George Peretz

Why Common Market 2.0 is the Brexit we need

Why Common Market 2.0 is the Brexit we need
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In recent weeks, there has been a lot of inaccurate media coverage of Common Market 2.0, which proposes that the UK should remain a member of the European Economic Area (EEA) after Brexit. The fundamental purpose of the EEA Agreement is to extend the benefits of the single market to countries that are outside the European Union but members of the European Free Trade Association (Efta). EEA membership for non-EU states involves accepting the rules of the single market – including the four freedoms – but excludes other EU policies that many in the UK dislike, such as economic and monetary union, political union, the common agricultural policy, the common fisheries policy, and other common policies.

The advantages of retaining deep levels of access by UK suppliers to the single market in goods and services are widely accepted. But truly “frictionless” access can be achieved only if the EU is confident that single market rules are correctly applied and if there is a process for updating our rules as the EU’s rules develop. This is what the EEA Agreement achieves. The Agreement was designed with the expectation that Sweden, Austria, Finland and Switzerland would also take part, so it was explicitly designed to cope with a large number of states. It sets out a workable answer to questions routinely ducked by those proposing a “common rule book” or “strong single market alignment”: how would UK compliance be monitored and enforced? And what will happen if the EU law to which the UK has “aligned” then develops?

The EEA Agreement is different from the framework of EU law which applies to the UK as a member of the EU. EEA law does not have “direct effect”: it has effect only because national parliaments have incorporated its rules into their own law. While the EEA/Efta States do not have votes on new EU laws, they have a right to be consulted and, crucially, every EEA/EFTA State has to agree before new EU single market law is carried over into the EEA Agreement.  If they do not agree, there is a process in which the two sides try to reach agreement on what should be carried over, failing which the relevant part of the EEA Agreement is suspended.

Of course, it would not be sensible for the UK to go into an EEA/EFTA arrangement intending to refuse to carry over new EU law routinely. But the suggestion that EEA/EFTA states are pure ‘rule-takers’ is simply wrong: the right to be consulted has real teeth, since, if their legitimate concerns are ignored, they can ultimately refuse to carry over the unacceptable provision.

If the UK became an EEA/EFTA State, it would have the right to appoint a judge onto the EFTA Court (which resolves disputes over interpretation of EEA law) as well as a UK member of, and officials at, the EFTA Surveillance Authority (which enforces compliance by the EEA/EFTA States with their obligations, and applied competition and State aid rules). The importance of those bodies vis-à-vis the European Court of Justice and the Commission would increase, as they would have more cases to deal with. So the UK would retain at least some of its considerable influence over the day-to-day development of single market law.

Some have questioned whether UK membership of EEA/EFTA is negotiable. That is a political question, of course. But the UK Government itself accepted in a 2017 case before the High Court that, in the absence of an agreement with all the other EEA Member States or a formal notice to leave the EEA (and this has never been served), the UK would remain “listed as” a party to the EEA Agreement after it left the EU. So the Government accepted in court that the legal default is that the UK remains a member of the EEA after Brexit, although the Government believes the UK’s membership would not be operational.

Some have raised questions about the compatibility of membership of EFTA with the comprehensive customs arrangement that we will need to enter to avoid a hard border on the island of Ireland or in the Irish Sea – at least until alternative arrangements that guarantee frictionless trade have been agreed with the EU. It is true that the four existing EFTA States will need to agree that the UK could derogate, at least for a while, from a few provisions of the EFTA Convention (in particular, the requirement to try to accede to existing EFTA/third country free trade agreements).  But there is no reason why that could not be agreed: derogations are frequently found in accession agreements, and it is hard to see why a derogation of that kind would be a deal-breaker.

Ultimately, the decision to accept or reject Common Market 2.0 is a political question. But, when so much hangs on the outcome of tonight’s vote, the decision to support or oppose the Common Market 2.0 motion should be taken on the basis of an accurate understanding of what it involves.

George Peretz QC is part of the Future Relationship Working Group set up by Common Market 2.0 to revise the Political Declaration