Brexit – What small things tell us about the big picture
Dr John Moriarty offers a personal reflection on the UK/EU future relationship negotiations and some possible implications of a no-deal Brexit.
After the 2016 referendum on the UK’s membership of the European Union, the invisible suddenly became visible. I’d lived in the EU all my life, as a child to the south and as an adult mostly to the north of the Irish border. Suddenly I found myself noticing things I never had before, things that now seemed less certain.
I hadn’t noticed that my UK driver’s license had a European flag on it. I bumped into a colleague whose salary is part-funded through the European Union Horizon 2020 research budget. I had to transfer money to a friend in the Republic of Ireland and did so from my Sterling account via the “SEPA” menu in my online account. I’d never thought about what the E stood for before. I read an article about the European Space Agency. How do these things work, I wondered, and what’s to become of them? I’ll talk you through what I found and then summarise what these examples have convinced me of.
Driving licences are subject to a European Directive and are mutually recognised among EU member states. The status quo is that if you move to the UK from any EU country or vice versa, you just send away to swap your current driving licence for a new one.
In any agreed future relationship, the UK’s Driver and Vehicle Licensing Agency could recognise all driving tests taken in an EU country and vice versa. This would probably incur a fee from the EU side for continuing to avail of the coordinated system. Bureaucratic headache at UK end still looks inevitable what with having to, at a minimum, redesign all licences by removing the EU flag from the front. Oh and did I mention there are different agencies for Scotland and Northern Ireland?
In a less harmonious version of the future, there are two options as far as I can see. Either the UK has to develop 27 different bilateral agreements whereby the DVLA has to liaise with 27 different licensing agencies, or else, sod it, everyone moving to the UK has to take a driving test here. Cue everyone who hasn’t converted their licence yet sending it off, resulting in near-term gridlock.
This is a reasonably good example of where the EU can be seen as an outsource destination for things which are finicky to regulate and impossible to coordinate bilaterally. There are webpages maintained and paid for at EU level and these pages direct you to people who can help if you have an issue with this or any other right you have as an EU citizen. By leaving the EU, the UK is opting out of the use of central facilities like this and opting, at best, to duplicate efforts and, at worst, making things harder on its own stretched facilities to process licences in a timely way and on its citizens to drive if they move abroad. Even in the benign scenario, the UK would certainly have to pay the EU to keep things simple on their behalf, but would miss out on shaping future directives as they adapt in the near future to new developments such as, say for instance, the arrival of driverless cars.
SEPA stands for “Single Euro Payments Area”. If you have a bank account in the UK, you can make a SEPA transfer to a bank account in any of the other 27 EU countries, plus an additional six members (Monaco, Lichtenstein etc) without incurring the charges that, say, a transfer from the US would incur. This is administered by the European Commission and paid for through EU member state contributions.
The easiest way to maintain this arrangement would be if the UK remained within the European Free Trade Association, though that has never looked to be part of the gameplan. Assuming not, harmonious relations would see special affiliate membership of SEPA for the UK, allowing transactions to continue. There would be a fee due for the administration of this, which could either be stumped by the UK government, or could be passed through the customer by adding some surcharge to transactions.
Or… all UK banks could become ineligible for SEPA transactions. Full charges apply for all transactions into SEPA countries (or at least the EU-SEPA members, but possibly also Monaco, Lichtenstein, etc.). I’m guessing that under EU competition rules, the member states have to negotiate as one on this and it isn’t possible to have country-level bilaterals about waving transaction fees. In other words, a nightmare for any companies north and south of the Irish border who regularly invoice or pay in either direction. (By the way, if you thought you could dodge that inconvenience with CurrencyFair you’ll find it’s subject to “Regulation 18 of the European Union (Payment Services) Regulations 2018”, so no way round there – money is awkward to move over borders for good reason!)
The European Space Agency (ESA) has 22 members of which the UK is one. Canada is an associate member, suggesting this should be straightforward. However, Canada doesn’t have what the UK has, namely the large research centre at Hawell, one of six ESA bases. The other five are also in EU member states. ESA is not a European Union initiative, but there is an objective to make it so and the EU subvents the contribution made by the members and associate members. So, with the UK contribution gone from the EU budget post-Brexit, where does the money come from? And what happens if ESA is brought into the EU?
On this occasion, this could be seen as equally problematic in both directions. Space Agency bases are notoriously awkward to move. Plus, the UK is a big ESA monetary contributor, so you would expect that both sides would be looking to keep the UK within ESA without diluting its membership should ESA fall under further EU control in the future. That way, the research centre at Harwell stays where it is.
However, nothing’s that easy. If the UK is weaning itself off contributions to the EU budget, then in effect its contribution to the EU subvention of ESA is disappearing. So, again, the likely price for maintaining the status quo is an increase to the UK’s annual contribution. Currently this stands at 324 million, less than half the contributions of either France or Germany. If UK doesn’t pay up, there are bound to be EU ESA members who would happily build whatever needed built to gain the 100 jobs at Hawell and the associated industry and prestige.
But once again, the UK is effectively opting to become a second-class ESA member as it can neither act to restrain further EU control over ESA, nor influence any future EU steerage of ESA.
So what do these examples show us?
One common pattern is that where a harmonised system is coordinated in Brussels, having a side-deal with the UK becomes more work for the EU. This could result either in the UK being dropped from the system or incurring a fee for the convenience. And in each case, it is then paying for a service whose shape it cannot influence.
But here’s the larger point. Want to guess what the transition deal has to say about all of the above? Don’t bother scanning it, because I’ve saved you the work. Correct, nothing. The transition deal covers none of this because none of this has been on the table, except in one sense which I’ll return to.
All of this falls under the ‘future relationship’ phase, along with aviation, Erasmus, food safety standards, security and data sharing, charges for accessing health services by UK citizens in the EU and vice versa, and countless other ‘line items’. And, all these things are in play until then endpoint of the negotiations, even the seemingly easy stuff. The transition deal, consisting of only four substantive areas, will read like a haiku by the time the future relationship deal is signed off. TTIP, the Transatlantic Trade and Investment Partnership, has been under negotiation since 2013 and has slipped well past its own targeted conclusion in 2016 (because you never who or what might happen to your negotiating position).
The TTIP documentation is held in several locked rooms. CETA, the Comprehensive Economic and Trade Agreement between the EU and Canada, was negotiated over seven years from 2007 to 2014, though only signed in 2016 following its ratification across the EU. If the withdrawal agreement and accompanying political statement on future relations were agreed, the UK would be in a similar position to where Canada was in 2008 after its joint study with the EU on the feasibility of a free trade deal. It’s an open question whether the UK negotiations would be made more or less complicated by coming from the starting point of EU membership. In all likelihood it will make standards easier to harmonise, but introduce complications through the UK needing to replace status quo mechanisms with new ones and the attendant necessity for mutual review procedures.
So on the one hand, the existence of all of these interconnections between EU and UK institutions points to a very long future relationship negotiation, with all the implications around the need for the post-transition backstop arrangements. But on the other hand, each example also points to something which could be suddenly and dramatically different come the end of March if no deal is agreed and the UK crashes out. Charges on all transactions, on top of the widely publicised WTO trade tariffs. Few if any protections for UK citizens in the EU or vice versa, let alone recognition of one another’s driving licenses. It’s not alarmist to say that in a no-deal scenario, life would suddenly and dramatically change in ways we cannot anticipate because we simply don’t see the plainest of available facts: we are in Europe.