Mr Varoufakis is on the right track

Yanis Varoufakis's has a strong presence in the UK media at the moment and his advice on how the UK can avoid various approximations to his Greek tragedy is well worth listening to (see https://www.theguardian.com/politics/2017/may/03/the-six-brexit-traps-that-will-defeat-theresa-may). 

The bottom line is that he recommends resort to an European Economic Area type agreement for a period of, say, seven years, i.e. to an off-the shelf arrangement rather than an attempt to initiate the negotiation of a comprehensive, bespoke agreement during the Article 50 process. 

In general terms this is what a number of people have been advocating since the referendum, and in some cases significantly earlier than that.  So far, however, this advice has fallen victim to what Mr Varoufakis has called the 'Swedish national anthem routine' (give it no thought) and the 'Penelope Ruse' (delay it), indicating that use of these particular tactics is by no means confined to the Brussels area. In fact, they are to be found much more generally across governments in different places and at different times. 

Quite apart from the supporting arguments for the approach which can be drawn from the detail of Mr Varoufakis's obviously searing experiences during the Greek debt negotiations with the EU, the underlying strategic logic has been set out in a series of papers to be found on the Regulatory Policy Institute's website (rpieurope.org): 'Brexit and the Single Market' (July 2016), 'Submission to the Scottish Parliament' (August 2016) and, most recently, 'The European Economic Area Agreement: A short introduction'.  Implications for policy strategy are summarised in the Brexit-in-one-diagram attachment at the end of this note, which to date has been circulated on a restricted basis. 

So far so good, but Mr Varoufakis also suggests "requesting" such an arrangement for a period of, say, seven years.  Unfortunately "requests" to the EU may themselves be vulnerable to the Swedish Anthem and Penelope Ruse tactics.  It is therefore particularly fortunate that they do not need to be made, at least in the course of the Article 50 withdrawal process. 

Since the UK is an existing Contracting Party to the EEA Agreement, in the first instance it simply has to notify the other Contracting Parties that it wishes to continue its participation in the Agreement and, further, to express its readiness to work constructively on the minimal set of 'necessary adjustments' that will be required for the effective functioning of the Agreement in the new circumstances that will pertain following the exit of the UK from the EU. 

Negotiations about 'necessary adjustments' will involve Iceland, Liechtenstein and Norway, as well as EU Member States. They would not, therefore, be part of the Article 50 process, but rather would run on a track parallel to that process.  That allows for simultaneous progress to be made on both tracks.  A notification of intention to stay in the EEA side-steps any delays associated with an EU insistence that progress be made on other matters, particularly budget issues, before discussions about future trading arrangements can be started.

There is also no requirement for a definite, initial specification of the subsequent period of UK participation in the EEA Agreement, such as Mr Varoufakis's seven year suggestion. The Agreement has its own provision for the exit of a Contracting Party, Artice 127, which specifies that a leaving Party must give at least12 months' notice of withdrawal.

Nevertheless, it would be unwise for the UK simply to rest on formal treaty rights under international law.  Making treaty adjustments has costs and, whilst these are relatively trivial for the EU, they would bear more heavily on Iceland, Liechtenstein and Norway for a least two reasons. First, the process gives rise to 'fixed' costs which, when spread over a small population, can lead to relatively high per capita costs.  Second, the adjustments would require some substantive changes in arrangements in the 'EFTA' governance pillar of the EEA Agreement (which, as is explained in the papers referred to above, is a set of arrangements that are not formally tied to the trade association EFTA itself), not just minor textual changes. 

It is these governance changes that will require the most time for consideration and discussion, which is why an early start was advocated in 'Brexit and the Single Market'.  Since the matters concern the 'EFTA' pillar of the EEA Agreement, the relevant powers to discuss and negotiate lie with the national authorities of the three states, not with the EU institutions.  No 'requests for permission to talk' need be addressed to the EU, though it would be good manners to inform the EU in the event that the UK sought to open negotiations with the three states.  

Given these points, it would be opportunistic for the UK, without further ado, to seek to retain its Contracting Party status in the EEA Agreement and then, once the Article 50 process was concluded, immediately to give Article 127 notice. That would not be a good look for a country that seeks to be a leader in promoting global free trade, an aspiration that entails protection and enhancement of a reputation as a good faith trading partner. 

The best approach might therefore be for the UK, when notifying an intention to remain in the EEA beyond the completion of the Article 50 process, to make good faith commitments to Iceland, Liechtenstein and Norway that it will not give Article 127 withdrawal notice within, say, two years of Brexit, i.e. of the day on which the UK withdraws from the Treaty of Lisbon. In effect, this would be equivalent to committing to a transition period extending at least three years past Brexit Day. Alternatively or additionally, the UK might seek to negotiate compensatory or burden-sharing arrangements with the three, non-EU states.