It's Time For The Norwegian Option

CapX, July 17, 2017

Extricating the UK from the EU after over four decades of membership was never going to be straightforward. And yet, more than a year after the referendum, David Davis’s talk of moon landings aside, the Government’s approach has been dismayingly vague and delusionally blithe. It has no one to blame other than itself.

Once the voters had (correctly, in my view) “advised” Parliament that the UK should depart the EU, it was up to the Government to decide on the type of Brexit it would put to Brussels. Representative democracy was back. The various Leave groups were self-selected and even Vote Leave’s “official” status was derived from bureaucratic fiat — designation by the Electoral Commission — rather than any popular mandate. This group’s “promises” were what they were, but they were binding on no one. There is also the little matter of the 48.1 per cent who voted to Remain. If such a closely-fought referendum were to be truly advisory, the opinions of the losers ought to count for something in shaping Britain’s Brexit proposals.

Some confusion was to be expected after the referendum’s unexpected result, but, even allowing for the Tory brawl that ensued, not on the scale of the chaos that Britain has witnessed. The months that passed between June’s referendum and the Article 50 notification in March were squandered by a team that didn’t have a clue when it took charge, doesn’t seem to have much of one now and has now blundered further by throwing away its parliamentary majority.

Article 50 gives the two sides two years to work things out. If that deadline is missed (and no extension is agreed), what follows is the hardest of hard Brexits. The clock, as the serpentine Michel Barnier, the EU’s chief Brexit negotiator, warned last week, is ticking.

Theresa May has repeatedly argued that “no deal is better than a bad deal”, a mantra that could — in indicating a willingness to walk away from the table — be defended as a negotiating tactic, but only if the EU is convinced that May is actually ill-informed enough to believe what she is saying. Unfortunately that could well be the case, but awkward reality cannot be wished away. No deal would be bad for the EU, but disastrous for Britain, triggering major economic (and probably not just economic) difficulties at home and, Tory ultra-Brexiteers please note, opening Number 10’s door to Jeremy Corbyn—or some equally sinister successor.

Even if it can be cobbled together in time, a more flexible Brexit featuring some sort of free trade agreement (hopefully including services, but quite possibly not) will still be rough going for Britain’s exporters, used to the “frictionless trade” with the EU that would be torn away from them. Tariffs won’t be a problem, but more insidious regulatory barriers will be. The notion that the UK can bypass the latter by simply importing the relevant rules into its post-Brexit legislation is naïve. Regulations change constantly, and Britain will struggle to keep up, even — fingers crossed — if an increasingly mercantilist EU cooperates, and, if or when it comes to services, particularly financial services, “regulatory equivalence” will only be able to do so much in the face of a bloc that regards the City with a dangerous mix of envy and distaste.

The idea that a buccaneering Global Britain, sailing out into the blue on a smile and a shoeshine, will be able to make up the shortfall anytime soon is fantasy. To be sure, there will be free trade deals to be had, but they will take time and, with the UK not in the strongest of negotiating positions, they will come at a price. And the Britain that signs them won’t be so very buccaneering. There’s a great deal to be said for a post-Brexit UK that goes fully “offshore”, deregulating, cutting taxes, flushing the green crap, but the political party that says so will lose the next election: the buccaneers will be sunk before they can set sail.

If Brexit is to be a way out of Brussels’ ever closer, ever less democratic union, while protecting Britain’s access to the more positive aspects of European integration, the best route (as a growing number of observers are pointing out) runs, so to speak, through Oslo. The much-maligned, much misunderstood “Norway option” — continued membership of the European Economic Area (EEA), and thus participation in the EU’s Single Market, on a basis similar to that enjoyed by Norway and two other European Free Trade Association (EFTA) countries — could represent either a transitional arrangement or, arguably less desirably, a final destination in its own right.

Norway, whatever some critics of the Norwegian option may maintain, is not a member of the EU either legally or in practice. Norwegians have twice rejected the delights of EU membership and, judging by opinion polls, they won’t be changing their minds any time soon. Yes, it’s true that Norway does make payments (on a net per capita basis, a bit lower than that now paid by the UK into the EU) connected to its membership of the EEA, but they mainly consist of direct assistance by Norway to poorer parts of the EU, and Britain should expect to pay as well, perhaps — naughty thought — drawing on some of its swollen foreign aid budget to help do so.

