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So many acronyms, so little time…

29th Nov 2018

EU, EC, WTO – the problem with Brexit is that there aren’t enough acronyms. Step forward a growing number of MPs from across the political spectrum intent on following up any rejection of Theresa May’s deal with two more – EFTA and the EEA. Confused? Let us explain.

In the event that Theresa May’s deal is voted down on 11 December, the amendment suggested by former Attorney General Dominic Grieve and adopted by MPs in an historic day in parliament is designed to allow MPs to influence the Government’s next move in the Brexit process. An idea gaining currency is the so-called ‘Norway Option’, which some have described as the softest possible Brexit, but which for others is ‘Brexit in name only’.

At its simplest, the Norway option involves joining EFTA (the European Free Trade Association), a loose grouping between Norway, Iceland, Lichtenstein and Switzerland. Broadly, they are members of the Single Market, meaning no tariffs, quotas or taxes on trade, but not of the Customs Union, meaning they must comply with the EU’s ‘rules of origin’, designed to show that goods from an EFTA country don’t contain too many parts from outside the EU (which would make them liable for certain tariffs). To avoid the Irish border issue, the UK might, under this option, need to remain a member of a (or the) customs union, which is why many refer to the ‘Norway Option’ as ‘Norway Plus’.

As well as joining EFTA, the UK would probably remain members of the EEA (European Economic Area), which is made up of the EU and EFTA countries (minus Switzerland – don’t ask!). In simple terms, most relevant EU legislation from the Single Market is applied across the EEA, meaning the elimination of non-tariff barriers (such as different safety standards or rules on packaging), but the acceptance of EU rules. This all helps EFTA countries achieve something much closer to frictionless trade than is enjoyed by third countries outside the EFTA bloc.

So, if the UK joined EFTA (and retained EEA access) trade would have less friction compared to a no-deal Brexit, rather than be frictionless, but the UK would be free to strike its own trade deals (EFTA already has several deals with countries such as Canada and Mexico), and would be outside the Common Agricultural and Fisheries policies - totemic issue for some Brexiteers. It would also mean continued payments into the EU budget, and the acceptance of free movement of people, thought by many to be a reason why the UK has so far rejected the opportunity to apply for membership.

Still want to know more? Go to The European Free Trade Association.

For help with preparing your business for Brexit please contact Luke or one of the team.

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