STARTING today, the formal negotiations for the UK to leave the European Union begin with the biggest question nowhere near being answered – will the UK Government seek a soft or hard Brexit?
Focusing on the economy, The National can report that there is no change to the forecasts made in October last year by the Fraser of Allander Institute that a hard Brexit could cost up to 80,000 jobs in Scotland over ten years, with Gross Domestic Product down by £8 billion and wage reductions averaging £2000 per year. Though there are no official statistics available, it is clear that a soft Brexit – principally with access to the single market retained, possibly through membership of the European Economic Area – would be considerably less damaging to the economy of Scotland.
For an explanation of the difference between a soft option and a “hard times” Brexit, The National contacted a man recognised as one of the top experts on the economies of Scotland and the EU as a whole.
Dr Fabian Zuleeg is chief executive and chief economist of the independent European Policy Centre. He has worked as an economic analyst in academia and the public and private sectors, and is honorary fellow of the Edinburgh Europa Institute and honorary professor at Heriot-Watt University.
Speaking to The National from his Brussels office, Dr Zuleeg said: “It is very clear that the whole Brexit process is a lose-lose proposition. Economically it just does not make sense and it will cost jobs, but there is a way of minimising the damage by participating in the single market through having a soft Brexit. The difficulty of doing that is being underestimated, however.
“We have the estimates of how many jobs would be lost, but the reality is even worse than that because economies are dynamic, they depend on interactions and they depend a lot on exchange.
“A soft Brexit is not only better for Scotland but economically the only sensible option for the UK as a whole. It would also solve some of the constitutional issues – a soft Brexit, for example, would ensure there is a soft border between the Republic and Northern Ireland.
“By soft Brexit I mean mainly participation in the single market, and I call it participation because it is different from membership.
“You can only have membership if you are a member of the European Union, but participation in the way that Norway participates in the single market through the EEA is possible – though it comes with obligations, and those obligations are the kind of things which the Westminster government so far has said are not acceptable to the UK.
“With participation in the single market comes the obligation to allow free movement of people and the obligation to make budgetary payments and the obligation ultimately to accept the rulings of the European Court of Justice, though there would be no input into the EU’s control of the single market. It makes the UK the law taker rather than the law maker.”
The UK Government has yet to define its “red lines” in these negotiations, though control over immigration is definitely one.
Zuleeg added: “Free movement of EU citizens is not an issue for Scotland, so the logic for accepting participation in the single market works easier for Scotland because it doesn’t contradict the red lines of the Scottish population or the Scottish Government.”
The May government is pinning its hopes on a trade deal, but Zuleeg is sceptical. “There is the possibility of a trade deal negotiated by the UK Government in the interests of the UK as a whole, but trade deals are difficult to do," he said. "They involve trade-offs, giving up something in return for something else. The UK as a whole will have to decide what are the priority areas, and these will be very difficult negotiations.
“So, for example, will the UK give up fisheries rights in return for access for financial services? It is those kind of deals which you have to make in any bilateral trade deal.”
The result of the General Election should have convinced Prime Minister Theresa May that a soft Brexit might be more in line with what the people of the UK want, and if Scotland is going to be taken out of the EU against the people’s wishes, a soft Brexit is surely necessary to preserve the Scottish economy.
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