The European Commission’s Brexit negotiator Michel Barnier’s team already floated the idea of a zero-tariff interim deal that preserves trade in goods, like German cars or French wine exports to the U.K, but would exclude trade in services and hit the U.K. hard on banking or aviation.
Brussels now has a plan B: The U.K. could temporarily become a member of the European Free Trade Association (EFTA) while both sides transition into their future relationship, a senior Commission official told POLITICO.
Joining EFTA, which governs free trade between Norway, Iceland, Liechtenstein and Switzerland, would allow the U.K. to apply for membership in the European Economic Area (EEA). That grants free access to the EU’s single market. The option — often dubbed the “Norway model” — would preserve current trade ties with the EU and spare the U.K. from negative economic consequences until future trade relations with the EU are sorted out, the official said. It would also retain ties in the area of services.
Such a plan, however, is a toxic idea for many hard-line Brexiteers because it would require the U.K. to accept the four founding EU freedoms of goods, services, people and capital. One of the central themes motivating many people to vote for Brexit was taking back control of immigration policy.
Britain would also have to continue paying Brussels in exchange for access to the EU market.
Norway will have paid €1.3 billion to the EU between 2014 and 2021. Iceland on the other hand, because of its size and economic wealth, paid just €49.4 million. Switzerland is part of EFTA but not the European Economic Area. It has a separate free-trade agreement with the EU.
The U.K. also would have to fully implement EU laws and regulations — while losing any say in drafting or vetoing them.
“The EFTA court judges on the basis of EU law, so it’s not as if you were really leaving the realms of EU jurisdiction,” said Andrés Delgado, a trade lawyer from the Max Planck Institute Luxembourg, a state-financed research institution located near the ECJ.
Still, officials in Brussels hope that once the reality of a “hard Brexit” — of which British manufacturers and industry associations already warn — comes closer, the U.K. might become open to the Norway option, at least as a temporary solution.
Such hopes have been spurred as the British government is backtracking from its earlier hardline stance on Brexit. Late last month, British Prime Minister Theresa May indicated that free movement of EU citizens post-Brexit could be permitted as both sides “implement” their future relationship. Foreign Secretary Boris Johnson last week opened up to allowing free movement for EU citizens after Brexit.
“Ideally I think it could be done, what with goodwill and imagination, it could be done,” Johnson told reporters in Athens, referring to free movement of EU nationals.
A Norway-like deal would be good for Brussels too.
“An EEA-type transition would help avoid complaints during the transition phase,” the senior Commission official said.
Testing the political waters
The deal also could be good for the current EFTA quartet, and some of its members are open to adding a temporary fifth member.
“We would maintain an open-minded stance in the event of an application for EFTA membership,” said Oda Helen Sletnes, Norway’s ambassador to the EU. “Overall, it is in Norway’s interest to maintain as close trade policy cooperation with the U.K. as possible, with as good a level of access to the British market as possible.”
And some analysts noted that a British application to EFTA would be a reunion of sorts.
“The U.K. was a founding member of EFTA and remained therein for some 12 years [until 1972], so you can imagine it probably wouldn’t take too long for them to be readmitted as a member,” EFTA spokesman Thorfinnur Omarsson said.
“We have been clear that we believe a phased process of implementation, in which both Britain and the EU prepare for the new arrangements that will exist between us, will be of mutual benefit,” the spokesperson said. “The exact structure and detail of such a process will be subject to the negotiations.”
The European Commission said it wanted “an orderly withdrawal agreement, taking into account the future relationship between the EU and the U.K.,” according to a spokesperson.
An imperfect solution
The proposal comes with some kinks for the EU.
British membership in EFTA would also give it a judge inside the EFTA court, which would raise concerns about a conflict of interest. Should a complaint arise during the years of the transitional agreement — for instance surrounding the behavior of a British bank — London could end up jeopardizing the enforcement of EU law.
“There would be a British judge with all the weight of the U.K. behind it,” said Wolff of the Bruegel think tank.
Peter Chase, a senior fellow at the German Marshall Fund of the United States, said he was also skeptical about Britain joining both EFTA and the EEA while only looking for a temporary solution for keeping trade ties with the EU.
“Bear in mind that in order to do this, treaties will need to be signed and ratified,” he said. “It will be going to a lot of effort … Right now the U.K. is unilaterally terminating its relationship with the other 27 member states of the EU.
“Is it really going to go into another treaty and terminate that a few years down the line?”