Don’t let the BBC and Brexiteers confuse you: Norway and Turkey aren’t the same

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This blog’s track record on Brexit remains solid. A while ago I predicted that the UK would opt to stay in the (or a) customs union with the EU. That hasn’t happened yet, but the tectonic plates are slowly but surely moving that way. Meanwhile opponents of the idea are trying to undermine it by confusing people about what it amounts to, and the media, even the BBC, aren’t helping.

First: what is the difference between soft and hard Brexit? A hard Brexit means a complete break with EU institutions and trading with the EU either on World Trade Organisation (WTO) terms or through a tailored trade deal, such as the one the EU has negotiated with Canada. You might call these the Japan and Canada options respectively. A soft Brexit means remaining part of some EU institutions, without being a full member. It boils down to two main options: the Norway option or the Turkey option. There is technically a third: the Swiss option, but EU officials regard this approach as a failure, and are likely to prefer a hard Brexit.

The Norway option is given support by this week’s Economist. It means being part of the the Single Market, but not the customs union. This Norway does though membership of the European Free Trade Association (EFTA), which includes Iceland and Lichtenstein as well. This excludes agriculture and fisheries. It means accepting EU directives as far as most trade goes, and the “four freedoms” – goods, services, capital and labour. It has been given a bad press by both sides of the EU debate. Brexiteers say that it turns the country into a vassal state because it has to accept regulations without a right of veto, and only limited consultation. Remainers say much to the same thing, so why leave? The Economist valiantly makes the case nevertheless. It would be the least disruptive approach for British business, while giving the country significant new rights not available to EU members. Apart from agriculture and fisheries policy, this includes doing trade deals with other countries; Iceland has made a deal with China, for example.

Norway does pay significant sums into the EU budget, though – a bit of a flash-point for Britons. But this is not as bad as it looks: it is mostly aid to Eastern European countries, which is separate from other EU aid, and Norway has a lot of say over where it goes.  So it is actually politically quite useful.

So might this be the elegant compromise that brings the two sides together without entirely satisfying them? There are two big problems. The first is border controls. Not being in the EU customs union means that goods have to be checked as they cross the border, as happens between Norway and Sweden. Since one of the UK’s aims is a frictionless border in Ireland in particular (helpful in Gibraltar too), the Norway option would fail. This is one of the toughest issues emerging in the whole process (as predicted from the start by this blog). Brexiteers, who tend to deal in broad visions and not detail, can’t stand this instance of the tail wagging the dog. They hope that if Britain says that there will be no checks on goods coming into Northern Ireland, it will force the EU to reciprocate. But that turns out to be more difficult than it sounds – unilaterally waiving tariffs creates issue under WTO rules – as well as being reckless with the Irish peace process.

But there is an even bigger problem with the Norway option: the four freedoms. Or rather one of them: labour. Claims by Brexiteers that more than a minority of their voters wanted a total break with the EU are hard to sustain: the Leave campaign deliberately obfuscated the issue by using Norway as an example of what Brexit might mean. But a claim that those voters wanted complete control over the movement of labour into the country is perfectly credible. The Economist argues that there is more Britain can do to manage incoming EU workers more strictly within the Single Market. I don’t think that washes.

The Turkey option addresses both these problems. There are no customs checks at the border, and there is no free movement of labour. The lack of customs checks means that most of those complex supply chains that cross the border between the UK and the rest of the EU should suffer reduced, and manageable, disruption. Agriculture and fisheries can be excluded (as are services, most likely – but this is where the Single Market works less well anyway). What’s not to like? It means that doing trade deals with non EU countries can only happen for those goods excluded from the customs union (agriculture and services most likely). The more extreme, neoliberal branch of the Brexit movement, well represented in the Conservative Party, has set great store by doing such deals. And yet to most critics of Brexit this has always looked to be the weakest part of the Brexit case. These other countries are far away, drive hard bargains, and Britain’s negotiating position is weak. There is little evidence that the voters are that bothered. Nobody could accuse Turkey of being a vassal state to the EU, so why should they be?

And so the Turkey option looks the most viable form of soft Brexit. In a speech today the Labour leader is taking a step towards it by advocating a customs union with the EU. However he is blurring the issue by suggesting that he wants to be part of the Single Market too. And yet he wants exemptions to suit his agenda, especially on state aid and free movement. The EU will never wear that because of the political difficulties it would create within the union. I would go as far as to say that it is dishonest of Mr Corbyn even to suggest it. It would be much clearer to go straight for a variation of the Turkey option. Still it has served to put the customs union idea on the agenda, and presents the possibility of linking up  Tory soft-Brexit advocates, who have a much clearer grip of the key issues.

And what of the government? It has rejected the idea of a customs union out of hand. But this is just words, meant to placate hard-Brexit advocates within Tory ranks. What the government says it wants is what it has called “Canada plus plus plus”. That is almost as dishonest as Mr Corbyn’s Single Market minus. The government wants to stay integrated in some sectors but not others. This looks like the sort of cherry-picking the EU so dislikes. But it could be an intermediate negotiating step towards a Turkey-like solution, even if they try to avoid the words “customs union”. I believe this may be the game plan of Theresa May, the prime minster, and David Davis, her pragmatic Brexit Secretary. Whether they have the political skills to pull that off is open to question, though.

