10 March 2019

Wolfgang Münchau: Norway shows the UK a better way to Brexit

[...]The Norway option is a softer version of Brexit than Mrs May’s deal, easier to reconcile with the Irish backstop, and preferred by some for those reasons. But it breaches the prime minister’s red lines: a member of the EEA must accept freedom of movement. Inside EFTA, members cannot strike meaningful third-country trade agreements.

Contrary to rumours, Norway is not a vassal state of the EU. It is not in the customs union, not in the common agricultural and fisheries policy, and not subject to the Lisbon treaty. The border is not, therefore, frictionless. But Norway accepts EU regulation. So its service industries, including in the financial sector, have the right to operate freely throughout the EU.

The Norway option offers the UK more than just a smooth transition. It could also act as a gateway to other post-Brexit relationships — all the way from a clean break to a fast-track re-entry into the EU. 

The Norway option is different from the Labour party’s preferred outcome — a customs union — in several important respects. What they have in common is that you cannot conduct third-party trade agreements under either. Unlike Norway, the customs union would allow the UK to restrict immigration, which parts of the Labour party believe is now politically necessary. But its biggest advantage is that it would be less disruptive to industrial supply chains. It would favour industry over services. 

But there is no majority for Labour’s plan in the House of Commons. Nor do enough MPs back a second referendum. For Norway, there just might be. If Mrs May’s deal is defeated again this week, I would expect the UK parliament to hold indicative votes on alternatives. Among those, Norway is the frontrunner, but it may still fall short if the current supporters of a second referendum or the customs union cling to their first choices. 

What will happen if there is no majority for any positive alternative to Mrs May’s deal? I would then expect Mrs May to represent a cosmetically amended version of her deal for a third strike. She could hold the final vote in the last few days of the month, perhaps even on Brexit day, March 29. 

At that point, but not before, I would advise Norway supporters to endorse her deal. Think long-term. By the time of the next general election, scheduled in 2022, bilateral trade talks with the EU will not have been concluded. Opposition parties could campaign for Norway, (or the customs union for that matter) as an alternative. 

The very worst outcome for Norway supporters would be a no-deal Brexit. The chances of that happening are higher than many assume because I believe the EU is limited in its ability to extend Article 50. EU leaders want to ensure a clear time period between the day Britain leaves and the EU-wide elections, which will take place between from May 23 to 26.  [...]

In the light of this constraint on any Brexit delay, I see the UK’s choices narrowing to three — Mrs May’s deal, a Norway compromise, or no deal. Norway deserves consideration. It may be the only way to avoid no deal.

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