Can Europe Make It?

Scotland has four EU options - but which are realistic?

Everyone is trying to figure out what Brexit means - including Scotland.

Kirsty Hughes
28 July 2016
PA-28088136.jpg

Scottish First Minister Nicola Sturgeon meets with UK Prime Minister Theresa May. PAimages/Andrew Milligan. All rights reserved.

Everyone is trying to figure out what Brexit means. Theresa May says Brexit means Brexit and is for the whole UK – but doesn’t mean a border (or not a hard one) with Ireland. Brexit minister, David Davies says the UK will start to negotiate dozens of trade deals in the next two years. And in Scotland, Nicola Sturgeon sets out key criteria (ranging from democracy to solidarity to voice) that any EU option for Scotland should include.

 
In Brussels and EU capitals, politicians and officials consider what their red lines will be in the upcoming talks while waiting for the UK to tell them what it wants Brexit to mean. Meanwhile individual businesses, financial and other markets, EU citizens in the UK, and UK citizens elsewhere in the EU start to make their own choices - with UK economic indicators pointing towards likely recession.
 
Much ink has and will continue to be spilt considering options, variants on existing models, new models and their implications. But in essence, Scotland has four options – two imply staying in the EU, and two would mean life outside the EU.
 
However, if Brexit does mean Brexit, the UK essentially has just two options, either a Norway-type solution, or a bespoke Canada-style trade deal.
 
How Scottish, UK and EU politics, preferences and negotiations unfold in the coming months will determine whether Scotland ends up with a different relationship to the EU from the rest of the UK (rUK) and what form that will take. But Scotland’s four EU options do not all look equally feasible.
 
Scotland’s four EU options

  • Firstly, Scotland could stay in the EU by going independent.
 
  • Secondly, it could, in theory, stay in the EU and the UK – perhaps with Northern Ireland and Gibraltar – in a ‘reverse Greenland’ model.
 
  • Thirdly, Scotland could be outside the EU and adopt a Norwegian European Economic Area approach (whether as part of the UK or independent).
 
  • Fourthly, Scotland could be part (give or take a few minor differences) of whatever Brexit deal the UK and EU agree.

How realistic are these four options?
 
(1) Staying in the EU as an independent state
If Scotland holds a second independence referendum, and if the ‘yes’ side wins, then Scotland as a European state is eligible for EU membership – and already meets almost all democratic, economic and regulatory criteria (the exceptions being the UK’s current opt-outs).
 
Might Spain or France veto Scotland’s EU membership? A veto is always possible – accession requires unanimity. But after the UK’s Brexit vote, the mood music in the EU towards Scotland is much more positive.
 
There are concerns that Spain – in the face of a vote for independence in Scotland – would be concerned that this might encourage Catalonia’s leaning towards independence. But Spain is not going to leave the EU, so it will not face the Brexit situation of the UK today. And the UK and Spanish constitutional set-ups are different, so a permanent Spanish veto would seem unreasonable as long as Scotland’s independence was not seen as a precedent for secession elsewhere.
 
However, if Theresa May refused to allow a second independence referendum, and if Scotland went ahead with an ‘indicative’ referendum anyway this would create a major constitutional crisis in the UK – if the UK then refused to recognise Scottish independence. In such circumstances, a Spanish veto would be much more likely but then if the UK did not recognise Scotland, probably the rest of the EU in the short term would not either. So, a contested independence referendum would create a tough stalemate.
 
If Scotland is independent before the UK Brexit deal is done:
Would an independent Scotland have to leave and re-join the EU?
 
If Scotland not only votes for independence but also formally splits from the UK before the UK completes exit talks with Brussels, then it is possible Scotland could remain in the EU.
 
It has been suggested that Scotland, as an independent state, might take over the UK’s EU membership – as a slightly complicated part of the UK’s exit talks. The EU 27 are highly unlikely though to accept Scotland continuing with all the UK’s opt-outs (euro, Schengen, justice and home affairs, budget rebate) which would complicate any simple amendment of existing EU treaties to replace ‘UK’ with ‘Scotland’. Equally, if the political will is there, the European Council has shown it can be highly creative in introducing unlikely and unexpected solutions.
 
An alternative, after a vote for independence, would be for Scotland’s EU membership talks to be fast-tracked – not least given the much more positive political mood towards Scotland across most of the EU.
 
Scotland would need to take into Scottish law all the EU laws that were passed through Westminster (since only some EU laws have been passed via the Scottish parliament in devolved areas). Scotland would also have to negotiate over any opt-outs – probably retaining the Schengen border-free deal, having to commit to eventual euro membership (but Swedish-style not expecting to join in the foreseeable future), possibly retaining the same ‘opt-in’ provisions on EU justice and home affairs policies as Ireland (and the UK), and accepting it would no longer get the budget rebate (though as a new state as well as a new member state, Scotland could try to argue for some transitional deal on budget).
 
