21 March 2019

Norway Plus is no solution to Britain’s Brexit dilemma

By Victoria Hewson

MPs on both sides of the house – including the Conservative Nick Boles and Labour’s Stephen Kinnock – are in favour of the UK opting for a ‘Norway style’ Brexit: inside the EEA (single market) but outside the EU’s political structures. Given that the various EFTA states are richer, happier (and less politically fractious) than either Britain or the rest of the EU the superficial appeal is obvious. If no other agreement can be found, their plan is to table ‘Norway plus’ as a compromise, uniting Parliament and the country around Single Market access, increased sovereignty and pickled herring.

It is a tempting prospect, but, far from being a compromise, the EEA option – even without the Customs Union attachment (the ‘plus’ of Norway Plus) – is more restrictive for the UK than the draft Withdrawal Agreement as it stands.

Firstly, it is legally fraught in the current forms of both the EFTA convention and the EEA agreement. The major problem here is in the ‘plus’; it is a customs union. And the UK cannot become party to the EFTA convention for as long as it remains in a customs union with the European Union, which Brussels contends is necessary to protect the Irish Border. The only alternatives would be to renegotiate either the EFTA convention, or the EEA agreement. Both EFTA states and the EU would have to agree that.

In the EU’s case, that simply isn’t an option. Article 50 does not give competence to negotiate on the future relationship (such as joining the EFTA ‘pillar’ of the EEA agreement). We would have to leave first and try to negotiate it under the political declaration.

For the EFTA states, such an arrangement is unpalatable for its own reasons. Why disbalance your entire relationship with the EU when you have every reason to believe that the UK might simply be using it as a stepping stone? They wouldn’t, and they’ve said so.

However, the more pressing issue is why this type of deal is wrong for the UK.

Simply put, it isn’t Brexit as most voters would understand it. During the referendum, Britain voted to ‘take back control’ of borders, laws and money. Becoming an EEA member would certainly limit (but not eliminate) the amount of money paid to the EU. But it would do very little in either of the other areas.

The UK in the EEA would not be able to end the free movement of workers. The provisions for an ‘emergency brake’ would not apply to the UK. This was made clear to David Cameron in 2015. Other controls allowing the removal of those who are ‘non-economically self-sufficient’ could only be utilised effectively if the UK were to introduce ID and registration systems for ALL citizens. Something likely to be about as popular as a plate of fermented whale meat.

The situation on law making is even worse. The EEA members are obliged to adopt all EU laws with ‘EEA relevance’. This includes labour and environmental laws, public sector procurement, product standards and financial services legislation. There is no vote and no veto. Even consultation is limited. In fact, the UK’s former EU commissioner for Financial Services, Lord Hill, described EEA members as “extremely grateful just for a meeting and even pleasantly surprised to get a reply to their correspondence.” Given the importance of financial services to the UK economy, such a scenario ought to be unthinkable.

If, in the EEA, the UK did object to rules on financial services, or other areas, the EU would be able to respond in the same way it did to Norway when it objected to rules on postal services: by threatening the removal of market access in unrelated areas such as fisheries.

This simply scratches the surface of the problems with a ‘Norway’ style Brexit.  These and other issues are explored in more detail in the Institute of Economic Affairs’ recent briefing on the various models.

The Norway model would be hard to adopt, and likely harder to leave if the UK wanted to. To call it ‘Norway Plus’ ignores far too many of the negatives attached to it.

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Victoria Hewson is Senior Counsel at the IEA's International Trade and Competition Unit.