Richard North, 21/05/2014  

000a Nomura-021 exit.jpg

Recently come my way is an edited version of the paper submitted by Nomura's chief UK economist Philip Rush to the IEA "Brexit prize" competition. Like mine, it made the short-list but was not amongst the six finalists. The paper can be viewed from this link.

What immediately strikes on is the professionalism of the paper, making an extreme contrast with the child-like incoherence of this one from Rory Broomfield and Iain Murray.

This paper, which won the second prize, posits as an exit option, negotiating a deal with the EEA as an alternative to re-entering EFTA. In so doing, the authors (and the IEA judges) apparently do not realise that the EEA is the fruit of an agreement between EFTA. Thus, for a post-exit UK, EFTA and EEA are not alternatives. Membership of EFTA is a precondition for participation in the other.

In common with the Philip Rush paper, however, Broomfield and Murray go on to reject the idea of EEA participation, but Rush opts something "between the set menu of the EEA and the pick-and-mix of the 'Swiss option'". He calls it a "simple association agreement" that grants access to the single market and all its four freedoms. Effectively, it is the EEA-lite espoused by Campbell Bannerman, but with the four freedoms thrown in.

It is not surprising, therefore, that the IEA judges rejected Rush's offering, even though it was far more professional than any of the six finalists. One wonders, though, what they might have made of UKIP's latest offering, as conveyed by Autonomous Mind from analysis of an article in Financial News by Margreta Pagano.

The egregious Pagano, under the heading "Prepare for a City surge in UKIP support" tells us that Tim Aker, the UKIP policy wonk, has "more elegant solutions" under review other "than the emotive in-out one". One of those, it would appear, would be for the UK "to exit but negotiate to stay in the Customs Union".

By this means, we are told, "UK plc would be allowed to vote on all trade matters but on an intra-governmental basis, not supranational one", a puzzling if not incoherent suggestion, as we are not at all sure what "intra-governmental" is supposed to mean.

Nevertheless, "the beauty of this approach" is apparently that, by staying in the Customs Union – rather than joining EFTA for example – "manufacturers can trade duty-free within the Customs Union area: Turkey and Monaco have Customs Union agreements".

This is, effectively, the Turkish Option which is nothing new to those who have studied possible exit options, and one which has been duly shredded by Open Europe and others, who find little merit in the arrangement.

What might have slipped the attention of Mr Aker, though, is that the Ankara Agreement which brings the trading agreement into being also includes substantial freedom of movement provisions, which would undoubtedly be replicated in any agreement that the UK sought to make with the EU. In other words, it would undermine completely Mr Farage's claim to restore control over the UK's borders, once we had left the EU.

Effectively, though, what Mr Aker is proposing is a policy of staying in the EU. In UKIP were to adopt this as policy, forget Nick Clegg and the Liberal Democrats. UKIP would become the party of "in".

In this context, Autonomous Mind informs us that Nigel Farage told John Humphrys on Radio 4's Today programme that he would do a deal with the devil to get an EU referendum. Why bother, asks AM when UKIP is considering a plan that keeps the UK in the EU while only pretending to be independent?

This isn't, he says, a case of good ol' Nige not doing some detail, this is a case of failing to understand the basics. A policy of "out" that really means "in" should defy belief. But this, he adds, "is UKIP and no amount of crass stupidity should surprise anyone any longer. If you plan to vote UKIP because you want to leave the EU, you may want to think again".


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