Brexit: The cold waters between Canada and Norway

Jean-Claude Piris | 19 February 2021

The UK’s push for the frictionless market of the Norway option, while accepting only the obligations of the Canada option, was not viable. It was a delusion, either due to ignorance or self-deception.

Photo: James Veysey/Shutterstock/NTB

The UK never had the same vision of the EU as the other Member States. A main reason for the UK’s accession to the EEC in 1973 came down to economic difficulties. It did not wait long to show its distinctness, by demanding a budgetary rebate. Then, it got derogations from the common currency, the cooperation in justice and home affairs and social policy.

Jealous of its sovereignty, it slowed, with others, the coordination of the Member States’ economic and fiscal policies, foreign policies, cooperation on defence, as well as on police and justice and internal security.

During its 47-year membership, the UK helped to develop the single market (SM), to open external trade, to welcome new EU members and to preserve its idea of Europe.

PM May’s key decisions

When the British chose to leave the EU in the 2016 referendum, the UK’s concerns had all been met:

by increasing the number of States and thus of possible vetoes from 9 to 28, without adjusting the EU’s decision-making
by getting better control of the EU powers (subsidiarity) and eliminating federalist symbols
by keeping the single market benefits, despite derogations from the euro, Schengen, and normal budget rules
by preserving vetoes on foreign and defence decisions, police and judicial cooperation, internal security, and many areas

Brexit leaders promised that the UK would keep the single market’s benefits after leaving, as the EEA/EFTA countries do in the EEA framework (the Norway option). However, as soon as the first quarter of 2017, PM Theresa May took two key decisions:

She triggered the two-year negotiation (duration fixed by article 50 of the Treaty on European Union) too early, at a time when there was no UK position, no study of options and deep divisions among people in the UK, and within Parliament and Government.

This put the UK negotiators under time pressure, while time was necessary to find a solution to avoid a border between Northern Ireland and the Republic of Ireland.

She announced UK red lines: no freedom of movement, no Court of Justice of the European Union (CJEU), no customs union.

This excluded the Norway option for the future. It meant that the result could only be a hard Brexit, similar to the Free Trade Agreement (FTA) between Canada and the EU (the Canada option).

Between Canada and Norway, there are only the cold waters of the Atlantic Ocean.

As I said at the time, between Canada and Norway, there are only the cold waters of the Atlantic Ocean. Trying to get a frictionless market, similar to the Norway option, while accepting only the obligations of the Canada option, was not viable. It was a delusion, either due to ignorance or self-deception.

Red lines

When PM Boris Johnson arrived at N°10, he managed to get a positive vote in the House of Commons on the draft Withdrawal Agreement (WA) negotiated by his predecessor, through slightly modifying provisions on the Irish issue. On this basis, he organised and won the general election.

Finally, the Withdrawal Agreement entered into force in February 2020, three and a half years after the referendum. PM Johnson then promised a hard Brexit and negotiated with the EU a Free Trade Agreement on the Canada option’s model. His negotiating team had only nine months to avoid a cliff edge and the application of WTO rules on 1st January 2021.

What were the red lines of the two negotiating parties?

For PM Johnson, the agreement on future relations with the EU had to fully respect the UK’s national sovereignty: the UK should decide alone its laws and policies, be the only master of its borders (no free movement of persons), its waters (EU fishermen), and its external relations (trade). The future agreement should exclude reference to EU law and to the CJEU, as well as cooperation on foreign policy and defence.

For the EU, the essential red line was to preserve the single market’s credibility. As EU’s trust had decreased sharply after PM Johnson had tabled a bill violating the Withdrawal Agreement, the EU insisted on associating the Level Playing Field (LPF) conditions on open and fair competition (state aid, social and environmental standards) with a binding arbitration and possible unilateral cross-sector retaliations, should an arbitration ruling not be respected.

Both parties got their red lines respected. A solution for a decreasing access of EU fishermen to British waters during a transition period was also finally found, largely in favour of the EU.

The agreement (Trade and Cooperation Agreement: TCA) was initialled one week before the possible cliff edge. It is based on the respect of the rule of law and on the protection of fundamental rights. It provides for cooperation in many areas, while mentioning others for which unilateral decisions of equivalence or agreed cooperation could be developed.

New year, new realities

Despite the provisional implementation of the TCA, huge changes happened on 1st January 2021:

Provisions of the Withdrawal Agreement permitting the UK to be treated as an EU member ceased to apply. British citizens lost the right to move freely to the EU 27 to reside, study, work, open a business, retire or have health care. Their (visa free) stay in the EU is limited to three months during any six-month period.
The UK stopped benefiting from the EU’s single market, customs union (except for Northern Ireland), EU policies and most EU programs.
As the TCA covers all goods, it should be beneficial to the EU, given its surplus of nearly £ 100 billion with the UK. Trade in goods continues to be tariff-free, but with non-tariff barriers: although not paying customs duties, goods must be checked at the border for their conformity with EU/UK sanitary and phytosanitary rules, norms and standards and rules of origin.
Trade in services became difficult for British economic actors, not only for financial services’ providers, who lost the EU passport and did not get significant EU decisions of equivalence. While services represent nearly 80% of the UK’s economy, the provisions of the TCA for services are weak, comparable to the Canada-EU agreement. UK firms and individuals lost the right of establishment and to deliver some services in the EU.
As for the fight against crime, including terrorism, the result is lose-lose, the UK being cut from EU institutions, organs, data bases and mechanisms (Europol, Eurojust, the Arrest Warrant, Schengen data bases, etc…), while keeping the Passenger Name Record and the Prüm cooperation. The EU did not adopt an equivalence decision for general transfer of data.

How to improve UK-EU relations?

The strategic, political and economic Brexit effects, especially for the UK, but also for the EU, will be negative, both in the short and the long term.

It was known before the referendum that Brexit could not lead to positive economic results. It was politically and ideologically driven, not aiming at economic results, but at increasing the UK’s national sovereignty.

The TCA’s aim was to reduce obstacles to trade created by Brexit. A soft Brexit was an illusion, excluded in 2017 by PM May’s red lines, confirmed and hardened by PM Johnson’s policies.

Given this context, what could be done to improve UK-EU relations? Should they, together, try to be less dependent on the external world? Should the EU be more open for closer cooperation with the UK in some areas? Which ones? Will both parties show good will?

This text is based on Jean-Claude Piris’ chapter in Handbook on the European Union and Brexit (Edward Elgar, forthcoming 2021), co-edited by EU3D researchers John Erik Fossum and Christopher Lord.