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Brexit: UK-EU movement of people

Summary:
On 18 January 2017 Zsolt Darvas appeared as a witness at the House of Lords Select Committee on the European Union, Home Affairs Sub-Committee. The key points of Mr Darvas’ testimony were the following: Question 1: What are the key considerations or choices relating to UK-EU migration that you anticipate Mr Barnier, his team, and individual EU Member States, will be thinking about in the run-up to the Brexit negotiations? Protect the rights of those EU27 citizens who currently reside in the United Kingdom. The indivisibility of the four freedoms (freedom of movements of goods, services, capital and labour) – yet in my view it does not mean all or nothing. I expect two freedoms to remain almost as free as today and certain restrictions on the two others. Prime Minister Theresa May said yesterday that the UK will not seek single market membership, but the greatest possible access to it. She also expressed the determination of the UK to control immigration. I expect some (but not overly extensive) immigration control, which will be retaliated by limited access to the EU27 services market, including financial services. I expect a comprehensive free trade agreement between the EU27 and UK, which is not the same as single market membership, but can facilitate the functioning of European and global value chains. I also expect that free capital mobility will be preserved.

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On 18 January 2017 Zsolt Darvas appeared as a witness at the House of Lords Select Committee on the European Union, Home Affairs Sub-Committee.

The key points of Mr Darvas’ testimony were the following:

Question 1: What are the key considerations or choices relating to UK-EU migration that you anticipate Mr Barnier, his team, and individual EU Member States, will be thinking about in the run-up to the Brexit negotiations?

  • Protect the rights of those EU27 citizens who currently reside in the United Kingdom.
  • The indivisibility of the four freedoms (freedom of movements of goods, services, capital and labour) – yet in my view it does not mean all or nothing. I expect two freedoms to remain almost as free as today and certain restrictions on the two others. Prime Minister Theresa May said yesterday that the UK will not seek single market membership, but the greatest possible access to it. She also expressed the determination of the UK to control immigration. I expect some (but not overly extensive) immigration control, which will be retaliated by limited access to the EU27 services market, including financial services. I expect a comprehensive free trade agreement between the EU27 and UK, which is not the same as single market membership, but can facilitate the functioning of European and global value chains. I also expect that free capital mobility will be preserved.
  • Symmetry/reciprocity: the immigration restrictions the UK imposes on EU27 citizens will be imposed on UK citizens seeking to work or live in the EU27.
  • Unity of the EU27: Most likely, there will be tough negotiations among the EU27, but I expect them to form a common view. I do not suggest the UK to try dividing the EU27 with special offers to selected member states, as that may backfire. The only exception could be the Republic of Ireland, in order to find a solution to maintaining the free travel area between the Republic of Ireland and Northern Ireland, which is an extremely difficult issue, given that the four freedoms apply to the Republic of Ireland.
  • While according to a 6 December 2016 Financial Times report Mr Barnier expressed the priority that the final deal would have to be worse for the UK than EU membership, I advise EU27 countries to not try to “punish” the UK in order to discourage other member states from leaving, and I expect that eventually EU27 leaders will adopt such a position. In my view, the EU should not be seen as a prison, but as a union which offers benefits to all members and is perceived as such.

Question 2: Do you envisage there being provisions in the UK’s withdrawal treaty with the EU – or in any treaty on the UK’s future relationship with the EU – about future flows of EU citizens to the UK and UK citizens to the EU?

  • I expect a separate treaty for withdrawal from the EU to settle the various aspects of the UK’s EU membership. For the new agreement after Brexit, I would not envisage one “mega-treaty” to cover all aspects of future cooperation between the EU27 and the UK, but more treaties, one for trade, another for immigration, another for scientific cooperation, etc.
  • Certainly, negotiations in various areas will move in parallel, and concessions offered in one area might have implications for deals in other areas. Yet any agreement would have to be time-consistent from the perspective of both parties. Tying the trade agreement strongly to the movement of labour agreement would be very risky for both the UK and the European Union. It would make future changes to any particular element of the deal difficult, even if just an element in one agreement needs to be changed, while e.g. the collapse of the trade agreement because of violations of the immigration agreement would cause harm for companies on both sides of the Channel.

Question 3: What sort of immigration control might work if the United Kingdom wishes to have a good relationship with the EU?