It’s also true that remaining in the EEA will imply accepting (much) more of a brewed-in-Brussels regulatory burden than enthusiasts for laissez faire (me, for one), would like. That would be a bigger problem if Brexit promised a bonfire of controls, but, as noted above, with Corbyn at the door and the Tories as they are, it can’t. And Norway has more of a say in those areas of EU regulation that concern it than is often claimed, including, as a last resort (it would risk retaliation), a “right of reservation” enabling it to reject EU legislation.

Then there’s immigration. While Norway has to play by the Single Market’s free movement rules, it also has the right (subject again to the risk of retaliatory measures) to unilaterally apply a temporary emergency brake to immigration from the EU in the event of “serious economic, societal or environmental difficulties”, a right likely to be the subject of fierce debate ahead of any agreement to let Britain take the Norwegian option or anything like it. That said, occasional murmurings, admittedly not always from entirely reliable figures (Tony Blair comes to mind), hint that there might be slightly more room for manoeuvre on this topic than hitherto imagined.

It’s also worth adding that Britain’s membership of the EU has little to do with immigration from outside the EU, a net 189,000 people in 2015 alone, compared with a net 184,000 from the EU the same year. If the government wants to reassure voters that it is determined to cut immigration, more effective restrictions on non-EU immigration would be a useful step forward, a step that Theresa May has notoriously failed to take: in 2010, the year she became Home Secretary, net non-EU immigration stood at 217,000, a total not so very different from where it stands today.

And, for the avoidance of remarkably persistent doubt, membership of the EEA is not the same as membership of the EU’s Customs Union. Britain would essentially (there are some technical issues) be free to cut the trade deals it wanted with that excitingly wide world beyond the EU.

With administrative chaos quite likely to add to the pain that a hard Brexit could inflict, a Norwegian-style prix fixe solution also has the advantage of drastically reducing Brexit’s complexity. Given that, and the broader continuity it preserves, the Norway option ought to be welcomed by business, and (polling indicates) not just business, whether as a temporary fix or — a separate debate — a final destination. And for the EU, it safeguards more of the benefits that the status quo gives its members, while (in what would be a tremendous development for Brussels, if not for many of those living within the EU’s borders) removing that perennial British obstacle to ever closer union.

Sadly, there is no guarantee that the Norwegian option (or something like it) is available for Britain to take up. Far from it. The moment may have passed — or been frittered away — if it ever existed, but for the UK even to propose it would suggest a seriousness about what Brexit involves and what Britain wants from it that has, up to now, been lacking. And that, at least, would be a start.

Corbyn or ‘Soft Brexit’: Choose One

National Review Online, June 12, 2017

Theresa May has just three key matters to attend to in what ought to be the death throes of her shattered premiership. The first is to cut a deal with Northern Ireland’s Democratic Unionist party good enough to give her a de facto, if precarious, parliamentary majority. As I write, that’s nearly, probably, maybe there. The second is either to postpone the first round of the Brexit talks with the EU (due to start in a few days) or to ensure that they proceed without any blow-ups. The third is to announce that she is resigning as leader of the Conservative party and will leave 10 Downing Street as soon as her successor is chosen.  

As she sorts through the statistics of her defeat — and even if the Tories emerged as the largest party, it was a defeat — there are some scraps of comfort. The Conservatives’ share of the vote (42.5 percent) was the highest since the 43.9 percent that Margaret Thatcher, still basking in Falklands glory, secured in 1983, and the Tories did better than they had in Scotland for a very, very long time, thanks mainly to the efforts of its charismatic Scottish leader, Ruth Davidson, someone who both adapted Conservatism to local conditions while preserving its essence and, while she was at it, helped take a second Scottish independence referendum off the agenda for quite some time.

But none of this counts for much when measured against the scale of the disaster that May has inflicted on her party and on her country. She has thrown away a small, if not entirely reliable, majority and (if she’s lucky) replaced it with a fragile less-than-coalition. She has greatly complicated the treacherous Brexit process. She has squandered one of Margaret Thatcher’s greatest legacies: The hard Left is now dangerously close to power. Labour won some 40 percent of the vote last week, its highest share since Tony Blair’s heyday, an era when it was a very different party.

Calling a snap election was a forgivable gamble, forgivable because it looked like a safe bet. Burdened by an extremist and in some cases none too bright leadership, Labour was vulnerable. A popular figure (particularly when compared with Labour’s Jeremy Corbyn), May seemed set for a substantially increased majority, maybe even a landslide, something that would have strengthened her hand at home during the Brexit negotiations.

