Brexit: Impact on Norway. What will it mean for Norway if the UK seeks a so- called Norwegian model?
What will it mean for Norway if the UK seeks a so-called Norwegian model?
Barely had the last votes in the UK’s historic referendum on EU xmembership been counted before pundits left, right and centre were discussing the question on everyone’s lips: now what? One possible outcome gained momentum: the prospect of the UK pursuing the socalled “Norwegian model”.
The term refers to Norway’s special relation with the European Union through its membership of the European Free Trade Association (EFTA), which, besides Norway, counts Iceland, Liechtenstein and Switzerland. The EFTA (minus Switzerland) is brought together with EU’s single market by the European Economic Area (EEA) Agreement, an international agreement which enables the three EFTA states of Norway, Liechtenstein and Iceland to participate in the single market. The EEA Agreement covers the so-called four freedoms, i.e. the free movement of goods, capital, services and persons, plus competition and state aid rules and horizontal areas related to the four freedoms. Pros and cons One of the main points – and contention point, seen from a UK standpoint – of the Norwegian model is that Norway, and any of the 31 EEA member states for that matter, must allow the free movement of labour from within the EU, something that Leave voters in the UK find hard to swallow. In addition, Norway still sends hundreds of millions of Euros to Brussels each year (the figure ranges anywhere from €447 million to €860 million depending on whom you ask), and, as Ben Chu, economic editor of the Independent newspaper puts it, “to have access to the single market a non-EU country also has to play by single market rules”. In other words, Norway implements most of the EU laws domestically – around 75 percent, to be precise – yet has no say in the making of these laws. The country has no representation on the European Commission, no Europeans parliamentarians and no spot around the European Council table of ministers.
So why does it make sense for Norway to have this model? One of the main differences between full EU membership and EEA membership is that the EEA Agreement does not cover the EU’s complex and often criticised Common Fisheries and Common Agriculture Policies, and states are no longer bound by the EU’s VAT Treaty, meaning they can regulate their own VAT rate to stimulate the economy. The EEA Agreement also does not cover the EU Common Trade Policy; the Common Foreign and Security Policy; the Customs Union; Justice and Home Affairs (although EEA countries are part of the Schengen area); or the Monetary Union. Welcome to the club – or not
These are some of the topics that the UK will need to discuss in the coming months and years. However, even if the British population decides on a Norwegian model, it is by no means guaranteed that Norway will welcome the UK into the EFTA with open arms. As a founding member of the EFTA and by far the association’s largest member, Norway enjoys special privileges and bargaining powers within the bloc and acts as a common voice for EFTA in the EEA. If the UK – a much larger country by any measurement – were to join, that position may be threatened.
In an email to the Independent newspaper, Monica Mæland, the Norwegian industry minister, said it is far from a clear-cut case that Norway should welcome the UK into the EFTA. “Britain
must first clarify its position,” she said in the email. “Then the EU must decide how they want to work with this and then we need to decide on our position. So it’s too early to decide on a possible expansion of EFTA.”
Likewise, in an interview with Norwegian daily Aftenposten, Elisabeth Vik Aspaker, the Norwegian minister for EEA and EU Affairs said, “It’s not certain that it would be a good idea to let a big country [such as the UK] into this organisation [the European Free Trade Association]. It would shift the balance, which is not necessarily in Norway’s interests.”
Decisions in the EFTA are made by consensus, effectively giving each member state veto rights. As pointed out by the Guardian newspaper, by keeping the UK out of the EFTA, Norway would in effect block the UK from entering the EEA Agreement as only EFTA and EU countries can enter the EEA Agreement.
Several experts argue that a UK entry into the EFTA would shift the balance of the agreement; one of the concerns is that the UK could want changes in the accord and use its clout to drive them through. The combined population of current EFTA nations is 14 million, compared with the UK population of 65 million. Another concern is that EFTA has signed bilateral trade agreements with 38 countries and that if the UK joined, those trade agreements might have to be renegotiated and become more complex as a result.
On the bright side Others point to the benefits of having the UK as a EFTA member state. According to the Guardian newspaper, Audun Lysbakken, the leader of Norway’s Socialist Left party, has argued that the EEA agreement should be renegotiated with the UK’s help, saying countries “outside need a better model for cooperation with the EU than the current EEA Agreement”. He said he was amazed that his government did not want to have an open debate about a new relationship with the EU. “Throughout the spring, the government has been adamant that the EEA is not a good model and it is not something they would recommend to the British. Now they suddenly want to leave it as it is,” Lysbakken said.
Raoul Ruparel, co-director of Open Europe, an online source for upto-date analysis on the UK referendum, also points to some ways in which Norway can benefit from having the UK at the table. “Trade between UK and Norway accounts for around 16 percent of total Norwegian trade – more than all the other countries outside of the EU with which it has trade agreements combined,” he writes on Open Europe. “As such, it would be a quick way for Norway to secure a free trade agreement on good terms with a key trading partner. Furthermore, it could also help boost EFTA’s profile and leverage in future trade negotiations.”