  • First, the United Kingdom will have to specify the type of immigration controls it wishes to impose. In my view, the EU27 would be open to offer the ‘indivisible four freedoms’, similarly to a European Economic Area agreement, but as the Prime Minister expressed yesterday, the UK will not aim for that. The EU27 can formulate a view on immigration issues only after the UK has specified its priorities.
  • The speech of the Prime Minister yesterday may imply that the UK will not discourage the mobility of high-skilled workers, but wishes to control immigration of low-skilled workers. Such a priority may be viewed unfavourably by the EU, as it may imply brain drain while restricting the mobility of lower-skilled workers.
  • My advice to the UK is that the reasons for controlling immigration have to be specified. In my view, there are political reasons (including the goal to satisfy ‘leave’ voters) and not economic reasons. Various research studies show that immigration was very positive for the United Kingdom: it contributed to economic growth, public sector revenues, fiscal sustainability, while unemployment in the United Kingdom is at a four-decade low, suggesting that there cannot be many natives who lost their jobs due to immigration. The employment rate of immigrants is very high (See my own contribution to this debate here.). The immigration-driven strain on public services, such as healthcare and education, was a major issue in the referendum campaign, yet that should be a manageable issue, not least because the rather stable inflow of immigrants through the years, which allows planning. Since 2004, half of immigrants to the UK came from outside the EU: the UK had full control over non-EU immigrants, but UK authorities allowed them to arrive, most likely because authorities understood the benefits immigrants bring. Therefore, in my view the goal to restrict immigration from the EU cannot be economic. If the goal is indeed political, then any kind of arrangement could be sufficient which will allow the UK government to state that it has control. I would not advise the UK to set numerical targets on immigration, because that would hurt the economy and thereby UK citizens too.
  • I expect that both the UK and the EU27 would guarantee preferential access of each other’s citizens over third-country citizens.

Question 4: What do you see as the likelihood of the EU27 being prepared to contemplate some kind of an emergency brake on free movement for the UK, as exists in the EEA agreement or along the lines of the ‘safeguard’ clause that Spain invoked in respect to Romanian nationals in 2011?

  • Many treaties include safeguard clauses and therefore I expect to have such clauses in the EU27-UK labour mobility deal too. Yet I think existing treaties do not provide good templates, because their safeguard clauses are too general. In my view, the EU27 might seek a clause which can be triggered under more concreate conditions.
  • Article 112 of the EEA agreement states that “If serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising, a Contracting Party may unilaterally take appropriate measures under the conditions and procedures laid down in Article 113.” In turn, Article 113 specifies requirements for notifications, consultations and timeline for the introduction of the measures. I find the EEA safeguard clause too general.
  • Richard North highlights that the EEA agreement actually allowed Lichtenstein to impose immigration controls, which were initially transitionary but eventually became a permanent quota system. While he argues that the small size of Lichtenstein did not play a major role, in my view the large size of the UK and the history of its relationship to the EU would not allow the UK to have such a system in place under the EEA agreement.
  • In summer 2011, Spanish control necessitated Romanian citizens who want to work in Spain for a company to ask for permission in advance, based on the existence of a work contract. The restrictions applied to activities in all sectors and regions, but did not affect Romanian nationals who were already active on the Spanish labour market. The imposition of this control was made possible by the accession treaty of Romania, which specified a 7-year transition period: 2 plus 3 plus 2 years, with different options to impose restrictions in these three phases. Spain abolished transitory restriction in 2009, but re-introduced them in August 2011 “due to serious disturbances on its labour market” and maintained them until the end of the 7-year transition period, December 2013 (see here).

Question 5: What do you see as the likelihood of the EU-27 being prepared to contemplate allowing the UK to re-introduce labour market restrictions of the kind that are permitted during transitional periods after new member states join the EU? 

  • The context of recent EU enlargements is very different from the context of the UK leaving the EU, which suggests that lessons are limited. The transitional period after an enlargement period lasts – at most – for seven years (see the last bullet point above), while in my understanding the UK wishes to introduce a permanent system.
  • I add that the UK unilaterally decided not to apply any temporary labour mobility restriction for countries that joined the EU in 2004, in contrast to most other older EU member states that relied on temporary restrictions. For the two countries that joined in 2007, Bulgaria and Romania, the UK applied the temporary restrictions for the maximum period of seven years, while temporary restrictions  still apply for the 2013 entrant Croatia.

