Following the United Kingdom’s vote to leave the European Union, the National Assembly for Wales is examining the implications for Wales.
The External Affairs and Additional Legislation Committee has been tasked to ensure that the interests of Wales and its people are protected during the process of withdrawal and in the future domestic, European and international relationships that follow. It is also responsible for making sure that the interests of Wales and its people are represented in any new relationship with the European Union and the countries that make up the United Kingdom. You can follow the discussions on Twitter and Facebook using #BrexitinWales.
The story so far
The First Minister, Carwyn Jones AM appeared before the Committee on 12 September 2016. You can watch the full session on Senedd.TV or read the transcript of the session here. Here, he gave an update on the Welsh Government’s response and actions since the referendum result and identified their six priorities to protect the interests of Wales:
- To protect jobs in Wales and maintain economic confidence and stability
- To play a full part in discussions about the timing and terms of the United Kingdom’s withdrawal from the European Union.
- To retain access to the 500 million customers in the Single Market.
- To negotiate continued participation, on current terms, in major EU programmes like CAP and Structural Funds up until the end of 2020 while arrangements are made for the longer term.
- Wales is a net beneficiary from the EU to the tune of hundreds of millions of pounds. There is now an overwhelming case for a major and immediate revision of the Barnett Formula taking into account needs arising from EU withdrawal, and
- Withdrawal from the EU is a massive constitutional shift for the United Kingdom. The relationship between Devolved Administrations and the UK Government must now be placed onto an entirely different footing.
He repeated his desire to see a UK negotiating position agreed on a four-nation approach involving Scotland, Northern Ireland Wales and England, and stated that one of the red-lines of the Welsh Government would be tariff free access to the Single Market.
He stated membership was not an option as this had been rejected by the EU referendum vote, but that he was flexible on which alternative model was pursued, provided it guaranteed access for as many sectors as possible to the European Market.
Developments in Wales
This week, Members of the Committee have been visiting Brussels for a series of meetings to inform their work on what the implications could be for Wales and in particular, the options for alternative models to EU membership. This has included meetings with Members of European Parliament, the Canadian and Swiss Missions to the European Union, the Irish Permanent Representative to the European Union, the European Commission and officials from Wales House and the Scottish Government.
What are the alternative models to EU membership?
There are a number of alternative models the United Kingdom may consider for its future relationship with the European Union.
The Norway Model
Norway is in the European Economic Area (EEA) but not in the EU. The EEA is an internal market providing for free movement of persons, goods, services and capital, and is comprised of the 28 EU Member States plus Norway, Iceland and Liechtenstein. This is the model outside of the EU which is most integrated with the Single Market. These three countries make contributions to the EU budget, and take part in some non-economic activity such as counter-terrorism. Though they must follow most of the rules of the Single Market, they have no vote or vetoes in how these rules are made.
Non EU Members of the EEA do not make contributions to or receive CAP funding. Although they are not generally eligible for European Structural Funding, Norway and Liechtenstein qualify for some cross-border and transnational programmes. The EEA Agreement ensures participation by Iceland, Liechtenstein and Norway in a number of other EU programmes, including Horizon 2020 (research and innovation) and Erasmus + (education and training).
Negotiated bilateral agreements
A number of countries have negotiated differing degrees of access to the EU’s Single Market, bringing with them a certain number of the obligations of EU membership.
Apart from the EEA, Switzerland’s agreement with the EU goes furthest to replicating the terms of EU membership: both in terms of opportunities and obligations. In return for a partial access to the Single Market, Switzerland must accept the free movement of people, contribute to EU spending and comply with most of the rules of the Single Market, such as product safety standards, environmental requirements and so on. Similarly to the non-EU EEA countries, Switzerland has no votes or vetoes on how Single Market rules are made.
Switzerland does not participate in CAP, is partially involved in Horizon 2020, and though not generally eligible for European Structural Funding, it participates in some cross-border and transnational programmes.
At the other end of this spectrum, Canada has recently finished negotiating a Free Trade Agreement with the EU – the Comprehensive Economic and Trade Agreement (CETA), which is going through the final stages of ratification. These negotiations have taken around seven years. The Canadian model involves less access to the Single Market than Switzerland has, and accordingly entails fewer obligations. With a Free Trade Agreement, countries agree market access, tariff levels and quotas for trade between them and the EU. As noted in the case of Switzerland, exporters wishing to sell to the Single Market are obliged to comply with the EUs Single Market rules concerning product safety, environmental and other standards. One of the advantages of a free trade agreement like CETA is that it includes mutual recognition of standards. Parties to a Free Trade Agreement do not, however, have any votes or vetoes on how the EU Single Market rules are made. Canada does not contribute to the EU budget, and does not directly receive funding from its funding streams. There is not free movement of people between Canada and the EU, though there are arrangements for the temporary movement of certain professionals.
World Trade Organisation-only Model
The UK, along with all other EU Member States, is also a member of the World Trade Organisation (WTO). In the absence of alternative arrangements, the UK would fall back on its WTO membership to provide the terms of its relationship with the EU. This is the only formal model of a future relationship which is currently available to the UK and that would not require further negotiations.
Under this model, UK access to the Single Market would be subject to the same tariffs as all 161 other WTO members that have not negotiated their own arrangements. Along with the limited access to the Single Market, this model brings with it minimal obligations to the EU. WTO countries are not required to contribute to the EU budget, or accept free movement of people. Again, businesses trading exclusively under WTO rules wishing to sell to the Single Market are generally obliged to comply with its rules. Once again, WTO members do not have votes or vetoes on how these rules are made. WTO countries do not necessarily have direct access to EU funding streams.
It is essential that Wales’s voice is heard and represented in the discussions about the future trading relationship between the UK and the EU, and that we fully understand the positive and negative opportunities of alternative trade models. You can read more about the options open to the United Kingdom by the National Assembly for Wales’s Research Team.
Next week, the Committee will hold the second of its themed expert seminars: Funding, Research and Finance with a particular focus on research and mobility and the impact of Brexit on the Welsh Higher Education sector.