 After completing fast-tracked accession talks, which could take as little as six months, Scotland’s accession treaty would need ratification which could take up to three years. But if Scotland has become independent of the UK before its EU membership is ratified, Scotland risks finding itself outside for some time.
 
The simplest solution to that would be for Scotland to stay in the EU in some sort of transitional ‘holding pen’ – not having a seat in the Council of Ministers or MEPs in the European Parliament until its accession deal is ratified but not having to exit and re-join. This model has not been used before but the EU has plenty of experience of establishing provisional arrangements while accession member states wait for their accession treaties to be ratified.
 
If Scotland is independent after the UK leaves the EU:
If Scotland had said ‘yes’ to independence in a second referendum before Brexit, but not completed its talks with Westminster on leaving the UK before the UK left the EU, then it would be outside of the EU though having expressed its wish to become a full member state.
 
Scotland would need, at this point, to avoid changing and repealing EU legislation, so it remained fully ready for fast-tracked membership talks. The simplest route might be to go for temporary membership of the European Economic Area with Norway (and the UK might even have decided to use this as a transitional route to its own more detached trade deal – which would make Scotland’s own transition much easier).
 
While still in the UK – and outside the EU – Scotland would then be part of the UK’s trade regime since the Norway EEA model does not include being part of the EU’s customs union.
 
This raises the challenge that if Scotland is independent of the UK before re-joining the EU, it could face having to set up its own trade regime – whether membership of the EU’s customs union could be also fast-tracked, at this point, would be a potentially important point.
 
One recent report suggests that there is a debate going on within Whitehall over whether the UK would indeed leave the customs union, and even if it does (which for now seems the more likely) there may be transitional periods before the UK left which would make Scotland’s own transition easier.
 
But beyond these complications, Scotland could then still look for fast-tracked EU membership talks while holding a transitional status in the EEA.
 
 
(2) Stay in the EU through a ‘reverse Greenland’ approach
The only route to staying fully in the EU without independence would be to make a reality of the so-called ‘reverse Greenland’ approach (there are several articles that consider a differentiated approach – for example Hughes, Ramsay, Lock and Keating).
 
In this approach, Scotland – possibly with Northern Ireland and Gibraltar – would represent the UK in the EU, while England and Wales would, like Greenland, no longer be part of the EU, not subject to its laws or courts.
 
The EU has shown flexibility in other cases too. Northern Cyprus (recognised only by Turkey) is part of the EU but without the EU’s rules and laws applying there (though if the current talks lead to reunification of the island, then they would apply). The former East Germany, when it reunified with Germany in 1990, also became overnight part of the EU, even though it did not immediately meet the EU’s rules and regulations.
 
But in each of these cases, the internationally recognised state – Denmark, Republic of Cyprus, Germany – is or was the EU member state, with just one part of its territory not complying with EU laws.
 
If Scotland was still part of the UK, and was in the EU Council of Ministers and Parliament, this would risk setting up various contradictions.
 
The EU agrees various common positions on foreign policy and defence issues – at unanimity. It also negotiates, through the European Commission, trade deals for the EU as a whole. If the UK was an international state, with its own foreign policy and trade deals, then it is hard to see how Scotland (with or without Northern Ireland and Gibraltar) could then vote on and take different foreign policy positions or trade deals in the EU that could potentially conflict with UK foreign policy as still set by Westminster.
 
Scotland, in the ‘reverse Greenland’ approach, would also keep full free movement of people, while England and Wales would not. This need not mean a border between England and Scotland – migration policy could be devolved. And if EU citizens still have the right to visit England and Wales without visas, but not the automatic right to live and work there, then this could be policed internally.
 
But if migration, trade and foreign policy were somehow devolved to Scotland, Northern Ireland and Gibraltar, this is surely a de facto independence (going beyond what a ‘federal UK’ set up might deliver).  Moreover, the contradictions it entails means agreement from the UK and EU to this approach is rather unlikely.
 
And the UK would have little incentive to go along with this from an economic point of view too. If Scotland was in the EU and the UK, while the UK was not fully in the single market, there would be considerable incentive for many UK businesses, especially if mainly supplying the UK market, to headquarter in Scotland not England.
 
Of course, there may be variants on this approach that might exclude foreign and trade policy. But if Scotland were to be in the EU Council of Ministers, with a voice and vote, but not part of EU trade policy and foreign policy, this sets up a differentiated EU to a degree for which there is no precedent – and one that the EU 27 are highly unlikely to go along with. They would surely be more likely to suggest Scotland joined Norway in the EEA.
 
