Paal Frisvold / Nov 2016
British Prime Minister Theresa May’s speech to the Conservative Party on 2 October warned of a 'hard Brexit'. She scared the markets and provoked strong reactions in Scotland and Northern Ireland, where they fear negative economic consequences and risks to the Irish peace agreement. The value of the British pound has fallen dramatically, with inflation looming. The British Bankers' Association has reported that major banks are preparing to leave London.
As May’s demands to regain British sovereignty seem incompatible with participation in the EU Single market, pressure is mounting to provide strong signals that she can keep the UK together and stabilise a jittery economy.
In my view, an adjusted EEA model, an EEA+, is the only way Theresa May can provide much needed clarity and predictability. It is the only option that can anchor the British economy in the Single Market, within the two year limit under Article 50. An EEA+ can also be compatible with the Prime Minister’s demands for national control over immigration, freedom from the EU Court of Justice, and the ability to enter into separate trade agreements. In addition, it is cheap compared to membership and the democratic deficit can be mended. Here is how:
At the EU summit in Bratislava on 9 September, heads of government categorically refused British demands for exemptions from the free movement of labour. EU is currently unified according to the narrative that the ‘four freedoms’ are indivisible and non-negotiable, and many Eastern European states are extremely unlikely to surrender further ground on free movement than was offered to David Cameron in his ill-fated re-negotiation package.
However, the continuing refugee disaster and growing support for populist parties will likely lead to political support from leading EU countries to alter the current system. In France, leading centre-right presidential candidates François Fillon and Alain Juppé both advocate reforming the Schengen Agreement, and hold annual votes in the National Assembly on the number of immigrants entering the country. If the extreme right, the Front National’s Marine Le Pen, is narrowly defeated in the French presidential election in May 2017, a tightening of immigration and free movement of people in the EU will be critical in denying her a victory in 2022. Chancellor Angela Merkel suggested recently to revise the directive on free movement of citizens.
Even if the four freedoms form a red line issue for the EU, the EEA offers precedent for flexibility on free movement of people. Liechtenstein has restrictions on free movement guaranteed by Protocol 15 of the EEA Agreement.
Legal homogeneity in the EU and EFTA countries is fundamental to the EEA Agreement. EU laws take precedence over national laws in its member states and rulings by the EU Court of Justice apply directly. In the EEA Agreement, legal precedence of EU directives in EFTA countries is not automatic. In fact, EFTA states even enjoy the right to exempt themselves, at least temporarily, from legislative acts, a right not granted to EU members. Moreover, the EFTA court is not nearly as intrusive as the EU’s. Most judgements are advisory, and the court does not have the legal authority to impose fines or sanctions, with a fiew exceptions.
Reducing the democratic deficit
The democratic deficit of the EEA arises from the fact that EFTA countries are obliged to transpose EU legislative acts without participating and voting in the EU decision-making bodies or having their own commissioner. When former Commission President, Jacques Delors, launched the EEA Agreement in January 1989, he suggested that EFTA countries should participate in the EU's decision-making bodies in areas covered by agreement. The proposal was rejected by both the European Parliament and the European Court of Justice.
A possible compromise between the EU and the UK will be to revert to Jacques Delors' vision, and give EFTA countries greater influence and participation in the EU's own decision-shaping process, but without access to the EU Council and the European Parliament. This way, the UK and the other EFTA states could have their own commissioners in areas covering the single market. It would reduce the democratic deficit embedded in the EEA, without undermining the EU countries' sovereign decision-making process. Another compromise may even to be include non-voting observers into the Council and Parliament. Today, the Norwegian government attends EU Council meetings on Schengen issue. MEPs from incoming members states attend the European Parliament without a right to vote.
The EEA is not a customs union. The UK is therefore free, just like Norway and the other EFTA countries, to enter into trade agreements with other countries.
Virtually for free
Being part of the EEA is considerably less expensive than EU membership. EFTA countries do not pay a single penny into the EU budget. They pay only to economic and social cohesion in Central and Eastern Europe in addition to programme cooperation, such as Horizon2020, from which they benefit financially. Norway today pays in under NOK 3bn per year to the poorest countries in the EU. Sweden's EU membership fee amounts to over NOK 30bn. Swedes get a lot back, but as a net contributor pay far more than Norway.
Will the EU accept it?
The EU will not want to grant the UK any deal which makes EEA membership appear more attractive than EU membership. Certainly, if talks collapse in acrimony, an EEA deal will appear unlikely. But if the talks are conducted in a spirit of compromise and goodwill from all sides, there is no reason why Britain’s EEA membership cannot proceed. As pointed out on both sides of the Channel, nobody wants to see obstacles to free trade, either through tariffs or non-tariff barriers. Key concessions by Britain in other fields – whether through budget contributions, guarantees to assist the CFSP/CSDP, or unilateral granting of permanent residency to all EU nationals currently in Britain – could demonstrate that Britain is serious about its commitments both to being a reasonable and reliable partner, and to upholding the single market which it did so much to engineer and promote.
Norwegian mediator role
As an EEA country and with close ties to the UK government, Norway has a unique insight and understanding of both the UK and EU’s concerns and requirements. Therefore, it should offer to serve in a mediating role between London and Brussels. This could help change the unfortunate signal that Norway might not welcome Britain into the EEA, and then ensure that Britain is steered into EFTA and the current EEA, rather than forging its own bilateral model that would render the current EEA agreement even more peripheral.
With the British at the Norwegians’ side, the political dialogue between the EU and EFTA countries – and indeed the EEA itself – could become politically relevant, a clear benefit to Norwegian economic and political interests. Far from reducing Norway’s clout, as some in Oslo fear, EFTA and the EEA could, for the first time in its 20 years existence, become a visible international institution. In this context, Norway, as the second-most significant member, would be punching well above its political and economic weight.
The Norwegian government has a historic chance. It will be in Norway’s and Europe's interests that it rises to the occasion and seizes it.