The EconomistFebruary 24th 2018 471T
HE dilemma is acute. In an unexpected
referendum result, voters decide by the
narrow but decisive margin of 52-48%
against European Union membership. The
government promises to honour the out-
come. But the EUis the country’s most im-
portant market, and most businesses are
keen to have unimpeded access to it. How
to square the circle?
This question faces Theresa May as she
prepares to make a speech on Britain’s de-
sired post-Brexit trade relationship with
the EU. But it also describes Norway in No-
vember 1994, when its voters rejected a
plan to join the club. Unlike Britain, how-
ever, Norway had a fallback: the European
Economic Area (EEA). It then included sev-
en countries that were in the European
Free Trade Association (EFTA) and not the
EU, but still wanted to participate in the
EU’s single market.
That group shrank when Austria, Fin-
land and Sweden chose to join the EUin-
stead, and Swiss voters also rejected the
EEA. It now comprises only Norway, Ice-
land and Liechtenstein—“a minnow and
two tadpoles”, one Eurocrat says. Yet al-
most 25 years on, Norwegians seem happy
with the deal. Business is content. Polls
find strong support for staying in the EEA
against only 20% for joining the EU. Succes-
sive governments have agreed not towould be Brexit in name only, making Brit-
ain a vassal state. Theyargue that only a
clean Brexit that abandons the single mar-
ket, the customsunion and the ECJwould
be consistent with the June 2016 referen-
dum result, which demands that Britain
take back control of its laws, its borders and
its money. Most Remainers are also against
the EEA, as they prefer full EUmembership
(though Stephen Kinnock, a LabourMP,
and Stephen Hammond, a Tory one, are ac-
tively promoting the Norwegian option). It
is a compromise that by its nature is no-
body’s first choice.In from the cold
Yet there is something odd about this. Nor-
way is a thriving democracy; indeed, the
Economist Intelligence Unit, our sister
company, ranks it as the world’s most
democratic country. It is competitive and
rich (a huge sovereign-wealth fund helps).
IfEEAmembership were so awful, why
would the country embrace it? That ques-
tion suggests it is worth looking more
closely at how the EEAworks.
The concept of the EEAgoes back to the
European Commission presidency of
Jacques Delors in the late 1980s (see time-
line on nextpage). This wasthe moment
when, under British inspiration, Europe’s
barrier-free single market was beingreopen the European issue. To borrow a
phrase from David Cameron, Mrs May’s
predecessor, the Norwegians have given
up “banging on about Europe”.
Many British Brexiteers were once also
keen on the EEAoption. It keeps the eco-
nomic benefits of single-market member-
ship, but dumps the political baggage of
ever-closer union and a would-be super-
state. Moreover, the EEAmodel for Britain
is one the EUwould be happy with. As far
as Brussels is concerned, it works. Norway
is treated as a friend—unlike Switzerland,
which in place of the EEAhas a laborious
set of bilateral deals. The EUhates the
Swiss set-up, because it is not dynamically
updated to changed single-market rules
and there is no agreed dispute-settlement
mechanism. Diplomats in Brussels are
clear that the Swiss model is not on offer to
the British (many say it would not now be
given to the Swiss). Besides, it excludes
most financial services.
But most Brexiteers now agree with Mrs
May in rejecting the EEAmodel. Although
the government’s own analysis shows that
it would be the least costly form of Brexit, it
crosses many “red lines” drawn by Mrs
May. EEA members are rule-takers, not
rule-makers, say Brexiteers; Norway is a
“fax democracy”, which receives its orders
from Brussels. EEAmembership, they say,Options for BrexitNorwegian lessons
BRUSSELS AND OSLO
Theresa May’s government is firmly against the Norway model for Britain’s trade
with the European Union. Yet it offers many advantages, even for BrexiteersBritain
Also in this section48 Customs controls
50 Bagehot: The divided kingdom