There’s been a lot of talk about Norway in the Brexit debate of late. And in keeping with the tenor of that debate as a whole, much of it has skipped happily around uncomfortable practicalities such as what a “Norway option” might mean in practice, whether Norway would welcome imitation by us, and whether the EU would even allow us to try.
The idea that membership of the European Economic Area, plus a comprehensive customs arrangement might offer an acceptable way forward in the Brexit process has been propounded by a cross-party group of MPs. Under this scheme we would be in the EU single market along with the 27 EU member states, but like Norway, Liechtenstein and Iceland, we would be outside formal EU membership.
The Common Market 2.0 (CM2) plan, however, is rather misleading.
First, proponents of CM2 stress that, while the UK would have to sign up to free movement of workers, the EEA model provides “new controls over free movement in exceptional circumstances.” This is a reference to safeguard measures in the EEA agreement that allow for the temporary suspension of any of the four freedoms—of goods, services, capital and labour.
What the CM2 crowd are less keen to point out is that the bar for application is high. The treaty states that there would need to be “serious economic, societal or environmental difficulties” arising from the migration of EEA nationals.
To put this in context, at its peak in 2012, net migration to Norway reached the equivalent of around 0.9 per cent of its population, the UK’s peak in 2015 was 0.5 per cent. To reach the Norwegian peak, the UK would need to see 594,000 net arrivals per year, more than a quarter of a million people above its highest of 336,000.
Clearly, the fact Norway does not invoke the emergency brake does not necessarily mean that the UK could not. Circumstances vary from country to country. Equally, however, the Norwegian case offers a salutary warning that current migration levels might not necessarily be seen among other member states as representing exceptional circumstances.
Moreover, the process for triggering the brake is not unilateral. Article 113 EEA specifies the need for notification of the contracting parties and consultation with the joint committee to find a “commonly acceptable solution.”
The second key claim made about CM2 is that it would allow the UK to take back control “of budgetary contributions from the EU to allow more money for public services.” Leave aside the potentially misleading claim regarding “more money for public services.”
Both the IFS and the OBR have said there won’t be any kind of Brexit dividend—quite the contrary. The fact is that although under CM2 we will be able to decide which EU programmes we’d like to be a part of, we won’t get a say on the budget for those we do decide to participate in.
The third claim is that the Norway approach would take the UK out of ever closer union and hence remove jurisdiction of the European Court of Justice (ECJ). This is something of a sleight of hand. The new arbiter would be the European Free Trade Association Court, which takes the Treaty-based duty of “homogenous interpretation” seriously.
The court usually mirrors the ECJ. Plus EEA membership is a commitment to further integration into the EU single market, which means adopting EU regulations aimed at harmonising rules across that market. This isn’t the fluffy language of “mutual recognition”—harmonisation means accepting these laws with little to no room for manoeuvre, unless the EEA joint committee decides the text is not EEA relevant.
A recent example is instructive. The EU directive harmonising rules on insurance for bank deposits set a €100,000 limit on deposits that governments could protect, substantially below the level in Norway, which wanted to maintain its higher level.
Norway adopted the directive in its entirety except for this aspect, for which it is—so far with little sign of success—still in negotiations with the EU institutions. The EU is understandably concerned about capital flight to Norway, where individuals can guarantee a larger share of their deposits will be protected.
So much for what might happen if we were in, but would we be allowed in at all? Politicians in Norway have already expressed concerns that we’d disrupt the balance between the three non-EU EEA states as they stand.
Heidi Nordby Lunde, a Norwegian MP who is president of the Norway European Movement, gave an excoriating interview to Channel 4 at the end of last year, stating that “I think you would mess it all up for us the way you have messed it all up for yourselves.”
Bear in mind that the EEA works on the basis of quiet consensus. Each member has a veto on changes to the EEA agreement to reflect changes to EU law. Yet they go about their business in a subtle and discreet manner, in a context in which the EEA issue is largely depoliticised. Contrast this with the UK. Imagine words that apply less to our handling of the Europe question than “subtle,” “discreet” or “depoliticised.” One can well understand the concerns.
And finally, of course, the EU itself would have a say as to whether to let us into the EEA. Would member states really be happy to provide a competitor economy the size of the UK the benefits enjoyed by the small, specialised economies of the EEA?
Norway, by far the biggest economy in the EEA, is economically equivalent to the north west of England and Yorkshire and the Humber combined. Iceland’s economy is the size of Suffolk’s. Liechtenstein is less than half the size of Coventry economically.
The knock-on impacts on the single market of these economies not fully applying EU regulations is relatively minor. When it comes to the UK, it would not be. Hence it is not unreasonable to expect some member states at least to insist on greater monitoring of the UK than exists for current EEA states—perhaps by creating a separate “pillar,” or arrangement, with greater safeguards for EU member states. To go back to the bank deposit example above, the risk of capital flight to Norway is one thing, to London quite another.
Continued membership of the single market, along with a comprehensive customs arrangement would certainly limit the economic impact of Brexit. It would not necessarily, however, address the political concerns behind the Brexit vote as effectively as its proponents claim. And it might not even be on the table in the negotiations to come.