Some have suggested other more partial and differentiated versions of this approach but again it is hard to see why the EU would go along with it – or exactly what the real benefits are.
 
One suggestion is that Scotland and Northern Ireland could keep Members of the European Parliament and a European Commissioner but not a seat in the Council of Ministers. Another is that Scotland could participate in meetings of the EU’s ambassadors (the permanent representatives).
 
But since the EU has been keen to get away from the idea that every member state has a European Commissioner, why would it open a Pandora’s box of a sub-state having a Commissioner (which other EU regions would then surely ask for)? And since the permanent representatives prepare the meetings of all the Councils of Ministers – which then vote on EU law – it would be a rather strange anomaly for Scotland to be present in a powerful EU body that prepares meetings of the Council of Ministers, when Scotland is not in the Council of Ministers and is not a member state.
 
(3) Join Norway in the European Economic Association
Scotland, whether as part of the UK or as an independent state, could ask to join Norway in the EEA. The advantage to this is it would remain fully part of the EU’s single market with full free movement of people.
 
But like Norway, the disadvantage is that Scotland would not have a say or vote in the EU laws and regulations that it would have to adopt. It would also be outside of various other key EU policies including common foreign and defence policy and judicial and anti-terrorism cooperation.
 
However, if Scotland were still part of the UK, and so was part of Brexit, then the EEA model could have some attractions over a weaker Canada-style trade deal that the rest of the UK may well negotiate with Brussels. Since the EEA deal does not include trade policy, Scotland would remain part of the UK’s trade policy but be fully part of the EU single market including free movement of people.
 
How feasible is this, if the rest of the UK is not fully in the single market but has negotiated some Canada-style trade deal with the EU?
 
Scotland could be part of the UK’s new trade deals with other countries around the world, but it would need an exemption from the UK’s trade deal with the EU. If, for instance, the UK  negotiates less free movement with the EU in return for less services access to the single market, then Scotland, in an EEA-style setup would have full access to the single market where rUK did not.
 
This would mean migration policy would need to be devolved to Scotland. And it would require customs checks (not necessarily at the Scotland/England border), to ensure English and Welsh good were not getting access to those parts of the single market not covered in the rUK-EU trade deal. Scotland would also, like Norway, need to follow rules of origin procedures to ensure other third countries didn’t use Scotland as a route round EU tariff barriers into the single market (assuming the UK had left the EU customs union).
 
Scotland may though benefit from whatever deal finally emerges over the common travel area between Ireland and the UK. If a deal is done that avoids a hard border between the Republic of Ireland and Northern Ireland, then Scotland would be able to use this deal as a template (since, like Ireland, Scotland would be fully in the single market – although in this option not a full EU member state).
 
Other areas of policy would also need to be devolved to Scotland, as it would need to implement all EU single market rules, where England and Wales would not. Many businesses in England might at this point see an attraction in being headquartered in Scotland – if they mainly serve the UK market (or otherwise may relocate headquarters elsewhere in the EU (including to Ireland)).
 
These considerations suggest that the UK would not be likely to accept such a differentiated deal – with Scotland fully in the single market and the UK not – even if the EU were happy with it.
 
Moreover, the political, economic and technical challenges involved in Scotland being part of the single market while the rUK was not, suggests that Scotland may find it more straightforward to go for full independence if it wanted to adopt the Norway model. But then an independent Scotland would surely prefer to go for full EU membership, not the Norway model, since as a member state it gets a vote and voice.
 
 
(4) Scotland is part of the UK’s Brexit deal – possibly with some small areas of differentiation
 
The fourth option for Scotland is to be part of whatever UK Brexit deal is finally agreed with Brussels, perhaps with one or two small concessions in a couple of areas that apply only to Scotland.
 
The UK essentially has two main options for its Brexit deal. Firstly, it could go for as much single market access as possible while arguing for some constraints on free movement of people. Secondly, it could go for a Canada-style trade deal – though aiming to cover services much more than the new Canada-EU deal does.
 
So far, Theresa May’s government has indicated it will start to engage third countries in trade talks, so it appears clear the UK will not look to be in a customs union with the EU (despite the recent FT report suggesting a live debate within government on this). May has also indicated she expects a new system of immigration with the aim of reducing inward immigration – so unless the EU offers major concessions, the UK is not likely to stay a full part of the single market.
 
Nor do Brexiteers, in the main, want to be a full part of the single market since then, like Norway, they would have to adopt all EU regulations and rules while having given up the UK’s vote and influence over the rules. In fact, whatever deal is struck, goods and services going into the EU will have to meet the EU’s rules – but with a trade deal, small, domestic-only UK businesses would no longer need to meet single market rules.
 
