Richard North, 31/05/2018  

With a rather good sense of timing, the Norwegian government has published a report called "Norway in Europe" - its "strategy for cooperation with the EU 2018-2021". It was actually released on 9 May – Europe Day - but has received no publicity from the zombie media in the UK, despite the fact that it has considerable relevance to the Brexit debate.

Cynically, one might say that this almost automatically disqualifies it from being publicised, although it was not helped by the absence of an English translation on the day of publication.

As to its relevance, in the Norwegian publication News in English, published a few days after the report's release, we saw the views of Foreign Minister Ine Eriksen Søreide recorded. "Even though Norway is not a member of the EU",” she said, "we will be active participants rather than passive observers", in trying to influence EU policy.

And that is what comes over in the report, helpfully set out on Twitter by James Strachan, deputy editor of The Medicine Maker. He has produced a short "explainer" which covers most of the salient points in a 19-point thread.

An important part of the report is devoted to the role of the Norwegian government in influencing the making of EU legislation. This is nothing new to readers of this blog, but it very emphatically puts to bed the "no say" meme that the ignorati have spread about.

Even then, as James Strachan points out, it does not discuss the role Norway plays in shaping legislation at the global level – such as its role on the Codex fisheries committee which I wrote nearly five years ago, after an interview with Bjorn Knudtsen, Chairman of the Fish and Fisheries Product Committee.

Back in 2013, we also had that illuminating interview with Norwegian state secretary for the Ministry of Local Government and Regional Development, Anne Tvinnereim, which I posted after talking to her in her Oslo office on a swelteringly hot August afternoon.

She had emphatically disputed the claim that Norway had no influence over EU law. "It is true that we are not there when they vote", she told me, "but we do get to influence the position". Explaining the simple facts of international relations, she said: "Most of the politics is done long before it [a new law] gets to the voting stage".

That this stuff was on the record well before the EU referendum makes it all the more irritating that the "no say" meme has survived for so long. And even now, with the Norwegian government publication getting such little publicity, there is still plenty of mileage left in the misinformation stakes.

That much is evident from the News in English report to which I've referred. Although it concedes that the EEA participation "gives Norway full access to the EU's inner market", it trots out the very meme which the report debunks. "Norway", it says, "has also agreed to abide by most all EU rules and regulations, even though it has no vote and can't sit around the EU’s negotiating tables in Brussels".

It is not only the UK media that needs educating, it would seem. The Norwegian press and politicians (Anne Tvinnereim excepted) also need to be brought up to speed. But it isn't only the Norwegian politicians who need the treatment. Alarmingly, it would appear, Michel Barnier needs to be set straight on a few vital issues.

This came over from an interview published on YouTube with M. Barnier and with Dave Keating at the Euranet Plus summit, where they talked about the latest developments in Brexit negotiations and, in particular, the prospect of the UK joining the EEA with Norway.

On the video, what was useful was that Barnier did not rule out the Efta/EEA option. In fact, he volunteered (approximately seven minutes in) that the only "frictionless model" for future trade relations between the EU Member States and the UK "would be Norway plus". This, on the face of it, was extremely encouraging, but he then went on to explain that the "Norway" component was the single market while the "plus" was membership of a customs union.

This is very far from being helpful. Barnier must surely know – he should know – that membership of a customs union with the EU would be incompatible with Efta membership. We cannot be part of that trade agreement and separately entertain membership of another trade agreement (a customs union) which puts us in conflict with it.

Wrongly, with reference to the Irish border, Barnier goes on to suggest that agreeing a customs union is the only way to avoid a hard border, with Northern Ireland and Ireland is to keep Northern Ireland "inside our customs union".

Earlier, Barnier had specifically cited in a list of controls the rules of origin (ROO) – and that is undoubtedly influencing his thinking. He seems to have swallowed the mantra from the trade wonks that ROO is a significant issue. What he doesn't seem to realise is that this is a very minor problem that is accommodated in the EEA Agreement, and does not necessitate controls at the border.

As we know, the EEA Agreement also includes no-tariff arrangements, provisions for customs cooperation, and bespoke ROO. As long as we agree to maintain parity with our external tariffs (which will happen automatically when we adopt the EU's WTO tariff schedules) and settle a continuity agreement on the EU's third country trade agreements, there is no need for a customs union. To suggest otherwise does not make progress any easier.

Interestingly, a much bigger problem – not mentioned by Barnier – is VAT. Once the UK leaves the EU, goods movements are treated either as exports or imports, depending on the direction of flow. When goods leave either administration, traders are entitled to recover VAT already paid, while full VAT will have to be paid by the importer when goods enter the new territory.

This was actually highlighted in a Notice to Stakeholders on 30 January of this year but it has now been flagged up in a long article in the Financial Times. Special attention is drawn to the problem of levying VAT on parcels which come from the EU, the sheer volume being enough to defeat the current system which only has to deal with third country goods.

Not untypically, though the FT piece rather over-eggs the problem. For third country parcels, there is a de minimis relief on duty and VAT for imports valued at £15 or less. Through Amazon or ebay, I quite often buy goods directly from China and they come to me, regardless of actual price, with a customs declaration label of £12 or so - even with stuff worth £100+. There is no way the post office can check anything but a tiny sample of the stuff coming through, so most of what I buy is VAT and duty-free.

This, in itself, has huge implications for the UK high street. As long as buyers are prepared to wait a week or so, they can buy an enormous range of goods more cheaply from China by buying direct, than they can get from the local shops - or even online from UK websites. It is no wonder that so many high street retailers (which also have to pay business rates) are going out of business.

But when it comes to Brexit, one can imagine the same de minimis rule will apply to EU goods. And if there is a similar level of under-declaration, the majority of goods will come through duty free and VAT free. Since there is hardly time to organise cross-border tax arrangements, that will probably have to suffice, which means that the UK government will suffer a substantial revenue loss – another unplanned Brexit cost.

Even more importantly, though, is an issue that the FT does mention. Once we leave, we will no longer be part of the EU's VAT territory, and there will no longer a flow of information between the UK and other Member State tax authorities. This, the FT observes, opens up massive opportunities for fraud.

In terms of border controls, this might be more significant than all the other issues put together. It would be unwise not to expect organised crime to exploit the confusion that will inevitably follow Brexit, and it may be necessary physically to inspect a high proportion of goods crossing borders into EU Member States (and coming from them), simply to prevent fraud – the cost of which could run into billions, as it has done in the past.

Nevertheless, the good news is that – in theory at least – it is possible to have frictionless trade with EU Member States, once we are outside the EU. M. Barnier has confirmed that. All we have to do is straighten him out on the details and we are back in the game.

Sadly, I suspect Barnier may be the least of our problems. Straightening out our own government may be the bigger deal, and prove to be beyond the wit of man.

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