04 February 2017

The Economist: Norway’s deal with the EU still holds lessons for Britain

“Outside and Inside”, a comprehensive review of Norway’s relations with the EU, implies that, once Britain begins negotiations with the EU on a post-Brexit settlement, it will have to reckon with uncomfortable trade-offs between sovereignty and prosperity.

 [...]Through its membership of the European Economic Area (EEA), which includes two tiddlers, Iceland and Liechtenstein, Norway follows most single-market rules drawn up in Brussels and must accept the free movement of EU workers. This was enough for Theresa May, Britain’s prime minister, to rule out the Norwegian model for her country’s post-Brexit relations with the EU. After all, Britain voted last June to take back control from unaccountable EU institutions. Why leave, if only to fall back in line? [...]

First, to do business with the single market—by far Britain’s biggest trading partner—firms will need to abide by EU rules. A promised “Great Repeal Bill” will, in fact, incorporate EU law into British statutes to ensure regulatory continuity. But Mrs May has vowed that Britain will not be subject to rulings from the European Court of Justice once it leaves the EU. Without any supranational overseer, how can investors or exporters be sure that British standards will remain harmonised with those in Europe?

Norway’s deal with the EU works in part because the EEA is a “dynamic” agreement, meaning it accommodates changes in European law. (By contrast, Switzerland’s “static” arrangements are fiddly to maintain, and an irritant in Brussels.) If that reduces the Stortinget (parliament) to rubber-stamping legislation handed down from the EU, and forces Norwegian diplomats to find back-channel ways to lobby in Brussels, it also assures businesses that they will not find themselves out of step with the single market. It also reduces demands on Norwegian civil servants.

Yet even the capacious EEA has proved inadequate. Norwegians have twice voted against EU membership, on sovereignty grounds. But since the last referendum, in 1994, the relationship has grown like a lappeteppet (patchwork quilt). Norway now has over 75 agreements with the EU, most of them signed at Oslo’s behest. [...]

Here is the second lesson for Britain. Mrs May, a former home secretary, has said she will seek co-operation with the EU on security and foreign-policy matters; some of her consiglieri think Britain’s clout in these areas might even help the government secure a better trade deal. But winning approval even for this may prove tough. Mrs May still bears the scars of her battle, in 2014, with hardliners in her Conservative Party over Britain staying in the European Arrest Warrant system. The Brexit negotiations will throw up many more such instances. Will MPs be prepared to swallow them?

You and whose EEArmy?

Britain is not Norway, of course. It has 12 times the population, historic bonds with countries across the globe, strong armed forces, a more diversified economy and extensive trade links (44% of British exports go to the EU, against more than three-quarters of Norway’s). It also hosts Europe’s largest financial centre; ministers hope that the Brexit deal will allow City firms to maintain friction-free operations inside the single market. Britain will hardly go into the negotiating chamber naked.

But the country is also plugged into cross-continental value chains that would leave its firms exposed if British and European standards were to diverge. Some in Britain, says Mr Sverdrup, appear locked into an archaic view of trade in which tariffs are the only measure of ability to export. But non-tariff barriers can prove a lot more damaging. Ask the Norwegian businesses who grouch at the six to nine months it can take to translate EU regulations into Norwegian law.

There is a final lesson for Britain. Norwegians like the EEA arrangement, and few wish to reopen the membership debate. This is partly because Norway has grown rich on its oil and gas; one study finds that a rise of one percentage-point in unemployment triggers a seven-point spurt in support for full EU membership. But it also suggests that voters may prize formal sovereignty more than the actual sort. Britain was carried to the EU’s exit door on a call to take back control, and its parliamentarians will balk at any deal that seems to withhold it. But its leaders must weigh their demands against the need to ensure Britain continues to prosper. It will not be an easy balance to strike.

Full article on The Economist

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