Brexit, Scotland and Europe

Kirsty Hughes | 6 February 2020

© 2017 SCER

The Brexit process and the general election have reignited debates over Scottish independence. The First Minister has argued that Brexit represents a material change in circumstances from that which prevailed in 2014, when the issue of Scotland’s constitutional future was put to the test in the independence referendum. The current debate is concentrated on process issues, and on who has the right to decide whether and when a new referendum should be held. But the fact of Brexit also affects the prospects of independence. This contribution focuses, in particular, on the options that would face an independent Scotland seeking to renew its relationship with its European partners.

The possibility of an independent Scotland being in the European Union remains a key issue in the independence debate. Brexit doesn’t much change the choices available to an independent Scotland – being in the EU, or in the European Economic Area or neither – but it certainly changes the impact and implications of these choices.

The EU debate was already central to the 2014 independence referendum. Many on the pro-UK side argued that Scotland would struggle, and take time, to re-join the EU. The pro-independence side argued it would be rapid and seamless given Scotland had been in the EU for over 40 years, and so already met its membership requirements.

Today, the EU is an even higher profile issue in the independence debate. Despite Scotland’s remain vote, it is no longer part of a member-state of the EU. If Scotland did seek to re-join as an independent country,, the rest of the UK would be a third country outside the EU.

Independence in the EU?

The SNP has a clear goal of independence in the European Union. This option is certainly feasible for any independent, internationally recognised, European state. An independent Scotland could apply for membership, go through the various stages of accession and eventually join, subject to a unanimous decision of the European Council, made up of the leaders of each of the member states of the EU.

There are many much-debated issues around the likely speed and ease or difficulty with which an independent Scotland might join the EU: what currency would it use, how big a fiscal deficit might it face, might its application be vetoed and so forth. The fact of Brexit – of the UK leaving the EU – also changes how some of these issues and challenges might look, also raising new questions not least on the border with the rest of the UK.

First, the issue of how rapidly an independent Scotland could reduce any initial fiscal deficit to EU target levels – and how close it would need to be ahead of accession – essentially stays the same, Brexit or not. But the question of currency, if an independent Scotland initially uses the pound sterling (possibly without the agreement of the rest of the UK), does change. Perhaps Scotland might have been able to join the UK’s opt-out from the euro, if the UK was still in the EU and if Scotland was using the pound. But, after Brexit, Scotland would be expected like any other accession candidate to aim to join the euro once it met the criteria.

Moreover, the possibility that Scotland as an EU member state might be temporarily using the currency of a non-EU member state is quite unique. How that would be tackled politically by the EU is not entirely clear. How quickly would Scotland introduce its own currency and would the EU agree to that transition taking place after accession or insist it must be complete first? Certainly, it would be hard for Scotland to argue it was in control of its own monetary policy without its own currency.

An independent Scotland would, presumably, aim to be like Ireland – benefiting from free movement of people alongside all the other freedoms of the EU’s single market, while also remaining part of the Common Travel Area (which allows British and Irish citizens to travel freely between, and reside in, both countries), and with an opt-out from Schengen to enable that. But the Common Travel Area would become a much more key issue in UK-Scotland divorce talks than if both were in the EU since it would underpin continuing free movement between Scotland and the rest of the UK.

Scotland would also be expected to be a full participant in the EU’s justice and home affairs policies, without any type of ‘opt-in’ such as the UK had. Given its separate legal system, this would not appear problematic but again it’s a change to when the UK was in the EU. The time needed for accession talks would also be likely to increase the longer Scotland had been outside the EU.

The UK government currently says it will insist on the right to diverge from EU regulations, while not yet clarifying whether it will in fact do so. The Scottish government, in contrast, hopes to remain aligned in as many areas within its devolved competence as possible. The further Scotland has diverged before accession talks, the longer those talks may take.

