The House of Lords voted for Theresa May to negotiate a Norway-style Brexit -- here's what that means

LONDON – On Tuesday evening the House of Lords voted for an amendment to the government’s Brexit bill which would force Theresa May to pursue a Norway-style relationship with the European Union.

It was one of fourteen defeats that the Lords – the unelected upper chamber which scrutinises legislation – has inflicted on May’s government since European Union (Withdrawal) Bill entered the House.

The government lost the vote by 245 to 218. Labour leader Jeremy Corbyn had told Labour peers to abstain from voting. However, a whopping 83 of them rebelled, siding with 17 Conservatives and 84 Lib Dems to vote for it. The other 60 or so peers who voted against the government were not affiliated with a specific party

Prime Minister May has repeatedly rejected the so-called “Norway option” as it would mean staying in the single market, which would be a huge break from the government’s current policy of leaving it.

However, the prime minister has already climbed down on numerous Brexit positions she once held and could be forced to reconsider her remaining red lines if issues like the Irish border come no closer to being solved.

Here’s what a Norway-style Brexit would actually mean in practice.

What is the Norway model?

So, the Norway model refers to two key European organisations: The European Free Trade Association (EFTA) and European Economic Area (EEA). Norway, along with Lichtenstein and Iceland, is a member of both.

EFTA is made up of the three countries listed above, plus Switzerland. The group’s members trade between themselves and the group as a whole has signed free trade deals with numerous non-EU countries, Canada, Mexico and others.

The EEA, on the other hand, is a collaboration of all EU member states plus Norway, Lichtenstein, and Iceland. All EEA members – including the non-EU members – enjoy full access to the European single market.

EEA membership is only available to either EU or EFTA member states. So, under a Norway-style Brexit, Britain would leave the European Union, join EFTA, and then become the 31st full member of the EEA.

What are the pros of the Norway-style Brexit?

Being an EFTA-EEA country would allow to Britain maintain full, tariff-free access to the single market. That would include services, which currently account for around 80% of Britain’s economy.

Most research suggests this would be the least damaging form of Brexit. The government’s own impact assessment found the Norway option would be the least damaging option in terms of economic harm.

And although Britain would retain full single market access, it wouldn’t be forced to sign up to some of the EU’s more contentious programmes. It wouldn’t be required to join the EU’s Common Fisheries Policy, for example, which has long been a bugbear for many Brexiteers. It would also be exempt from the Common Agricultural Policy.

And what about the much-debated European Court of Justice? Brexiteers are determined to abandon the EU’s supreme court, after all. Under the Norway model, the ECJ would have no jurisdiction over Britain.

What about the cons?

The Norway model clearly has its advantages, hence why it enjoys growing support across the House of Commons – but it is not without criticism.

Although Britain would finally be free of the ECJ, it would be obliged to dock to the EFTA court – which to most Brexiteers would merely represent another set of unaccountable, interfering foreign judges.

Then there’s the issue of Britain’s influence as an EFTA/EEA country. Under the Norway model, Britain would have full access to the single market but retain much less say in shaping its rules than it does now as an EU member.

“Pay with no say” is how critics of the Norway model describe this. Norway does not formally participate in Brussels decision-making but has incorporated around 75% of EU law into its national legislation.

What about immigration?

The elephant in the room here is immigration. The public’s desire to control immigration was arguably the biggest driving force for Brexit, and the UK government has vowed to end the free movement of EU citizens.

EEA members are required to accept the famous (or infamous) four freedoms, including the free movement of people. Clearly, this would be politically dangerous for any government, and for that reason is probably a non-starter.

There is one way around that. It’s unrealistic – but theoretically possible.

Article 112 of the EEA Agreement allows non-EU member states to opt out of the four freedoms if they are facing serious economic, societal or environmental strain. For example, Lichtenstein used Article 112 to impose controls on the free movement of people, due to concerns over whether a country of its modest size and resources could cope with big influxes of people. It’s unlikely that Britain could successfully make the same case, though.

What would it mean for the Irish border?

Perhaps the strongest case for a Norway-style Brexit is that it would go some way to resolving the Irish border dilemma.

By effectively remaining fully aligned with EU market rules, Britain would avoid the plethora of non-tariff barriers which are set to emerge on the border between Northern Ireland and the Republic under May’s plan to leave the single market.

A Norway-style relationship between Britain and the European single market wouldn’t provide the whole solution avoiding physical infrastructure on the island of Ireland. In order to also eliminate tariff barriers, Britain would need to be in either the current or a new customs union with the EU after Brexit. Norway is not in a customs union with the EU.

However, Britain becoming an EFTA-EEA country would go a long way to solving an issue which is currently threatening to collapse negotiations.

So how likely is a Norway-style Brexit?

The Norway model has picked up a lot of steam over the past few weeks.

Last month, the Brexit committee led by Labour’s Hilary Benn published a report saying May should use the Norway option has her official backup if she fails to meet key negotiating goals in Brexit talks with the EU.

Ultimately, it is MPs in the House of Commons who will decide what final form the government’s Brexit bill will take. They could decide to ditch all of the amendments put forward by the Lords over the last few weeks.

What is likely, though, is civil warfare inside both parties.

The Conservatives are already tearing themselves apart over whether Britain should stay in a customs union with the EU after Brexit. With rebels Anna Soubry, Nicky Morgan, Ken Clarke and others ready to throw their weight behind single market membership, we are set for more clashes between the Cabinet and Conservative backbenches.

And in Labour tensions are reaching boiling point. 83 of the 86 Labour peers who voted last night rebelled against Corbyn and there are many Labour MPs who are prepared to do the same if the Labour leader whips them not to vote in favour of the Norway-style Brexit amendment.

One of those willing rebels, Wes Streeting, said over the weekend it was “incredible” that the Labour leadership was standing in the way of staying in the single market.

If you thought the last few weeks of UK politics have been fiery, well, you’ve probably seen nothing yet.

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