 Meanwhile, pushing out her mandate to 2022 would buy her potentially valuable breathing space. Under the timetable set in motion when May gave notice under Article 50 of the EU treaty in March (an act of extraordinary irresponsibility if she was already contemplating an election), the two sides have two years to work out the terms of their divorce (which does not, incidentally, include sorting out what their post-separation relationship should look like). If they don’t come to terms, there is (in the absence of an extension or transitional agreement) simply a break, after which trade between the UK and the EU would be governed by, to use the shorthand, WTO rules. Whatever some Brexiteers like to claim, that would not be a happy state of affairs. There are signs that uncertainty over what may lie ahead is beginning to unsettle business. That uncertainty — exacerbated by May’s unwise decision to opt for a “hard Brexit” rather than one of the gentler “prix fixe” alternatives — will weaken the economy, at least for a while. May presumably calculated that by 2022 the worst of this turbulence would be behind her.

A gamble is still a gamble. Good odds are no reason for carelessness, for stupidity, or for hubris. May’s campaign displayed all three in abundance. One survey has shown that 57 percent of Labour voters swung behind the party in the last month before the vote, 26 percent in the final few days. To butcher a storied Sun headline: It was the campaign wot lost it.

Among many blunders there were two that stood out. The first was proposing changes to the rules governing state-funded “social care” (including plans for a predatory “dementia tax”) that were seen as an attack on the elderly (typically among the Conservatives’ most loyal supporters), especially those who had the effrontery to own their own homes and the desire to pass something on to their children, achievements and aspirations that once were at the core of Thatcherism. It was a gesture that might not have delighted those children either: According to one poll, 50 percent of 35- to 44-year-olds voted Labour, but only 30 percent for the Conservatives.

Throw in the suggested changes to a free schools meal program and, in just a few self-destructive paragraphs in a manifesto that was ill-conceived enough as it was, May had revived the legend — one of the most powerful in British politics — of the Tories as the “nasty party” (a phrase, ironically enough, that she had made famous).

Then there was the decision to base so much of the campaign on May. Say what you will about Stalin and Mao, mass murderers and all that, but they earned their personality cults. May, by contrast, had been prime minister for less than a year, and before that a home secretary (interior minister) whose time in office was notable primarily for its longevity and failures over immigration. What’s more, by becoming the centerpiece of her own campaign, May seemed to repudiate some of the qualities that Brits most appreciated about her — understatedness and, by politicians’ standards, self-effacement. Then, in a cruel paradox, she was brought low when those aspects of her character proved to be all too genuine. Awkward in the spotlight, she stalked from Potemkin event to Potemkin event, too grand or too unsure of herself (take your pick) for debate and serious questioning. Voters were offered the repetition of slogans (“strong and stable leadership”) and evasive sound bites that grew emptier and more embarrassing by the day. She was a more likable robot than Hillary Clinton, but one with even less vim.    

She also chose the wrong battleground, casting herself as the defender of the Brexit she had (tepidly) opposed, a battle that has already been won. (Most Britons now accept, if in many cases reluctantly, the referendum’s outcome.) And she did so not solely on the strength of her (much bragged-about but largely untested) negotiating skills, but also by promising that she would be going for a “hard Brexit.” That includes withdrawal from the “single market” in which Norway and other non–EU members happily participate, a promise that would not only prove economically expensive but also cost May dearly at the polls. Yes, the half-truth that “hard Brexit” would be hard on immigration delivered the Tories votes and some seats in working-class areas not previously known for their enthusiasm for May’s party, but the extra twist of the knife it applied to resentful Remainers in the south of England cost the Conservatives more.

With the Tories facing a Labour party led by Jeremy Corbyn, this was an election that needed to be about more than Brexit and May’s managerial skills. Corbyn, a man of the hard Left, an extremist ably backed by extremists rather brighter than he is, should have been confronted on his record and on his ideology. But despite some tabloid venom, Corbyn was treated by the Tories with disdain rather than subjected to the more forensic treatment that was called for. The result was that this courteous fanatic was able to get away with being repackaged as a genial old codger, progressive, pleasantly eccentric, and principled. The last, at least, was true, but those principles — atavistic, intolerant, and irreconcilable with respectable democratic practice — were never properly examined. To be sure, a good number of people liked what they saw of Corbyn’s program, but many were either beguiled by its mood music — “hope,” “fairness,” an end to “austerity” — or just used a vote for him as a vehicle to express annoyance with May and a more general resentment, sometimes justified (for example, real wage growth has been dismal for years), sometimes not.