What sort of transitional relationship Scotland might have with the EU once it had left the UK and before accession would also need addressing. Normally, a candidate country would agree an association agreement with the EU ahead of accession, but this takes time. What transitional arrangements would apply in the meantime? Perhaps, Scotland, the UK and EU would agree for Scotland to, de facto, remain part of whatever UK-EU deal was in place. Perhaps, there could be informal talks with the EU in parallel to Scotland’s divorce talks with the UK but – as we’ve seen with Brexit – actual talks on a future relationship, whether an association agreement or full membership, would likely need to wait until Scotland actually was an independent third country.

The biggest change compared to the debates in 2014 surround the border questions. If an independent Scotland were in the EU, then Scotland’s border with the rest of the UK would be an external border of the European Union. If the UK negotiates some form of ‘Canada-dry’ or ‘Canada minus’ trade deal, as seems, at best, most likely at the moment, the Anglo-Scottish border would be both a regulatory and a customs border. And while the Brexit debate has seen much time spent discussing how to minimise such checks or move them away from the border, it is clear there will indeed be a range of checks needed at the ScotlandUK borders. There will be the Scotland-England land border that may require regulatory and customs checks. Then there would be a different sea and air border between Scotland and Northern Ireland – softer than the one with England and Wales perhaps – since Northern Ireland would be de facto in the EU’s customs union and in its single market for goods.

There will also be considerable challenges around services. If a UK-EU free trade deal can be negotiated by the end of 2020, it is not expected to include services. The shape of any future deals on services, transport and various security issues may take considerably longer. So, again, there would potentially be barriers between the rest of the UK and Scotland in the services sector as a result.

Depending on the timing of any independence referendum, there is political uncertainty too. What if a Labour government took power in five years’ time and decided to negotiate to re-join the EU’s customs union (or even the EU)? This would ease potential border issues but it would change the context of the debate once again.

Politically, at EU level, there has also been a shift. There is now more openness to the possibility that Scotland could become independent and apply to re-join the EU. Certainly, member states with concerns around secession – including, but not only, Spain – would want to be re-assured that any independence referendum was constitutionally and legally valid. But, with the UK no longer a member state, and with the ill-will generated by the whole Brexit process, Scotland as a proEuropean, remain-voting country is now seen by EU member states (and indeed by EU officials) in a much more positive light.

The EEA and Third Country Options

In the face of the likely border challenges, some argue an independent Scotland should consider negotiating a close relationship with the European Union without seeking full membership, much as Norway has done. If Scotland were in the European Economic Area (EEA), alongside Norway, Iceland, Liechtenstein and the EU member countries, it would be in the EU’s single market but not in its customs union. It would therefore be free to strike its own trade deal with the rest of the UK. The upsides would mean less, but potentially still substantial, friction in Scotland-rUK trade. The downsides are clear – there would then be borders and barriers in both directions: regulatory borders with the rest of the UK (not being in the EU single market) and customs borders, as Norway faces, with the EU. Any serious discussion would need in-depth economic analysis of the static and dynamic benefits of these different options.

Some argue an independent Scotland should be in neither the EU nor the EEA. The costs of being a third country outside the EU have been extensively analysed and debated during the Brexit debate in terms of border frictions and knock-on effects to lower trade volumes, lower growth and lower investment (including by both UK and Scottish governments). So, it would seem an unlikely option for Scotland. But if an independent Scotland went down that route perhaps it would form a customs union with the UK and so remain part of whatever UK-EU trade deal emerges – a new form of ‘independence light’.

If, in the end, an independent Scotland negotiated its way back into the EU, it would find itself part, with the other EU member states, of whatever UK-EU trade and security relationship had already been negotiated. It’s clear that, compared to the debate in 2014, Brexit radically changes, in many ways, the implications of independence in the EU.

This article was first published in Brexit and the Union (2020) Centre on Constitutional Change

 

Kirsty HughesKirsty Hughes | Twitter

Scottish Centre on European Relations

Dr Kirsty Hughes is Director of the Scottish Centre on European Relations. She is a researcher, writer and commentator on European politics and policy, and she previously worked for a number of leading European think tanks.