brexit. Harry Western is said to be the pen name of a senior economist working in the private sector "who needs to remain anonymous for professional reasons."  I assume he faces the sack if his views were known.

Mr Western, or whoever he really is, says the prospects of reaching an "acceptable trade deal [are] worse than most people think." In this I think he's right - but not because the EU is intransigent  or will seek to punish us as he believes, but simply because a deal 'acceptable' to the average Brexiteer was never possible anyway. We will accept whatever deal we can in the end.

The shy economist says:

"As a result, the EU is likely to follow much the same approach as it did in the first round of negotiations on the withdrawal agreement, attempting to delay, delay and dilute Brexit".

He thinks the EU will set out "extreme" pre-conditions, rely on "intense business lobbying and dubious economic modelling by friendly bodies to try to scare the UK into concessions on the length of the transition period, timetabling of negotiations, and their content" and try to force us into an "Association Agreement-style model".

For attempting to "dilute" Brexit, read 'introducing the UK government to reality'.

Although a Swiss style deal isn't mentioned by name he suggests the final landing zone might see the UK as an associate member of EFTA (Switzerland is a member), in the European Aviation Safety Agency and CENELEC (the non-EU electrical standards setting body), using the PEM (Pan-Euro Mediterranean) rules of origin system, accepting non-regression clauses on labour and environmental rules in line with international standards, redefining level playing field requirements in an "imaginative way" and getting a deal on fisheries that allows "some continued access by EU boats". 

All of which, when you begin to look at security, science, space and other areas to be covered later, actually begins to look a lot like Switzerland.

The senior economist goes on:

"If the UK government wants the EU to engage seriously and agree the kind of limited trade deal it now says it wants, which maximises UK economic freedoms, it is going to have to be prepared to scrap very hard.

"Firstly, the UK will have to make it 100% clear to the EU that a thin trade deal linked to onerous LPF conditions is not of any interest to it and it would prefer to leave on WTO terms than accept one. With the EU’s average WTO tariff on UK goods only around 3%, the UK would almost certainly be better off leaving on WTO terms and flexing its regulatory independence."

He wants the UK to "aggressively get on" with negotiating trade deals with the USA, New Zealand, Australia and Japan - as well as the EU - to force the EU to "engage seriously".

"There have been some promising signals on the above in recent days, including statements from the UK government that it intends trade talks to go forward in parallel with other partners as well as the EU. But we remain unconvinced – as the EU will also be – that the government has the strength of will to take the very tough actions needed to force the EU into a serious negotiation on trade. Some very clear and concrete moves are needed in the coming weeks – bluffing won’t work."

No, bluffing won't work but this is all we have ever had isn't it?.

Another person who seems at first glance to think a Swiss style deal is our destination is Brigit Laffan, a Director and Professor in the Robert Schulman Centre, European University Institute. Her tweet below was then retweeted by Mujtaba Rahman, who also thinks it's unlikely:
However, I note what professor Laffan is talking about is a coherent overall framework, which I take to mean some kind of over-arching deal to which new aspects can be added later. That really would make it much more like an Association Agreement, as Harry Western fears, than the 100+ separate bilateral agreements the EU has with Switzerland. It is perhaps what Barnier was talking about in his Sweden speech when he cryptically said, "First, we must build up a new capacity that enables us to work together."

This would be the foundation stone of all that will have to follow. Something on which to build a future close and deep relationship.

I wouldn't underestimate the difficulty in reaching such an agreement on this 'new capacity' but the EU must be well aware that the time to do it is now. If they cannot get the UK government to agree when it's dangling above a cliff edge or a very steep slope covered in jagged scree, they will never do it. And they must see it is better to get this agreed at the outset rather than having endless repetitive arguments stretching into the years ahead.

We will soon know if we're headed for Switzerland or Sweden.
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