17 July 2017

It’s time for the Norwegian option

By Andrew Stuttaford

Extricating the UK from the EU after over four decades of membership was never going to be straightforward. And yet, more than a year after the referendum, David Davis’s talk of moon landings aside, the Government’s approach has been dismayingly vague and delusionally blithe. It has no one to blame other than itself.

Once the voters had (correctly, in my view) “advised” Parliament that the UK should depart the EU, it was up to the Government to decide on the type of Brexit it would put to Brussels. Representative democracy was back. The various Leave groups were self-selected and even Vote Leave’s “official” status was derived from bureaucratic fiat — designation by the Electoral Commission — rather than any popular mandate. This group’s “promises” were what they were, but they were binding on no one. There is also the little matter of the 48.1 per cent who voted to Remain. If such a closely-fought referendum were to be truly advisory, the opinions of the losers ought to count for something in shaping Britain’s Brexit proposals.

Some confusion was to be expected after the referendum’s unexpected result, but, even allowing for the Tory brawl that ensued, not on the scale of the chaos that Britain has witnessed. The months that passed between June’s referendum and the Article 50 notification in March were squandered by a team that didn’t have a clue when it took charge, doesn’t seem to have much of one now and has now blundered further by throwing away its parliamentary majority.

Article 50 gives the two sides two years to work things out. If that deadline is missed (and no extension is agreed), what follows is the hardest of hard Brexits. The clock, as the serpentine Michel Barnier, the EU’s chief Brexit negotiator, warned last week, is ticking.

Theresa May has repeatedly argued that “no deal is better than a bad deal”, a mantra that could — in indicating a willingness to walk away from the table — be defended as a negotiating tactic, but only if the EU is convinced that May is actually ill-informed enough to believe what she is saying. Unfortunately that could well be the case, but awkward reality cannot be wished away. No deal would be bad for the EU, but disastrous for Britain, triggering major economic (and probably not just economic) difficulties at home and, Tory ultra-Brexiteers please note, opening Number 10’s door to Jeremy Corbyn—or some equally sinister successor.

Even if it can be cobbled together in time, a more flexible Brexit featuring some sort of free trade agreement (hopefully including services, but quite possibly not) will still be rough going for Britain’s exporters, used to the “frictionless trade” with the EU that would be torn away from them. Tariffs won’t be a problem, but more insidious regulatory barriers will be. The notion that the UK can bypass the latter by simply importing the relevant rules into its post-Brexit legislation is naïve. Regulations change constantly, and Britain will struggle to keep up, even — fingers crossed — if an increasingly mercantilist EU cooperates, and, if or when it comes to services, particularly financial services, “regulatory equivalence” will only be able to do so much in the face of a bloc that regards the City with a dangerous mix of envy and distaste.

The idea that a buccaneering Global Britain, sailing out into the blue on a smile and a shoeshine, will be able to make up the shortfall anytime soon is fantasy. To be sure, there will be free trade deals to be had, but they will take time and, with the UK not in the strongest of negotiating positions, they will come at a price. And the Britain that signs them won’t be so very buccaneering. There’s a great deal to be said for a post-Brexit UK that goes fully “offshore”, deregulating, cutting taxes, flushing the green crap, but the political party that says so will lose the next election: the buccaneers will be sunk before they can set sail.

If Brexit is to be a way out of Brussels’ ever closer, ever less democratic union, while protecting Britain’s access to the more positive aspects of European integration, the best route (as a growing number of observers are pointing out) runs, so to speak, through Oslo. The much-maligned, much misunderstood “Norway option” — continued membership of the European Economic Area (EEA), and thus participation in the EU’s Single Market, on a basis similar to that enjoyed by Norway and two other European Free Trade Association (EFTA) countries — could represent either a transitional arrangement or, arguably less desirably, a final destination in its own right.

Norway, whatever some critics of the Norwegian option may maintain, is not a member of the EU either legally or in practice. Norwegians have twice rejected the delights of EU membership and, judging by opinion polls, they won’t be changing their minds any time soon. Yes, it’s true that Norway does make payments (on a net per capita basis, a bit lower than that now paid by the UK into the EU) connected to its membership of the EEA, but they mainly consist of direct assistance by Norway to poorer parts of the EU, and Britain should expect to pay as well, perhaps — naughty thought — drawing on some of its swollen foreign aid budget to help do so.

It’s also true that remaining in the EEA will imply accepting (much) more of a brewed-in-Brussels regulatory burden than enthusiasts for laissez faire (me, for one), would like. That would be a bigger problem if Brexit promised a bonfire of controls, but, as noted above, with Corbyn at the door and the Tories as they are, it can’t. And Norway has more of a say in those areas of EU regulation that concern it than is often claimed, including, as a last resort (it would risk retaliation), a “right of reservation” enabling it to reject EU legislation.

Then there’s immigration. While Norway has to play by the Single Market’s free movement rules, it also has the right (subject again to the risk of retaliatory measures) to unilaterally apply a temporary emergency brake to immigration from the EU in the event of “serious economic, societal or environmental difficulties”, a right likely to be the subject of fierce debate ahead of any agreement to let Britain take the Norwegian option or anything like it. That said, occasional murmurings, admittedly not always from entirely reliable figures (Tony Blair comes to mind), hint that there might be slightly more room for manoeuvre on this topic than hitherto imagined.

It’s also worth adding that Britain’s membership of the EU has little to do with immigration from outside the EU, a net 189,000 people in 2015 alone, compared with a net 184,000 from the EU the same year. If the government wants to reassure voters that it is determined to cut immigration, more effective restrictions on non-EU immigration would be a useful step forward, a step that Theresa May has notoriously failed to take: in 2010, the year she became Home Secretary, net non-EU immigration stood at 217,000, a total not so very different from where it stands today.

And, for the avoidance of remarkably persistent doubt, membership of the EEA is not the same as membership of the EU’s Customs Union. Britain would essentially (there are some technical issues) be free to cut the trade deals it wanted with that excitingly wide world beyond the EU.

With administrative chaos quite likely to add to the pain that a hard Brexit could inflict, a Norwegian-style prix fixe solution also has the advantage of drastically reducing Brexit’s complexity. Given that, and the broader continuity it preserves, the Norway option ought to be welcomed by business, and (polling indicates) not just business, whether as a temporary fix or — a separate debate — a final destination. And for the EU, it safeguards more of the benefits that the status quo gives its members, while (in what would be a tremendous development for Brussels, if not for many of those living within the EU’s borders) removing that perennial British obstacle to ever closer union.

Sadly, there is no guarantee that the Norwegian option (or something like it) is available for Britain to take up. Far from it. The moment may have passed — or been frittered away — if it ever existed, but for the UK even to propose it would suggest a seriousness about what Brexit involves and what Britain wants from it that has, up to now, been lacking. And that, at least, would be a start.

Andrew Stuttaford is a contributing editor of National Review