Broadening Our Horizons

I know very little about the organisation UK in a Changing Europe, but whenever I have interacted with its director, Anand Menon, I have found him creditably frank in refuting idiocy on both sides of the referendum debate. His article for the FT about the possibility of enhanced UK-EU co-operation post-exit largely reflects my own view of Brexit.

The crucial point, in my opinion, is that post-exit any such decision would be a conscious policy choice, taken with the knowledge and consent of the British electorate.

Leaving the EU is not about ending our relationship with the EU, it is about reorienting our relationship in a way that is more amenable to both parties.

Outside of the euro and “ever closer union”, Britain has no role in the EU. There are, however, enormous opportunities open to a self-confident, self-governing, free trading UK released from the supranational EU policy straitjacket.

So it is with a degree of respect that I offer the following rejoinder to this UK in a Changing Europe report on the so-called Norway Option. Indeed, I would like to think that these perspectives could inform the organisation’s future work.

The article begins:

Norway is central to the debate about British membership of the EU, because it is often talked about as a possible model for a new UK-EU relationship. Norway is not a member of the EU. It is in the European Economic Area (EEA), along with Iceland and Liechtenstein.

I am happy to promote the Norway Option as a desirable exit route on its own merits, but it is important to note that Flexcit—the only comprehensive transition plan so far presented by any “leave” group—proposes using EFTA EEA membership as a “staging post” for a post-exit UK; a firm foundation on which to build a longer-term relationship centred upon trade and co-operation but without the unwelcome encumbrance of political integration.

The pragmatic acceptance of an EFTA EEA position immediately post-exit eliminates the economic uncertainties that both the UK and the EU would wish to avoid should the British public cast a vote to leave the EU. Regulation, immigration and cost would remain largely unchanged, in the initial phase, so as to facilitate an Article 50 agreement within the minimum two-year timescale guaranteed under the terms of the EU treaties.

With that one rider in mind, let us move on with the UK in a Changing Europe analysis:

Norway follows a lot of the EU laws that the UK currently does

As a proportion, the EEA acquis is one quarter the size of the current EU acquis. Whether that denotes “a lot” is a matter of interpretation. It is also vitally important to note that the EEA acquis falls under the jurisdiction of the EFTA court, which is a very different animal to the avowedly political European Court of Justice (ECJ).

It must, in principle, comply with EU laws on a broad range of issues: the single market, competition, social policy, environmental policy, state aid, transport policy, financial services, indirect taxation, consumer protection and company law.

Apart from agriculture and trade with non-EU countries, Norway is covered by all the significant EU laws that apply to the UK, according to UK in a Changing Europe Fellow Damian Chalmers.

Agriculture and trade are two enormous areas of policy with quite extraordinary reach into Britain’s broader policy-making framework. That “apart from” could be interpreted as implying that these policy areas are in some sense diminutive. They most certainly are not. Indeed, trading agility, flexibility and self-representation at the global level are strong reasons to Brexit in their own right.

Damian Chalmers also neglects to mention fisheries, justice & home affairs, foreign aid, foreign and defense policy, in which EFTA EEA members are not bound by common EU policies. Moreover, EFTA EEA states have full self-representation on the increasingly important intergovernmental bodies which define the standards that form the basis for most Single Market regulation. An independent voice, vote and right of reservation at the global level—outside the “common position” of the EU28—gives EFTA EEA members more say than any EU Member State over the standards that are later adopted by the EU.

As EU laws are made, they’re passed to a committee made up of EU civil servants and civil servants from the EEA states to be made into laws that apply in those countries. These have to match the EU version “as closely as possible”.

So in a sense, following this model would mean that the British, like the Norwegians, would become ‘rule-takers’ not ‘rule-makers’. Insofar as EU rules apply to them, they are made by others.

This line about the Norwegians being ‘rule-takers’ rather than ‘rule-makers’ is the reverse of the truth. It is EU Member States which have their voices muted where it really matters. Independent self-governing countries set the agenda which the supranational EU is obliged—by virtue of the international agreements to which it is party—to follow.

Norway has some influence on EU law-making, but it’s limited

That said, the Norwegians are not passive in the EU law-making process.

They are informally consulted on any proposal for a new EU law. Norwegian experts participate in the drafting process like EU member countries’ experts.

Norwegian influence is limited, however, as Norway does not have a vote on the EU law adopted.

Yet EEA enjoy more wiggle room than EU states in their obligation to follow EU law.

EFTA EEA states also have a unilateral opt-out from any EU law. This gives EFTA EEA states, like Norway, more say than any EU Member State, which, while their representatives are present when the EU votes, are nevertheless treaty-bound to abide by decisions-reached under Qualified Majority Voting (QMV) in the Council of the EU. Norwegians, on the other hand, need never face the prospect of laws being imposed upon them without the explicit consent of their national representatives.

There are ways for Norway to refer EU laws to its own parliament

Norway, Iceland and Liechtenstein can refer a matter for consideration to their own parliaments whenever it is felt to be constitutionally required.

This happens frequently. Since 1 January 2004, it has been used for around 550 EEA measures.

These constitutional requirements do not allow Iceland, Norway or Liechtenstein to opt out of EU law, but greater leeway can be given to the phrase “as closely as possible” in such circumstances.

The Norwegian government, for example, believes that EU rules can be adapted if they involve “a change in Norwegian policy that is considered to be problematic”.

In theory, Norway can refuse to implement an EU law it’s supposed to follow

The EEA Agreement does give Norway, Iceland and Liechtenstein a ‘right of reservation’ which allows them not to implement an EU law they would otherwise be required to. Norway has only formally invoked it once, in 2011 over the third Postal Services Directive, which sought to open up the delivery of letters to competition. To put this into perspective, in 2014 Norway implemented 627 EU laws.

The right of reservation may be used so rarely because the EU can suspend the “affected part” of the Agreement in response. Professor Chalmers says that this is a strong countermeasure that will, in many instances, mean shutting down EU market access in the sector. In 2013, after much pressure from the EU, Norway lifted its reservation over the Postal Services Directive.

The other weakness of the right of reservation is that it can only be invoked when laws are being brought in. If Norway passes an EU law and then finds that it has negative consequences, it is not allowed by the Agreement to repeal that law.

While dogmatic “neoliberals” may look with horror upon the ability of national governments to restrict competition in specific industries or product categories, the ability to do so is an example of that democracy thing about which our politicians like to speak but towards which they evince little commitment. Shorter lines of accountability and reduced complexity should concentrate minds. You can’t call it co-operation if one party is not entitled to opt-out; forced collaboration is an oxymoron; a synonymy for coercion.

The remainder of the article addresses the issue of cost, to which I can but say, international co-operation costs money; and the issue of Swiss bilateral agreements, which Britain could not and would not seek to replicate during the course of an Article 50 exit negotiation.

All in all the UK in a Changing Europe piece is not bad, but it would benefit from a greater understanding of the global dynamic that has transformed the way in which interfacing with the rest of the world via the EU, far from enhancing Britain’s influence, severely limits Britain’s ability to fully participate in the global trading and regulatory system.

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