Leave camp must accept that Norway model is the only safe way to exit EU
By Ambrose Evans-Pritchard
The Leave campaign must choose. It cannot safeguard access to the EU single market and offer a plausible arrangement for the British economy, unless it capitulates on the free movement of EU citizens.
One or other must give. If Brexiteers wish to win over the cautious middle of British politics, they must make a better case that our trade is safe. This means accepting the Norwegian option of the European Economic Area (EEA) – a ‘soft exit’ – as a half-way house until the new order is established.
It means accepting the four freedoms of goods, services, capital, and labour that go with the EU single market. It means swallowing EU rules, and much of the EU Acquis, and it means paying into the EU budget.
Leavers know that if they gave in to these terms, they would drive away all those other voters who want to slam the door on immigration. So the campaign has been evasive, hoping to muddle through until June 23 with the broadest possible church.
Some Brexiteers have tried to square the circle with blue sky romanticism on trade, or sweeping talk of a ‘Hong Kong’ model, or by suggesting we fall back to the default settings of the World Trade Organisation.
Professor Patrick Minford from Cardiff University was refreshingly candid in proclaiming that his Brexit vision would “eliminate” most of Britain’s manufacturing – what he describes as a Schumpeterian “good shock” to clear away dead wood – but this is just as Utopian as EU ideology itself. It is no an answer to the politics of Project Fear.
As my colleague Allister Heath argued last week, there are great numbers of middle-class, centrist, Tory-leaning readers of The Telegraph who want Britain to restore sovereign self-government, but have been rattled by the barrage of taxpayer-funded propaganda. They crave reassurance that it really is safe to vote for Brexit.
Prof Minford is right to denounce the Treasury’s document on the short-term horrors of Brexit as “intellectually deceitful”, but his reasons are different from mine. The Treasury claimed that a “vote to leave would cause an immediate and profound economic shock”. The hit to GDP ranges from 3.6pc to 6pc, with a loss of 800,000 jobs in a ‘severe’ scenario, comparable in scale to the collapse of Western banking system in 2008.
What is striking about this ghoulish document is that it did not model the Norwegian EEA outcome, even though this ‘off-the-shelf’ option is the most likely counter-factual. The reason is obvious. Had the Treasury done so it could not have come up with such alarming figures.
There have been two excellent reports on the EEA option, one by the Adam Smith Institute and another entitled ‘Flexcit’ by Richard North from the EU Referendum blog.
The Adam Smith Institute starts from the premise that the EU is “sclerotic, anti- democratic, immune to reform, and a political relic of a post-war order that no longer exists.” It says the EEA option lets the public judge “what ‘out’ looks like” and keeps disruption to a minimum.
“The economic risks of leaving would thus be neutralised – it would be solely a disengagement from political integration. All the business scare stories about being cut off from the single market would fade away,” it said.
The report argues that everybody could live with an EEA compromise, whether the Civil Service, or the US, or the EU itself. Britain would then be a sovereign actor, taking its own seat on the global bodies that increasingly regulate everything from car standards, to food safety, and banking rules.
“As Britain is already a contracting party to the EEA Agreement there would be no serious legal obstacle,” it says.
David Cameron disparages the Norwegian model as a non-starter. “While they pay, they don’t have a say,” he says.
Actually they do. As our forensic report on Norway by Szu Ping Chan makes clear, they have a de facto veto over EU laws under Article 102 of the EEA agreement. Their net payments were £106 a head in 2014, a trivial sum.
They are exempt from the EU agricultural, fisheries, foreign, defence, and justice policies, yet they still have “passporting” rights for financial services. Their citizens can live in their Perigord moulins or on the Costa Del Sol just as contentedly as we can.
They do not have to implement all EU law as often claimed. Norway’s latest report shows it has adopted just 1,349 of the 7,720 EU regulations in force, and 1,369 out of 1,965 EU directives.
The elegance of the EEA option is that Britain would retain access to the EU customs union while being able to forge free trade deals with any other country over time.
There would be no need for a desperate rush to both reach a modus vivendi with the EU and to renew all the EU’s 80 bilateral deals with other countries and regional blocs before the two-year guillotine fell under Article 50, the EU secession clause.
Miriam Gonzalez Durantez, a former EU trade official (and Nick Clegg’s wife), argues that Britain is so short of trade expertise that it would struggle to assemble 25 experts even after repatriating staff from the EU.
In this she is right. Where she is on shakier ground is to claim that we would need 500 officials “working intensely for a decade” to renew our third party trade deals.
Really? There is a simple administrative mechanism for the switch-over. All it requires is a filing at the United Nations under the “presumption of continuity” and trade goes on as before, a procedure used time and again over the post-war era.
This is what occurred after the break-up of Czechoslovakia and Yugoslavia. It was the formula used for decolonisation in the 1960s. It would take a willful decision to override this mechanism of international law, and it is hard to see why a close allies such as US, Canada, or Japan would act in such a fashion.
The G20 and the G7 profess to stand for free trade and keep telling us a lurch towards protectionism would shatter the world’s fragile economic order.
What is true is that any EU state could stop Britain stepping back to the EEA. Hell hath no fury like a union spurned. But Article 3 of the EU’s Lisbon Treaty says the union will uphold “free and fair trade” with the rest of the world, and this has legal force.
Such vindictiveness would be the quickest and most certain way to tear the EU apart, for would it deeply damage the interests of the Dutch, Nordics, and Germans. It would cut across Britain’s intimate defence ties with France, and across Britain’s NATO pledge to Poland and the front-line states of Eastern Europe.
There may be many powerful reasons why Britain should remain in the EU, whether to ensure the comity of these Isles and show solidarity to Ireland, or to close ranks with our fellow liberal democracies at a time of civilizational threat. One thing that we do not have to worry about is a trade embargo, provided we stick to the safe ground of the EEA.
So we have bizarre situation. The Leave campaign is in effect lying about the Norwegian imperative because it dare not admit that EU migrants will continue coming to work in a post-Brexit Britain; and this in turn allows the Remain campaign to air its lies on economic Armageddon.
Just ignore them both. Every citizen is capable of reaching his or her own verdict on 40 years of EU conduct.
This article first appeared in the Daily Telegraph on 2nd June 2016.