Scotland's place in Europe: our way forward

Summary of Negotiations and the Scottish Government's Plan

6. The UK Government is presently negotiating with the EU over two sets of linked issues. Firstly, the withdrawal agreement that will determine how the UK will leave the EU, including issues such as the UK's budget contribution and the rights of EU citizens in the UK and UK citizens in the EU. Negotiations on this part of the process are well advanced and there is some expectation that the UK will conclude a withdrawal agreement with the EU in November - including a backstop arrangement for the Irish border that may see the UK as a whole remain within the EU Customs Union. However, nothing is agreed until everything is agreed and there are a number of outstanding issues that could still jeopardise progress, raising the prospect of the UK exiting the EU without a deal. It is also clear that without a withdrawal agreement, there will be no transition period. Any agreement must be ratified by both the UK and European Parliaments. The UK Parliament will have to vote on the terms of the agreement that the UK Government concludes with the EU, and with uncertain parliamentary arithmetic it is far from clear that an agreement will be ratified by Parliament.

7. Secondly, and despite what the public was led to expect by the UK Government, it is clear that the future relationship between the UK and EU will not be discussed in detail and certainly will not be agreed before the UK has exited the EU. Despite the fact that the UK Government agreed to begin the negotiations on the future relationship at the end of 2017, it was a further six months, well into 2018, before discussions to shape the negotiations really began following the UK Government's publication of the Chequers proposal in July. However, as is now clear, this is a proposal that not only lacks the agreement of the EU27 but also commands no majority in the House of Commons. As a result preparatory discussions regarding our future relationship appear to be both aspirational and restricted to the broadest of principles at this stage. This reflects, in large measure, the UK Government's insistence on maintaining its damaging red lines. This lack of clarity about the future relationship between the UK and EU risks a withdrawal agreement being concluded that is not accompanied by any detail on the future relationship. This would consign the UK to the uncertainty of many more years of negotiation without the comfort of an on-going trade and broader relationship with our EU partners.

8. In contrast, the Scottish Government was the first administration in the UK to set out clear proposals on how to respond to the EU referendum in Scotland's Place in Europe in December 2016^[4]. The Scottish Government followed this up with further evidence and analysis in an updated Scotland's Place in Europe in January 2018^[5] along with a series of other evidence-based papers covering migration^[6], agriculture^[7], trade^[8] and an alternative white paper to Chequers^[9]. We have been consistent since 2016 in our policy position.

9. The purpose of this paper is to explain why at this critical stage in the negotiations the UK Government is offering a false choice between either a withdrawal agreement accompanied by a vague and non-binding statement on the future relationship, or a no-deal outcome. By contrast this paper sets out a workable plan that, we believe, would be acceptable to the EU and cause the least damage to Scotland and the UK from exiting the EU. It could also minimise the damage of Brexit to our closest economic partners across the EU. We provide further evidence taking account of independent analysis of the Chequers proposal, and propose an approach around which a common-sense coalition can be built. Time is running out and this plan must be adopted before it is too late.

10. Our proposals and recommended approach can be summarised as follows:

• Scotland voted overwhelmingly to remain in the EU in 2016. The Scottish Government, supported by the evidence, believes that continued EU membership would be the best outcome for Scotland and the UK.
• If this is not possible, our position is for the UK as a whole to remain within the European Single Market and the Customs Union. The evidence for this position was set out in our two Scotland's Place in Europe publications, the most recent in January 2018. In the period since January the conclusions reached in those papers have been further strengthened by a wide range of additional studies and reports^[10]. Our policy would minimise the social and economic damage of leaving the European Union. It would also provide a workable solution to achieving a frictionless border between Northern Ireland and the Republic of Ireland. A Brexit outcome that ensures the UK maintains membership of the European Single Market and Customs Union would also make a future return to full EU membership significantly easier.
• If the UK Government does not wish to take up this sensible and practical position, then given the strong preference of the people of Scotland to stay in the European Union, the Scottish Government would pursue the differentiated approach for Scotland that would allow us to stay in the European Economic Area (EEA) as set out in Scotland's Place in Europe^[11].

11. The prospect of a final deal that sees the UK retain membership of the European Single Market and the Customs Union is still a viable one. There is an increasing body of opinion emerging around the EEA and Customs Union^[12].

12. Based on the stage the negotiations have now reached and with less than six months to our intended departure from the EU, we make the following proposals:

• The Scottish Government believes that the UK Government should revise its negotiating position on the future relationship to ensure that the whole of the UK remains within the European Single Market and the Customs Union. This would ensure that the UK did not leave the EU without a clarity that the future relationship with the EU would not be an economically and socially damaging one.
• If that proposal is rejected by the UK Government, then the political statement on the future relationship should be sufficiently detailed to allow the people of Scotland to understand the impact on their lives from the monumental decision to leave the European Union. We must not be required to sign up to a blindfold Brexit.
• If the UK Government refuses to remain in the European Single Market and Customs Union, the Scottish Government demands that the UK Government seeks an extension to the Article 50 process to allow for a consensus across the UK on a less damaging approach to be agreed, thereby avoiding a hurried and damaging exit. This could be embodied in a revised EU/UK political declaration and the UK implementing legislation should bind the UK to that approach. This would avoid the dangers posed by a blindfold Brexit resulting from a high-level political declaration. Such an extension would also provide an opportunity for another EU Referendum on Brexit if the UK Parliament agreed. Proposals should also explore how it could be ensured that Scotland would not again be in the situation where should we vote to remain, while other areas of the UK chose to leave, we would nevertheless be taken out of the EU against our will.
• The Scottish Government also proposes that the withdrawal agreement makes provision for an extension of the implementation (or transition) period beyond December 2020. It is wholly unrealistic to expect a comprehensive future economic agreement with the EU to be secured within two years. Failure to build in such flexibility will simply create another potential period of instability towards the end of 2020.

13. The remainder of this document sets out our views on these key issues in further detail. The next section assesses the Chequers proposal, the impact it would have on the UK, and the EU's reaction to it, demonstrating that it cannot form the basis of the future relationship.