The Economist Asia - 24.02.2018

10 Leaders The EconomistFebruary 24th 2018

A

S WE went to press, the cabi-

net was due to enter an ex-

tended session in order to ham-

mer out what kind of Brexit is

best for Britain. Ministers are at

loggerheads over the relation-

ship the country should have

with the European Union. Time

is short. With just over a year until Britain leaves the EU, lead-

ers of the 27 other member states, who will meet in March, are

frustrated. Britons on both sides of the Leave/Remain divide

need to plan ahead. All they getis blather and contradictions.

The government is groping towards a “hard” Brexit, leaving

both the single market and customsunion. The prime minister,

Theresa May, seems to believe that this is the only way to hon-

our the result of the referendum. On that view, a “soft” exit,

into an arrangement closer to that of Norway, is unacceptable

because it fails to secure the independence of the courts, the

freedom to strike new trade deals and the ability to limit immi-

gration. It would render Britain a “vassal state” that, to add in-

sult to injury, would have to pay the EU a vast annual levy.

Yet a closer look at Norway shows that this depiction of a

soft Brexit is simply wrong. Mrs May is right to say that Britain

will end up with its own model rather than copying anyone

else’s. But instead of ignoring other countries, she should learn

from them. And Norway, it turns out, is a good place to start.

Think again

In 1994 Norwegians voted against joining the EU, by the same

narrow margin as Britain chose to leave it in 2016. Whereas the

debate in Britain has been dominated by hardliners, Norwe-

gians took that as a cue to compromise (see page 47).

Their countryis outside the EU, but inside the single market,

allowing it to trade freely with the continent. For Britain, by the

government’s estimate, leaving the single market would mean

thatGDP 15 years after Brexit would be 3-6% lower than if it

stayed in it. (Brexiteers counter this with rosy predictions for a

hard Brexit, but their models are based on far-fetched assump-

tions, such as the total abolition of tariffs.) Norway set up

carve-outs to keep control over areas it prized, such as farming

and fishing. It agreed to follow most otherEU rules, open its

borders to EUmigrants and make hefty annual payments.

How does that square with Leavers’ demands? Start with

the money. Per person, Norway’s contributions to the EUare

about three-quarters of what Britain pays now. Rather than go-

ing into the central EU budget, most of the cash is tied to partic-

ular research or educational programmes, such as the Erasmus

student exchanges, or sent to poorer countries in the form of

grants that are controlled by Norway, not the EU. A country

with $1trn in oil wealth may shrug off such payments more

easily than one grappling with a budget deficit. But Britain has

already said that it will pay for access to the single market and

take part in specific programmes.

Next come EUlaws. Mrs May has said Britain mustescape

the jurisdiction of the European Court of Justice (ECJ). Nor-

way’s trade with Europe is instead governed by the court of the

European Free Trade Association (EFTA). As a matter of princi-

ple, the EFTAcourt’s rulings are advisory, and it lacks the pow-

er to fine member states that do not comply. Britain could ex-

pect to nominate a judge to the court, which it could not to the

ECJ. As a matter of practicality, British exporters will have to

follow the rules of the single market even if they are not in it.

More important, Norway is not the “vassal state” that Brexi-

teers claim. It is involved in drawing up EUlaws and regula-

tions, particularly in areas such as energy, where it knows the

ropes. It has no seat in the European Parliament or Council, but

most regulations are passed without a formal vote. Instead

they are negotiated in committees where what counts is exper-

tise and knowledge. Both Norway and Switzerland wield in-

fluence in Brussels. Britain’s clout would be greater still, espe-

cially in areas that matter to it, like finance.

It is the same with free movement of people. At least in the-

ory, Norway might be allowed an emergency brake against a

sudden upsurge in migration. In practice Britain could anyway

take measures that are available underEUrules, such as re-

stricting property purchases or expelling those who have not

found a job after six months. Net migration to Britain is falling

and worry about immigrantsis subsiding. A majority of all

voters, including a third of those who voted to leave, would ac-

cept free movement in return for free trade.

In one area, however, Britain would need a closer arrange-

ment. Norway is not partof a customsunion with the EU, so

vehicles crossing atthe border with Sweden and Finland are

subject to checks. This would not suit Britain. Its borders are

busier than Norway’s and its firms more integrated into Euro-

pean supply chains. Worse, customs controlsin Northern Ire-

land would jeopardise the peace process, and hence the secu-

rity of both British and Irish citizens. The government has

ruled out a customsunion with the EU, claiming it would pre-

clude signing trade deals with third countries. That, too, is

wrong-headed. The customsunion applies only to goods; Brit-

ain would still be free to strike deals in services, which the gov-

ernment says is the priority in a longed-for deal with America.

A final benefit is choice. Britain is leaving just as the EU is be-

coming a looser union of countries moving at different speeds.

Euro-zone members are heading for closer integration; others

outside it hang back. In a multi-speed Europe, being in the sin-

gle market and the customsunion would put Britain in an out-

er lane, rather than forcing it off the road altogether. Later, it

could move closer or farther away, as it wished. To hardliners,

who want out at any cost, this flexibility is dangerous. To prag-

matists who accept that the future isuncertain, itis valuable.

And think a third time

A regime akin to Norway’s, fortified by a customs agreement,

does not honour every promise made in the heat of the Brexit

campaign. We know of no deal that could. But it would mean

doing what Britain voted for: leaving the EU. This newspaper

argued against that course. Now that the country is set on it, it

needs a proven, workable model for being out of Europe’s po-

litical project but in its economy. Norway would be a good

place to start. 7

Britain and Europe

The right way to do Brexit

Britain can “take back control” from Europe without cutting all ties