Common Market 2.0 would be a Brexit capitulation too far

Common Market 2.0 would be a Brexit capitulation too far

TheBetter Brexit’ website provides a clear explanation of the proposal known as ‘Common Market 2.0’, or ‘Norway Plus’, which is being pushed hard as a solution to the current impasse in parliament. However, it also exposes the fundamental weaknesses of this plan. Rather than being a reasonable compromise, my fear is that it would simply end up as a capitulation to those who never wanted the UK to leave the EU in the first place. In summary, the proposal is that the UK should join the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway and Switzerland, as a stepping stone to membership of the European Economic Area (EEA), which extends the EU’s Single Market to non-EU states.

At the same time, the UK would negotiate some form of ‘comprehensive customs arrangement’ – in effect a new customs union – with the EU. Some supporters of Common Market 2.0 anticipate that this customs union would only be temporary until something else can be agreed that prevents the need for a ‘hard border’ in Ireland. Others clearly hope that the arrangement would be permanent. Either way, this is the ‘Plus’ in ‘Norway Plus’, as Norway itself is outside the EU Customs Union.

So what’s not to like? First, and most obviously, Common Market 2.0 would be Brexit in name only. Its supporters are seeking a deal that includes full participation in the Single Market, plus a customs union. That would surely be inconsistent with the vote to leave the EU. We can of course debate exactly what people wanted in 2016 until the cows come home. However, as the Prime Minister and the government have repeated said, “the agreement we reach with the EU must respect the referendum. It was a vote to take control of our borders, laws and money”.

Common Market 2.0 surely fails all these tests. On borders, even supporters acknowledge that the continued membership of the Single Market would require freedom of movement. In principle, the UK might gain some additional powers to take ‘safeguarding measures’ to control immigration and the rights to work and claim benefits, but only in an emergency and even then still limited in both scope and duration. These powers would add very little, if anything, to those that the UK already has as a member of the EU.

On laws, the UK would still be subject to the bulk of EU rules and regulations, with even less influence than it has today. EFTA members are required to adopt any measure related to the Single Market into their own domestic law, without any seats on the European Council or Parliament, and only limited participation in the activities of the Commission.

Admittedly, the UK would regain control in some important policy areas, including justice and home affairs, foreign and security affairs, and taxation. If following the Norway model, the UK could also quit the Common Agricultural and Fisheries Policies. But these potential gains have to be set against the loss of influence in many other fields. In particular, the UK would effectively become a rule-taker on services, and especially financial services. This would, in the words of Bank of England Governor Mark Carney, be ‘highly undesirable’.

Supporters of Common Market 2.0 like to emphasise that the UK would no longer be subject to the direct jurisdiction of the ECJ and would be overseen by the EFTA court instead. But this would only be a symbolic change. In practice, the EFTA court follows the ECJ closely and interprets the EU rules and regulations in the same way. And while EFTA rulings are not legally binding on member states, there would be significant political costs if the UK tried to ignore them.

On money, the UK would be expected to continue to make large contributions to the EU budget. The sums would be smaller than as a full EU member, but still substantial. Supporters of Common Market 2.0 note that the UK’s per capita contributions would probably be lower than those of Norway. However, this would only be because Norway’s per capita GDP is much higher. What’s more, Norwegian officials have emphasised that the UK cannot expect a better deal than Norway itself on any of the key points, whether borders, laws, or money.

This is all before considering the ‘Plus’ in ‘Norway Plus’, namely some form of customs union with the EU. As it happens it is hard to see how this could be compatible with joining EFTA, whose existing members do not participate in the EU Customs Union. Indeed, it is surely significant that two large economies, Norway and Switzerland, have chosen to remain outside the Customs Union, despite the alleged benefits of joining.

Even if the technical problems can be overcome, membership of a customs union with the EU, combined with the loss of regulatory independence from remaining in the Single Market, would all but eliminate the UK’s ability to do its own trade deals with the rest of the world. The UK would also have no real influence over the trade deals that the EU might do with other countries, who would then gain preferential access to our markets with no guarantee that the UK would get anything in return.

That should certainly be a red line for Tory MPs elected on the basis of the 2017 Conservative Party manifesto, which stated that “we will no longer be members of the single market or customs union…” and “leaving the European Union also means we will be free to strike our own trade agreements with countries outside the EU”. There is also a significant risk that the EU would make continued participation in a customs union conditional on the UK remaining part of the Common Agricultural and Fisheries Policies too.

To be fair, many supporters of Common Market 2.0 recognise these problems, and some have suggested it might just be a temporary arrangement (‘Norway then Canada’, or ‘Norway for now’), until the UK can negotiate a better deal. But there is an obvious danger that it becomes permanent, given the coalition of forces still trying to overturn the 2016 referendum, or only pay lip service to the result. It may also be harder to convince existing EFTA members to commit a lot of effort to new arrangements that might only be temporary.

In short, rather than Common Market 2.0 being ‘a Brexit deal everyone can support’, it is hard to imagine anything worse.