IO540
I am, of course, well aware of the relationship between the DfT and the CAA. However, they are two different organisations and they can and do function independently of each other in many areas.
Again I am aware that JAR-FCL is not binding on JAA member states which is why I phrased my answer as I did. As I understand it, the UK system of validating licences for VFR privileges in G registered aircraft complies with the requirements of JAR-FCL 1.015(b). However, JAR-FCL 1.015(b) provides that the validation of non JAA PPLs with an IR is restricted to one year and that such validations can only be granted in accordance with certain stated requirements.
It is difficult to predict how the proposed EU Regulation FCL requirements but if they did adopt the current JAR-FCL requirements on validations it would not, as you appear to suggest, prevent the validation of licences. It would simply mean that licences would have to be validated in accordance with harmonised requirements and the current UK practise could continue.
From what I have heard the FAA are not particularly fussed about any action to prevent US registered aircraft operated by non US citizens from being based in the UK/Europe. US legislation is already designed to prevent this which why the owners of such aircraft need to enter into "daft trust arrangements". In any case the EU/EASA could easily stamp out the practise by asserting (on behalf of Member States) the rights afforded by Article 32(b) of the Chicago Convention which would not give the US any cause for complaint. I therefore cannot see there being a trade war should the EU/EASA decide to act on this matter.
Anyway I still don't see how any of the new EU Member State "would make many millions by the simple expedient of accepting FAA licenses and ratings (and certification) in their own reg planes"