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"Norway Plus" Option is Least Damaging

The so-called “Norway Plus” option is the least damaging practical form of Brexit for the UK’s companies trading with EU countries.

At the time of writing, the draft withdrawal agreement and political declaration agreed by Prime Minister Theresa May and the EU Commission seemed almost certain to be rejected by the House of Commons. Equally, it appeared there was no majority in Parliament for the UK leaving the bloc without a deal next March, this being the default option under the Article 50 withdrawal process.  

One potential route out of this impasse which seems to have gained support among MPs recently is the country operating alongside Norway, Iceland and Liechtenstein by re-joining the European Free Trade Association (EFTA) and becoming a European Economic Area (EEA) member.

This arrangement could apply following the UK’s envisaged post-EU transition period ending in December 2020, perhaps negotiating a Canada-style free trade agreement with the bloc which would probably take several years.   

For the UK overall, as recent government analyses made clear and Chancellor Philip Hammond has acknowledged, no plausible form of Brexit is likely to deliver future economic benefits equalling those we’d derive as a full EU member.

Although these analyses excluded the deal Mrs May negotiated, they did forecast that the “Norway” option would be the least damaging main alternative, resulting in UK Gross Domestic Product (GDP) being 1.4 per cent per person lower in 15 years’ time than it would be if we stayed in the EU. This compares with reductions per head of up to 2.7 per cent with the Prime Minister’s now-abandoned Chequers proposals and 8.1 per cent if we leave the bloc without a deal.

The main reason for the EEA option causing the least economic damage is that it would keep the UK in the EU’s Single Market, a position that would also benefit the country’s EU traders.

Covering all EU member states, plus four other countries, the Single Market involves the free movement of goods, services, labour and capital. Member nations observe common rules and regulations, making it easy for their companies to trade with each other across borders.

The second word in “Norway Plus” refers to the UK adding the effective continuation of its Customs Union membership - already agreed in principle by the EU, as it’s part of the existing draft withdrawal agreement - to EEA membership. The Customs Union, embracing all EU states and some other countries, involves members waiving taxes on goods traded between them and applying a common tariff to items entering their territories from external nations.

Retained Single Market and Customs Union membership combined would mean goods continuing to be shipped between the UK and EU without costly tariffs being imposed or burdensome and time-consuming customs and regulatory checks taking place.

Such arrangements are easy, quick and cheap for Britain’s EU traders and the freight forwarders, like us, that they employ. It seems the only practical alternative way of retaining these almost-ideal arrangements now would be Brexit not happening at all, through a vote in Parliament or – more likely – a further referendum, for example.

The EEA option, in addition to providing much-needed certainty for the UK’s EU traders, would preserve the open border in Ireland, which is vital for maintaining trade and other reasons.    

Perhaps the most crucial piece of evidence in favour of the EEA is that, almost 25 years after joining it, Norway is prosperous and competitive. Polls among its people show strong support for retaining EEA membership and typically only about 20 per cent of those questioned want to join the EU. 

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