That resentment is strongest among young voters, and it delivered them to Labour. Convinced that coffin-dodgers and boomers are robbing them of their future, whether by voting for Brexit or by imposing tuition charges for university or by driving up house prices beyond their reach, “generation rent” hit back, its choice of weapon — a vote for Labour — unaffected, willfully or otherwise, by any understanding of Corbyn’s past association with terrorism or, for that matter, of where his brand of socialism will lead, an ignorance reinforced by left-wing bias in the educational system and a convenient forgetfulness of what the 1970s were really like.

This rejection by the young means trouble for the Tories for a long time. But they have horrifying short-term problems to contend with too. Should May’s government fall any time soon, the momentum behind Labour is likely to sweep Corbyn into power. The most immediate threats revolve around Brexit and the search for a new Tory leader, two closely connected conundrums. Whatever she might think or hope, Theresa May is finished, and her party does not have much time to find a replacement. The idea that May would ever be able to negotiate a satisfactory “hard Brexit” was always, to put it mildly, unconvincing, but with the EU fully aware of her weakness, it’s now impossible. And there is no fallback. May has argued for a while now that “no deal is better than a bad deal,” a characteristically vacuous argument that sidesteps the distressing reality that “no deal” (which would mean trading under those WTO rules) is a bad deal, a very bad deal indeed.

A breakdown of the Brexit talks would create chaos in Parliament and trigger the election that would take Corbyn to Number 10. As mentioned above, May should, given the circumstances, try to suspend the negotiations for now, and there were signs over the weekend that the EU is expecting just that. Failing that, begin the talks, and do everything possible to keep them going. In the meantime, the Tories must pick a new leader, a process complicated by the small matter that, at the time of writing, the incumbent shows little sign of wanting to go. But assuming that she can be prevailed upon to accept the inevitable, there are a number of alternatives.    

Naturally there is talk that Boris Johnson (the former mayor of London and current foreign secretary) is “on maneuvers.” Naturally, he has denied it. But Johnson has been left badly tarnished — a joker turned into a knave — by his role in the Brexit campaign and the turmoil that followed it. He’d be unlikely to tempt errant Tory voters back into the fold, and as he appears to be loathed by much of the EU leadership, his chances of striking a decent Brexit deal would be minimal. David Davis, the tough and intelligent Brexit minister, would normally be someone to consider, but his bewildering failure to master his EU brief ought to rule him out — although it may not. In the last few days Davis has, intriguingly, edged — just a bit — away from hard Brexit. Ruth Davidson’s triumph in Scotland saved May on Election Day, but she still has plenty to do in her home country. She has also said that she’s not interested in the national leadership, for which she’s not, in any event, eligible (as she doesn’t sit in the British parliament). Davidson, who like most of her compatriots favored remaining in the EU, has now suggested that the Tories should consult with other parties on the shape that Brexit should take. Those other parties would probably run a mile, but in principle she’s not wrong.

If I were in a position to choose the next Conservative leader, I’d either skip a generation and opt for, say, a promising up-and-comer such as Priti Patel or — spoiler alert, crazy thoughts ahead — perhaps look for a Nixon to go to China. Ken Clarke may be 76, a euro-fundamentalist and a man on the Tory left, but he was an effective chancellor of the exchequer (finance minister), and he’s a well-liked figure both in the UK and, I would imagine, within the EU’s hierarchy. If Clarke could be persuaded to stand (unlikely) and to endorse a soft Brexit (maybe less unlikely), he — or if not him someone of similar views, such as Dominic Grieve (a former attorney general, respected in Parliament on both sides of the aisle and a holder of the Légion d’honneur, no less) — might be best placed to deliver the “soft Brexit” (of which the ‘Norway option” continues to be the best variant) that is the only realistic way for the country and the Tory party to get out of the current mess.

Even suggesting those last two individuals (however improbable it is that they would want the job) will shock euroskeptic readers, but whoever the new Conservative leader turns out to be, the reality of what lies ahead is clear. Corbyn or “soft Brexit”: Choose one.