Friday, 22 September 2017


Facing increasing panic over a looming exit deadline in March 2019, Theresa May has called for a ‘transition period’ in which the UK loses its EU voting power but still has to follow its rules. It could easily turn permanent.

Desperate to salvage Brexit talks which have gone off the rails, British Prime Minister Theresa May gave a much-anticipated speech in Florence today. She surely hopes it will stem the panic over the country’s lack of preparedness for the ‘cliffs edge’. That is March 29, 2019, when the country must leave the EU.

There is now little prospect that an agreement on Britain’s post-Brexit relationship with the EU can be agreed by that date. And so the prime minister had little choice but to do something to calm the jitters of British businesses and markets. 
Her solution is a two-year transition period after Brexit, in which the UK would technically leave but still have to follow all of the EU’s rules, in exchange for access to the single market. Because it will have technically left, the country will lose its voting rights and members of the European Parliament for these two years.

Fax democracy

It is a situation well familiar to Norway, Iceland and Switzerland, whose relationship with the EU has been called ‘fax democracy’. These three countries are not technically in the EU, but they have worked out arrangements with Brussels in which they have to follow almost all areas of EU law in exchange for access to the single market.

Unlike a phone call, which involves a two-way conversation, a fax is a one-way diktat. Oslo gets its orders from Brussels and Norway must follow them. Unlike real EU members, they have had no input in crafting the law and have no way to object to it.

According to UK media reports this week, Foreign Secretary Boris Johnson is horrified by May’s transition period plan, fearing it will become permanent. He reportedly threatened to quit the cabinet if she proposed it.

May was only able to obtain the agreement of her full cabinet by promising that this arrangement will not become permanent, and the UK will not copy the Norway or Switzerland models for its future relationship with the EU after 2021.

But any cabinet member who believes this promise is kidding themselves. For starters, it is very unlikely May will still be prime minister in 2021. But more importantly, the lessons from Norway, Iceland and Switzerland’s experience in the 1990s shows that in the end, it is nearly impossible for a Western European country to be outside the EU single market.

The UK is about to fall into the same trap suffered by its Germanic neighbors.

Lessons not learned

Picture it: it’s the day after a monumental referendum vote, and the political class is stunned. After a nationwide in/out referendum on EU membership, expected to yield an 'in' result because the entirety of the political and business establishment supported it, people awoke to the news that the public had voted out, by 52%. A yearning for national sovereignty had won the day.

This wasn't 24 June 2016. It was 29 November 1994, the day after Norway's referendum on whether to join the European Union. 52% voted for Norway to be outside the EU, while 47% voted to be in it - an almost exact mirror of the UK result 22 years later. The result was a political shock that sent reverberations through the government and business establishment. 

What happened in Norway in the ensuing years was a lesson in how politicians must sometimes pull their citizens along begrudgingly, or even unwittingly. Because even though EU membership had been rejected, Norway effectively ended up becoming an EU pseudo-member - under terms much worse than if it had become a member state. The same fate awaited Iceland and Switzerland. 

In the end, these three countries (plus Liechtenstein) had to work out an arrangement in which they maintained illusions of sovereignty while doing what was necessary for the economic health of the country. Knowing that they could not get a referendum on EU membership to pass a public vote, the governments found a work-around.

Norway has access to the EU single market through a custom-created vehicle called the European Economic Area (EEA). In exchange for this access, Norway has to follow EU law and pay the same amount into the EU budget as member states. 

But because it is not actually a member state, the country has no say in crafting those rules. Norway has no commissioner in the EU executive, no members of the European Parliament, and no vote in the European Council. 

In short, it is exactly the vision of 'decisions being taken by foreigners in Brussels and forced on us without our consent' that has been created by British tabloids for 20 years. That description was always a lie. But it may be about to become a reality, thanks to the referendum that those same tabloids forced on the government.

Damage control

Will the British public accept such an EEA-like arrangement? They may have no choice.

Right now it is clear that a deal by March 2019 is unlikely. But is there any reason to believe that a deal by 2021 is any more likely? 

The UK government has boxed itself into a corner. A free trade deal, like the one taking effect between the EU and Canada this year, would not give the country the full single market access it needs to avoid economic harm. But at the same time, May has promised that in its future relationship, there will be no freedom of movement or subjection to the European Court of Justice, something necessary for an EEA-like arrangement.

The EU has stood firm in insisting there can be no single market access without these two things. Michel Barnier, the EU’s chief negotiator, repeated this insistence yesterday when he said: 
“One thing is sure. It is not — and will not — be possible for a third country to have the same benefits as the Norwegian model but the limited obligations of the Canadian model.”
So the promises of the British government will be impossible to deliver. That means backtracking on one or the other. A future prime minister will have to choose between honoring May’s promises to the public or economic collapse. He or she is unlikely to choose the latter.

Would the public revolt? Perhaps, perhaps not. They did not revolt in Norway or Switzerland - they were content to have their national pride satiated by being politically outside the EU. It was enough for them to not show up in blue on an EU map.

An EEA arrangement would leave nobody in the UK happy. The Brexiteers will not have received satisfaction on one of the main issues motivating the 'leave' vote - an end to EU freedom of movement. 

The remainers will be able to clearly see the absurdity of what the UK had just done - still being subject to EU law but castrating itself in Brussels by no longer getting a vote on shaping the laws that effect the UK. But it may be that this is the only acceptable compromise between the two sides.

It is clear that the leave vote was motivated by emotion - an urge to be free of Brussels control. Being part of the European Union was a humiliation for many British people, who have still not gotten over the loss of empire. The very idea that Britain needs to be in such a union is what they opposed. And so it may be that, like in Norway, Iceland and Switzerland, the technical status of being outside the EU will be enough to satisfy the leave voters' post-imperial trauma.

That will leave Theresa May as the sacrificial lamb, which is likely the reason she is still prime minister at all. It may seem odd that after such a disastrous election defeat, she has not been unseated by one of the many plotters in her cabinet who are sharpening their knives. 

The Tories are likely about to set May out to sea, like a viking funeral ship they have loaded with trash for disposal. A future prime minister will not be beholden to May’s promises. And that is why this transitional arrangement is likely to become a permanent one.

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