Meanwhile supporters of hard Brexit are trying to turn the public against the Turkey solution by conflating it with the Norway one. This includes Australia’s undiplomatic ambassador, Alexander Downer, to his great discredit, on the radio last night. This allows them to suggest it means accepting free movement of labour, for example. They also suggest that it means that the UK cannot do trade deals with other countries: that is not true either, though the scope of those deals would be restrained. Britain could import US chlorinated chicken and Australian wheat tariff-free if it wants to, as agriculture is not in scope.

For now the politicians are exercised about a potential vote in parliament over the customs union. Expect the government to defer this until the actual shape of its deal with the EU becomes clear. Something like a customs union with the EU is on its way. It is exactly the sort of compromise the country should be aiming at.

4 thoughts on “Don’t let the BBC and Brexiteers confuse you: Norway and Turkey aren’t the same”

  1. Are we sure there is an offer of a customs union from the rest of the EU. They’ve said “no cherry picking”, so is this going to be exempted? If not, we might as well forget it.

    Both campaigns and the UK government told us before the referendum that leaving the EU meant leaving both the single market and the customs union. I like to think that I’m reasonably well informed on such matters but I have to admit that when I cast my vote I really only had the haziest of knowledge of what these were.

    I have a better idea now. I know I should probably have done more of my own research at the time. But why were neither side keen to enlighten us all more at the time as to just what were the Switzerland, Norway, and Turkey options?

    1. From what M. Barnier has been saying it is clear that a customs union of some sort is on offer… after all I don’t think the Turkish arrangement is considered a bad thing. But I think you are right to be suspicious – it will only be on offer because EU countries don’t see it as a threat. And I haven’t seen a proper analysis of its implications. Presumably a lot of the non-tariff barriers are still there – so you can transport product across the border, but still be unable to sell it because it doesn’t comply with EU regulations. That may entail some sort of inspection or audit system, even if it isn’t at the border. But all of this applies to hard Brexit too. But the main catch is scope, I suspect. Services are out, especially financial services. And I think it will be on scope that the arguments on cherry-picking will arise. There will be some areas where we don’t want to apply EU tariffs to imports (not sure which, apart from agriculture, which will surely be excluded anyway); there will be others where want tariff free trade to be automatic, but which are excluded (agriculture again…and services). But that all looks like bog standard negotiation to me.

      And I agree on the quality of debate during the campaign. It is right out fashion amongst political communication professionals to suggest that campaigns should be fought using informed debate. The thing is to mislead people and denigrate the other side as much as you can. Both sides were pretty terrible – it didn’t help that they were fragile coalitions that didn’t really agree amongst themselves. Some elements of the media (BBC More or Less for example) did try to inject some facts and information into the debate, but that wasn’t picked up by very many people. I think if Remain had ignored their highly-paid professional advisers and gone for the high ground, they would have done better. But alas they went for that “emergency budget” and wiped out any credibility they might have had.

  2. I agree that the idea of a customs union would unpack into complications. There are, as I have read, queues of lorries seeking to enter the EU at the Turkish/EU border while EU officials check documentation (which Turkey does before they get to the border). I don’t know exactly what causes this, but presume it may be that the EU wants to guard against a danger of substandard products being sold on a black market after gaining entry to the EU. Britain would start with aligned product standards; but expect some hard bargaining about the UK maintaining standards, rather than Britain becoming a ‘Singapore on Thames’, if the Turkish experience is not to be replicated in respect of British exports. In particular, I imagine the EU would want assurances against ‘regulatory dumping’ by Britain having lower labour standards, eg on security of employment than those of their EU competitors .These labour market issues look tricky, given that, by say French standards, we could already be charged with ‘regulatory dumping’, whereas we would accuse the French of having an unduly rigid labour market (a matter in which the Dutch the Swedes and to some extent the Germans would support us while we are in the EU).

    However, I would also agree that the Economist horribly underplays the difficulties in the UK being a rule taker rather than a rule maker. As its articles claim, we could expect cooperation amongst technical experts on regulatory rules at working level; but once issues get into the cut-and-thrust of EU political negotiations, we would sorely miss the clout of being an actual EU member. Unlike Norway, we have some industrial sectors that are sufficiently large as to be worth invading by EU competitors. We are used to having clout in EU affairs, and have the heritage of having been fairly recently a great power. Also we are more open to problems of mass immigration than Norway, because Norway’s climate is unattractive to many.

    Moreover, in political terms, there is the problem of the hit the city would take. In economic and social terms, one can perhaps take the view that the city is quite capable of looking after itself; that its present pre-eminent position in the UK economy inflames anti-establishment feeling against those rich ‘citizens of nowhere’; and that rebalancing of the economy in favour of other regions would be a good thing. However, under a customs union, the city would lose its passporting rights and it could find some anti-city protective measures taken by the EU, e.g. in requiring some Eurocurrency transactions to be undertaken by EU companies; a circumstance which I see as creating political difficulties for the Conservative party and some difficulties for the UK’s taxation revenue.

    So I am far from clear how all this is going to play out. But I certainly agree that the right tactic at present is to go for a customs union, for the reasons you give Mathew to do with having some control over immigration, the avoidance of the -to some hated – direct EU regulatory controls, and the removal of tariffs on cross-border flows without the need for checks on country-of-origin.

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