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?

Norway-Asia Business Review - - Contents - SOFIE LISBY

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.”

PHOTO: ISTOCKPHOTO

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