Hard choices

The SNP should debate whether a separate Scotland should join the EU post-Brexit. But all their options are bad

We often forget the SNP campaigned against the Common Market in 1975. But ‘Independence in Europe’ has been an SNP rallying cry for quite some time now. The European Union creates an unusually benign home for small states. To the SNP, the EU also promised continued economic integration with the United Kingdom after secession. The SNP claim that Scotland could carry on in the EU automatically was almost certainly spurious, but that didn’t stop them.

Brexit changes that. It makes the SNP’s political case more appealing, but its practical case harder. It creates sharper dilemmas for a separate Scotland. So it makes sense that some in SNP ranks are raising the question of Scotland’s future EU relationship. Most still back EU membership, including Nicola Sturgeon herself. Some look to the European Economic Area — the so-called Norway model. Are there any good options?

A hard border in Great Britain?

Scotland wouldn’t just need to align with the UK on customs and rules of origin. Not joining the Schengen Agreement would avoid checks on people, but still wouldn’t suffice. Scotland would need to align on goods, VAT and sanitary and phytosanitary standards (SPS) too. Joining the EU prevents that, unless the UK aligns with the EU or the EU exempts Scotland from some EU rules.

In the EEA but outside the EU, Schengen, VAT and the EU Customs Union wouldn’t pose an obstacle. But goods regulation remains, as does SPS: EEA members don’t have free trade in agriculture, but apply plenty of EU food safety rules. And being outside the EU Customs Union doesn’t avoid the need for customs checks and rules of origin between Scotland and the UK. And a customs union with the UK is hard to square with joining the European Free Trade Association — required for a non-EU EEA member.

Liechtenstein manages, but Scotland is not a microstate

This delayed Liechtenstein’s EEA entry until 1995, but it managed in the end. Both Swiss and EEA goods circulate via so-called ‘parallel marketability’. The authorities monitor goods ‘in the market’ to keep EEA-only products out of Switzerland. Where EEA goods attract tariffs in Switzerland but not Liechtenstein, Swiss customs reimburses importers to Liechtenstein. (This isn’t too far from the plans for Northern Ireland.)

This is much easier for Liechtenstein than it could ever be for Scotland. Switzerland aligns with the EEA for most goods and applies EU SPS rules. It’s in EFTA, along with Norway, Iceland and Liechtenstein. All but Switzerland joined the EEA, reducing the scope for friction due to other trade deals. Furthermore, Liechtenstein is tiny — and so permitted to be anomalous.

Scotland, by contrast, would have the EEA’s largest EFTA population. The UK plans to diverge from EU norms far more than Switzerland. We don’t know how its new trade deals will go, but it shows no interest in joining EFTA. Switzerland has a long history of cooperation with its small, sovereign neighbour. The UK would be asked to help Scotland carve a niche to advantage it against itself.

Cake from London, Brussels, Oslo, Reykjavik and Vaduz? No chance

Yes, the EU bent some rules for Northern Ireland. Scotland will not get the same offer. It was required for Northern Ireland because Ireland, a continuing EU member, had a vital national interest at stake. Perhaps excepting a Schengen opt-out to preserve the Common Travel Area if it wanted to rejoin the EU, Ireland has no such interest in helping Scotland.

Nor would the UK have much interest. It wants to be able to diverge from the EU. It will want to secure the integrity of its regulatory order. And Scotland would be an important trading partner, but not as important as the EU. The UK left the EU to avoid pooling sovereignty: it wouldn’t re-pool it with Scotland for much less economic gain. Any deal would mean Scottish rule-taking and UK decision-making.

Breaking up is hard to do

Still, the scale of Scotland’s UK trade means even this flawed compromise might beat EU membership on economics. A separate Scotland would have two main trading partners: the UK and the EU. But those two partners are far from equal: UK trade dominates.

Data from the Scottish Government. Figures do not add to 100% due to rounding. Flag images from Wikipedia.

For now, Scotland sells to the rest of the UK within a far more integrated market too. There’s a reason the Commission keeps battling to complete the single market. From digital services to hairdressing, from the limits of EU mutual recognition to the UK monetary and fiscal union, sharing a state goes much deeper than joining the EU.

For both reasons, the shock of leaving the British home market — whether for the EU, the EEA or neither — would dwarf leaving the single market. This matters. UK fiscal transfers are crucial, but not the biggest economic question about Scottish secession. The bigger question is: how far would growth exceed or fall short of growth within the Union?

Nationalists make heroic assumptions here, cherrypicking small states and copying countries whose growth isn’t higher than the UK’s. Above all, they don’t factor in the true cost of their political project.

Secession will hurt. So tell Scots what you think they’re paying for

But such close alignment with the UK isn’t realistic. It can’t be: the point of Scottish secession is rejecting the neighbours. Shared EU membership could have cushioned that shift, but not now. Unsure voters will back major pain for radical change, the SNP still wants to sell separation as safer than the Union. But that’s a worse lie than anything from Vote Leave. And the SNP leadership are far too intelligent not to know it.

Breaking up Britain is a far bigger leap of faith than Brexit. It would pull Scotland away from its main market and closest neighbours and the people with whom it shares most. Its rationale is ideological and nationalist, not practical or economic. The least the SNP could do is own its costs.

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