Question 6: Would a possible surge in immigration from other EU countries before the UK’s actual exit from the EU make it possible to introduce temporary controls over immigration from the EU?

  • I regard that very unlikely, for two reasons.
  • First, politically, other EU leaders would find it difficult to explain to their electorate (which in some countries is also dominated by anti-immigration voices) that they give a concession for the UK before all elements of the final exit deal and the deal for the new relationship have been agreed. Prime Minister Theresa May said yesterday that no deal is better than a bad deal, so there is even the possibility of having no deal at all.
  • Second, current EU mobility rules allow the UK to control excessive immigration. EU rules provide an unconditional right to EU citizens to stay in other member states only up to three months. They can stay for a period of more than three months only if they find a job or have sufficient resources and sickness insurance and do not become a burden on the social assistance system of the host member states. Different rules apply to family members, students, pensioners, and those who are leaving a job, but jobseekers (for whom the main concern expressed in the question is likely relevant) can stay only up to six months. After six months, host country authorities can ask the jobseeker to leave if she/he cannot prove to have a realistic chance of finding work there. In exceptional cases, host country authorities can deport the jobseeker on the grounds of public policy, public security, or public health (see here). Given that that the UK has a record low unemployment rate, it is unlikely that many immigrants would find a job in the event of a surge in immigration prior to Brexit. Therefore, EU27 jobseekers in the UK will become unauthorised residents after six months and the UK will have to right to expel them even under current EU rules.
  • NOTE ADDED AFTER THE PUBLICATION OF THE UK WHITE PAPER ON 2 FEBRUARY: For reasons mentioned in the previous point, I note that HM Government’s The United Kingdom’s exit from and new partnership with the European Union report includes potentially misleading information about current EU mobility rules. Chapter 5 of the report states that there is “unlimited free movement of people to the UK from the EU” and that “The Free Movement Directive[15] sets out the rights of EU citizens and their family members to move and reside freely within the territory of the EU. This Directive replaced most of the previous European legislation facilitating the migration of the economically active and it consolidated the rights of EU citizens and their family members to move and reside freely within the territory of the EU.” These statements greatly exaggerate the options available to EU citizens. Certainly, there is unlimited free movement of tourists and EU citizens can stay in another EU country for a period of three months without conditions. However, as the point above highlights, only workers (and their family members), students and the very rich who do not rely on the social assistance system of the host country can stay for longer. Jobseekers can remain in another EU country for six months.

Question 7: Looking at the deal that was struck between the EU and Switzerland following the Swiss referendum in 2014, what lessons should we take away from negotiations between the EU and Switzerland over the issue of free movement of people and what to expect in the negotiations?

  • A thin (50.3%) majority of Swiss voters said yes to the 2014 referendum question asking: “Do you accept the federal popular initiative against mass immigration?” However, following almost three years of tough negotiations between the EU and Switzerland and the suspension of Switzerland’s participation in the research programme Horizon 2020 and in the education programme Erasmus+, the initial idea of quotas was dropped. Instead, the new law adopted in December 2016 requires Swiss employers in sectors or regions with above-average unemployment to advertise vacancies at job centres and give locals priority before recruiting from abroad. In my assessment this is only a minor alteration of previous rules. Furthermore, in December 2016 Switzerland ratified the Protocol providing for Croatia’s accession to the Agreement on the free movement of persons which the country rejected to ratify earlier.
  • The key lesson from this episode is that the EU has a strong preference for linking broad-based single market access to the freedom of movement of workers. I cannot exclude the hypothesis that by adopting a tough position against Switzerland, the EU wished to send a message to Britain.
  • On the other hand, the context of the new Swiss deal is very much different from the context of Brexit. The Prime Minister’s speech yesterday revealed that the UK will not seek single market membership. Therefore, as I argued in my answer to question 1, I expect that free movements of goods and capital will largely be preserved after Brexit and the cost of immigration control to the UK will be a more limited access to services markets.

The full transcript of the evidence session is available here.

I thank Inês Goncalves Raposo for her great help in my preparation for the testimony.

Zsolt Darvas
Zsolt Darvas joined Bruegel as a Visiting Fellow in September 2008 and continued his work at Bruegel as a Research Fellow from January 2009, before being appointed Senior Fellow from September 2013. He is also a Research Fellow at the Institute of Economics of the Hungarian Academy of Sciences and Associate Professor at the Corvinus University of Budapest.

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