All this suggests the UK will negotiate its own specific trade deal. Scotland would then be part of this deal. It would also be part of whatever consultation arrangements are set up for the UK to discuss foreign policy, anti-terrorism policies and actions, climate change and more – although whether Scotland would have much presence or voice in these consultation arrangements is for now an open question – the current status quo suggests it would have little voice.
 
It would still be possible for Scotland, potentially, to ask for some mini-deals for itself in the new UK-EU trade deal. Scotland might have certain research or educational programmes that it is keener to stay in than rUK. Whether the EU and rUK would then agree for it to stay in those is unclear but some small compromises in a few areas might be possible.
 
Scotland’s Choices
Scotland has some key choices to make. And it does not have long to decide.
 
It seems likely the UK government will issue a White Paper on Brexit in the autumn, and could trigger Article 50 to start accession talks by early 2017. Nicola Sturgeon’s Standing Council of EU experts will need to offer its advice rapidly.
 
Scotland has four main EU options but only two look relatively straightforward. The first option is to decide to go for another independence referendum – guessing, if it wins, that Spain will not veto its EU accession. Or, at the other end of the spectrum of options, Scotland could decide to put its efforts into influencing the UK’s Brexit deal – and staying a full part of the UK.
 
The two in-between options that Scotland might consider – ‘reverse Greenland’ or the Norway model (whether inside or outside the UK) – both look more tricky and less desirable. In the ‘reverse Greenland’ model, policy contradictions would abound on foreign policy, trade, and other policy areas, between the UK (still a recognised international state) and Scotland (as the representative of UK EU membership).
 
Any lesser versions of ‘reverse Greenland’, with Scotland having some sort of associate membership with the EU while still in the UK, shade into the Norway model.
 
But if the UK negotiated a full, Canada-style trade deal with the EU, while Scotland stayed fully in the single market (with membership of the EEA) including free movement of people, then Scotland would need an exemption from the UK’s new deal with the EU – and the difference in goods and service access to the EU, would then require complex coordination over customs and trade rules between England and Wales on the one hand and Scotland on the other (whichever choice Northern Ireland expressed a preference for), as well as on free movement.
 
The only straightforward way for Scotland to remain both fully in the single market and in the UK would be if the UK also remained fully in the single market. But if the UK adopted a Norway approach – taking the EU’s rules while having given up its say over them – neither Leave nor Remain supporters would be satisfied with this outcome.
 
If the May government goes for being a full part of the single market but with exemptions on free movement, then Scotland being fully in the single market including free movement of people would be feasible. But at present this does not look like the UK government’s direction of travel – nor does it look like an acceptable outcome for the EU. 
 
Scotland could decide to go independent and still join Norway in the EEA – but since Scotland’s First Minister has said one of her five priorities for Scotland’s future EU relationship is having voice and influence, it is unclear why the Scottish government would choose the Norway option over full EU membership. In fact, the Norway option only meets two of Sturgeon’s 5 key criteria – it would ensure the economic benefits of single market membership, and social protection/worker’s rights.
 
The Scottish Parliament voted at the end of June to explore all options for keeping Scotland in the EU – a process that the Scottish Government, with its new advisory ‘Standing Council on Europe’ group of experts, is taking forward. The Parliament’s European and External Relations Committee is also exploring Brexit options.
 
But the four options analysed here suggest that, without independence, keeping Scotland fully in the EU – or even mainly in the EU – while also part of the UK, looks difficult or impossible.
 
The politics of this will get interesting very fast. Sturgeon’s 5 key tests for Scotland’s EU interests are hard to meet without staying fully in the EU – the 5 tests are: democratic (respecting Scotland’s vote to remain in the EU), economic (single market), social protection (workers’ rights), solidarity (security, foreign policy, climate change, anti-terror cooperation and more) and influence (shaping the rules of the single market).
 
The UK will surely set up some sort of foreign policy, anti-terror and security cooperation with the EU but it will not be as intense as when the UK was an EU member state, and the UK will have less influence. Even if the UK went for a ‘single market minus free movement’ model, it would lose voice and influence – as Norway has found. So at best a UK Brexit deal might meet or partly meet two or three of the SNP’s criteria.
 
So the SNP will have to decide if they think they can win a rapid independence referendum in the next year or two, and then would have to find the best way to get Westminster’s agreement on that.

Labour and Lib-Dems have not yet set out their own criteria for remaining in the EU or the single market – although their MSPs supported the Scottish Parliament resolution to explore all options on this. If, as argued here, the only real options are independence in the EU or Brexit with the UK, Scotland’s Tories will doubtless choose the UK over the EU. But for Labour and the LibDems the choice they haven’t wanted to make – between the UK and EU – may soon be unavoidable. 

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