If Scotland does hold an independence referendum in 2019 and votes in favour, what would be the challenges to be overcome in transitioning to EU membership?
Key considerations in negotiation and transition process
Scotland would be in in a very different position from other current applicants. Scotland is already in the EU’s single market and an active player in key EU policies such as agriculture, structural funds, Horizon 2020 and ERASMUS+. For that reason negotiations would proceed relatively quickly, perhaps taking one year, with a subsequent two year period for ratification.
The EU and Scotland would need to negotiate a formal accession treaty. This would highlight areas of EU law and regulation which are currently addressed by legislation and regulatory systems operated at UK level and which the Scottish Government would need to replicate. These would include economic and financial regulation, customs and VAT, EU budget contribution and management, and freedom of movement.
Action Plans would set out the Scottish Government commitment to deliver the appropriate legislative and regulatory systems. There could be “twinning” arrangements where selected member states agree to assist Scotland, such as with Ireland on financial regulation. On budget contributions, Scotland would be unlikely to secure a rebate on the UK model, although the EU may take into account macroeconomic constraints such as a public sector deficit. Scotland could make a strong case that it need not commit to any timetable to join the euro given the position in Sweden following its referendum. Issues such as Schengen membership would be less controversial given the fact that Ireland, part of the Common Travel Area, also has an opt out.
The position on EU policy areas where Scotland already participates actively are different matters. Here there would be a strong wish on behalf of the Scottish government, as well as EU partners, that Scotland has the finance, structure and legal basis to continue to do so. A bespoke EU-Scotland association agreement could give Scotland the ability to continue to participate in these programmes and have observer status in relevant Council working groups and Commission led committees during the negotiation and subsequent ratification phases.
EU policy and financial programmes
EU programmes generally involve a policy and a financial support component. Financial support is divided normally into two areas: nationally allocated funding; and “competitive” funding competed for at an EU wide or multi-country basis. Where funds are allocated on a national basis, such as for the main structural and investment funds programmes (ESIF), Scotland would be likely to want to mirror current programmes using national funding. Scotland could also continue to participate in key ‘INTERREG’ cross border and transnational programmes, such as with its Nordic and Irish neighbours. If, as seems sensible, Scotland maintains a position in the European Economic Area (EEA) Scotland may make a contribution to the EEA financial mechanism to recognize the basic principle of the single market that countries with higher GDP per head should support financially countries and regions which are lagging behind.
Scotland would want to secure its position with the European Investment Bank (EIB), a major investor in Scotland, by ensuring that its share of the UK 16% stake (some 1.3%) is transferred to Scotland. Scotland would also need to reach an agreement with the EIB to secure existing investment and to continue investment in agreed priorities such as innovation, higher education and renewables.
Scotland would need to reach agreement with the EU on continued participation in the research and development programme Horizon 2020 and how this would be funded using contributions from the Scottish budget. Given its leading role in key policy initiatives, such as the Vanguard Initiative, Scotland would want to ensure that it can continue to be involved in both policy-making and key project delivery in areas such as advanced manufacturing, using Scottish funding where necessary. Scotland would want to continue and increase participation in the student mobility ERASMUS+ programme, based on an agreed funding arrangement, and to seek to continue EIB investment in higher and further education in Scotland.
In environment and climate change, we could expect Scotland to demonstrate its commitment by maintaining in force and updating EU environmental legislation. It could seek observer status in EU environment and climate change discussions in the Council and Commission to continue to make contributions on areas of importance to Scotland. Influencing the EU role in the UN climate change negotiations would be particularly important given the growing divergence between UK and Scottish policy on climate change.
Similarly in Justice and Home Affairs, Scottish judicial, legal and police organisations, are actively involved in the delivery of cooperation in this area, including the operation of the European Arrest Warrant, as well as on civil justice measures such as child protection. Scotland would wish in the transitional period to maintain as close working relationships with the EU JHA process as a whole, using existing EFTA operational and partnership agreements as a model (but recognising that Scotland would not be within Schengen). Scotland would also want to continue to participate in EU JHA programmes such as the Civil Judicial Network.
Agriculture and fisheries
Since the referendum the Scottish fishing industry has made clear its support for taking Scotland out of the common fisheries policy. The key argument put forward is the opportunity Brexit provides to strengthen control over the fisheries resource to maximise benefits for Scottish fishermen. The interests of the processing sector, however, often do not coincide with those of producers, especially the specialist seafood sector which is closely tied into high value markets in the European Union. The agriculture industry is concerned about losing access to EU subsidies and avoiding crippling tariffs on its important trade, especially of red meat, with the EU.
Once independent, Scotland would want to take responsibility for its own share of the former UK fishing allocations and to establish its own policy priorities. Scotland would need to coordinate its position with the EU and avoid taking any measures which might make rejoining the EU as an independent state more difficult. At the same time Scotland would want to develop its relationships with its neighbours in EFTA and the Faroes. This would require very sensitive political handling. The fact that, for the first time, Scottish officials would be in the lead on negotiations, should build up respect, experience and confidence.
Assuming a transition deal is in place on trade, it would be open to Scotland to continue existing agricultural support measures, using national budgets rather than EU budgets until Scotland rejoins the EU, as long as Scotland does not break state aid and other rules which would impact on cross border trade. A key consideration in the interim period will be how Scotland could influence the reform of the common agricultural policy and common fisheries policy post 2020 (due to be implemented from 2021) and how Scotland would prepare to implement agreed changes in the run up to full EU membership.
Running an effective transition programme would require significant investment in preparation and implementation by both the Scottish and EU authorities and a high level of commitment by Scottish stakeholders. This investment would be resource intensive. But its benefit would be continued Scottish involvement in, and influence on, EU policies, networks and funding programmes, which are worth considerably more to Scotland through collaboration than the simple financial contributions Scotland would have to make. It would also demonstrate to the Scottish public the strong added value of EU membership.