EEA/EFTA: The Brexit Compromise Solution

By James Melville.

Brexit is tearing the country apart with tribalism and division on both sides, political stalemate, business uncertainty, job losses, decreased investment and the spectre of a no-deal Brexit that wasn’t even mentioned as an option at the EU Referendum.

In an ideal world, Britain would simply remain in the EU. But we are where we are. We urgently need a grown up and workable Brexit compromise that both sides should accept. No Brexit option is going to make all sides completely happy. Politics and life itself doesn’t work like that. There is no utopia. So we need a pragmatic  compromise that offers a sensible pathway through this mess. There is an obvious compromise solution: EEA/EFTA membership or what is now known as the “Norway model”. Common Market 2.0 is that solution. The Common Market was set up as a mercantile solution to create peace in Europe by facilitating free trade on the continent as a way of providing security in a previously perpetually warring continent.

The “Norway model” would mean Britain becoming members of two European economic organisations — the European Free Trade Association (EFTA) and the European Economic Area (EEA). Norway, Lichtenstein and Iceland are members of both. EFTA comprises these three countries plus Switzerland, and has free trade agreement between all four. The trade group has also signed free trade deals with 38 non-EU countries. The EEA, on the other hand, is a collaboration of all EU member states plus Norway, Lichtenstein and Iceland. All EEA members, including the non-EU members enjoy full access to free trade within the EU single market.

The UK quit EFTA in 1972 but has the option of rejoining the group and then becoming part of the EEA as an EFTA member. Only EU or EFTA members can currently become members of the EEA, meaning if Britain wants to secure full access to the single market after Brexit, joining EFTA is the logical route. It is a free trade association but not a customs union. Members are free to trade with anyone on their own terms, which is a gain of trading sovereignty, some might argue.

The EEA-EFTA (Norway model) main selling point in terms of compromise is that it would allow the UK to retain full access to the single market but also regain control over powers that under EU membership are controlled by Brussels, as non-EU members of the EEA are not in the customs union, meaning they can broker new trade deals around the world. Remaining within the single market also removes the issue surrounding the Irish border as freedom of movement still applies.

To placate those who are concerned about immigration control, as member of EFTA, the UK could offer to sign up to free movement of labour but not persons. This would return a significant degree of control over immigration to the UK. In fact, this was the common market (economic) freedom that the UK willingly signed up to, and not the (political) free movement of persons it signed up to in the Maastricht treaty in the early 1990s. This model is in essence, what the UK voted to join back in the 1970s. It should be sold to the British public by repeatedly saying, “we are going back to the Common Market”. Economic Union but not Political Union.

As a model, EEA/EFTA keeps the benefits of the single market, yet takes the UK out of the common agriculture and fisheries policies. It also quashes concerns over the Irish backstop problem – which Brexiters worry ties the UK to the EU almost indefinitely. This is no longer an issue under an EEA/EFTA deal as there is no need for a backstop as it takes the UK out of the customs union, but still staying within the single market.

EEA/EFTA also changes how financial contributions to the EU are made, with money going directly to the facilities and machinery that the UK is participating in, as opposed to the European Commission.

Hard-Brexiters claim that the EEA/EFTA model would still mean that Britain is a ‘rule taker’. This is a false assumption. EEA has different impacts upon EU members compared to EFTA members. While EU and ECJ laws have a direct effect on EU member states, it does not have direct effect on the EFTA states because the EFTA states have preserved their own domestic legal sovereignty. In order for say, a new single market law to have effect on the EFTA states, it must first be ratified by that state’s own Parliament. It cannot be imposed through the EEA. In effect, by combining EEA/EFTA membership, the UK protects its own law making sovereignty.

The Norway EEA-EFTA model is an off-the-shelf, already functioning and workable solution which would mean the UK being able to replicate an existing economic alliance framework rather than attempt to create a range of whole new structures. Rejoining EEA by virtue of EFTA is an arrangement that would offer stability both legally and economically.

Just after the EU referendum, many pragmatic Remainers and Brexiters were largely open to an EEA/EFTA style deal (as was Nigel Farage who regularly cited the Norway and Switzerland models as the solution). Yet here we are, over 3 years on, and that sensible Common Market version of Brexit is now seen as some sort of non-Brexit betrayal. The dial has shifted away from this option.

Theresa May is largely to blame for this. She wilfully ignored this path because of her rigid freedom of movement red line, which ultimately caused the Irish backstop issue. If she had gone down the EEA/EFTA route, she would have probably won a parliamentary vote because of moderate Tory & opposition party support. Even now, the EEA/EFTA solution is the most likely option that would win parliamentary support.

Regarding freedom of movement, EEA-EFTA offers another pragmatic compromise. The biggest sticking point when it comes to the Norway model is what it would mean for immigration to the UK. All EEA members are required to accept the ‘four freedoms’, including the free movement of people. But the EFTA model restricts freedom of movement to labour rather than people. Also, Article 112 of the EEA Agreement does allow non-EU member states to opt out from any of the four freedoms if they are facing serious economic, societal or environmental difficulties as a result of the freedoms. For example, Lichtenstein used Article 112 to impose controls on EEA migration due to concerns whether it was able to handle a huge influx of people under freedom of movement.

The country is split and needs a pragmatic solution. Tribalism and division is wider now than ever before and the solutions are becoming more extreme on both sides. We urgently need a sensible compromise outcome, one that satisfies most of the people most of the time and one that a) doesn’t inflict economic damage b) respects the will of the 52% Leave vote c) takes into account the concerns of the 48% Remain vote. That solution is the European Economic Association and European Free Trade Association. It gives both sides a significant degree of what they want: For Remainers – the single market, no hard border in Ireland, economic security, immediate access to free trade deals in the EU and maintenance of economic union in Europe. For Brexiters – the independence to broker new trade deals around the world, controlled immigration, increased jurisdiction in the UK and an end to EU political union.

Like most things in life, the solution lies in compromise. The Brexit compromise is EEA/EFTA and back to the Common Market. Economic Union. But not Political Union.

 

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