Brexit – The Norwegian model

One of the frequently discussed post-Brexit models is the “Norwegian solution”. The oil- and gas rich, but sparsely populated country in the North is not a member of the EU, but of the European Economic Area (EEA), similar to Liechtenstein and Iceland. Technically, it is as much a part of the single market as France, Germany or the UK.

Norways is a regular contributor to EU budgets: It pays into the EEA and Norway Grants scheme (388 million Euro anually) and into a number of other EU programmes like Horizon 2020, Erasmus+ and Galileo. According to the Norwegian mission to the EU, the second amounts to 447 million Euro per year, plus nearly six million Euro for the participation in the Schengen agreement as well as 25 million Euro for the European Territorial Cooperation Interreg. In total, Norway, on average, contributes 866 million Euro per year to the EU budget.

Under the EEA arrangement, Norway has to adhere to part of the existing regulatory framework of the EU. Some areas, for example the fishing and agricultural industry, are excluded from that. Nevertheless, Norway has to accept the European freedom of movement which leads to Norwegians working in the EU and EU citizens working in Norway.

On the political level though, Norway is much less involved than a full EU member. Although it can influence new laws and directives in the early stages by trying to work with the respective EU bodies, it is not involved in drafting new regulation nor in decision-making. As the government in Oslo concludes, “Norway is in practice bound to adopt EU policies and rules on a broad range of issues without being a member and without voting rights”. According to Fullfact.org, new EU rules are passed through a committee before they become Norwegian law. Only in significant cases does the Norwegian parliament consider them.

For those in Britain arguing to “take back control”, one of the core straplines of the Leave-campaign, this cannot be the most attractive route to take after a vote for Brexit. Still sending money to Brussels, still introducing EU laws, but having no real say at all? To me, that does not sound too convincing. If we take immigration into consideration, the Norwegian model appears even less attractive, given that immigration is one of the most important arguments cited by the Leave-side.

Under a Norwegian style EEA-agreement, the UK would still have to allow EU-citizens to come and to work here. Assuming that years after a Brexit vote, the economy would finally recover, there is not much that would keep European workers coming to Britain in similar or even bigger numbers than now. The Norwegian solution hence does not solve the immigration dispute.

Regardless of all these objections, the majority of Brits seems to favour this option. 54 percent of those questioned by YouGov for the Adam Smith Institute would support a Norway-style trade deal in case of a Brexit. Among Brexit-supporters, the figure is even higher (79 percent). Just 25 percent of those surveyed would oppose such an arrangement.

Interestingly enough, the Norwegian model is also the one which would cause the least economic damage, compared to other options such as the Swiss model, the Turkish model or the WTO-model, as the London School of Economics, the National Institute of Economic and Social Research (NIESR) and the Treasury have found out in their various Brexit studies. Nevertheless, the economists at NIESR expect that cost for exports will rise ten to 16 percent, compared to today’s levels, as will prices for costs for imports (eleven to 17 percent).

So how does that work? Why would the majority of Leave-supporters vote in favour of a Norwegian-style model, given that immigration is one of the core concerns for why the UK should leave the EU? For me, this is another strong indicator of the lack of coherence on the Leave-side. If European immigration is really the reason for why people think the UK should leave the UK, a continuation of the freedom of labour can obviously not be what people want.

Even if this might be the most economically feasible option on the table (which remains to be seen), it seems quite daring for any politician to negotiate a Norway-type treaty with the EU after a Brexit-vote. That’s why David Cameron has already signalled his opposition to a Norwegian solution should there be a vote for Brexit. The Prime Minister told the BBC’s Andrew Marr show during the weekend that it would be impossible to follow the Norwegian model by remaining inside the single market despite being outside the EU because that would mean accepting freedom of movement and trade legislation made in Brussels. “What the British public will be voting for is to leave the EU and leave the single market”, he said. Were the British public to vote for Brexit, he would take the country out of the single market, the Prime Minister pledged.

But that, of course, remains to be seen as well. I would be very surprised to see David Cameron lose the referendum and still be Prime Minister for long enough to pull the country out of the single market. It might very well be his successor trying to convince voters before the next general election in 2020 that pulling out of the EU was a good idea, even if the immigration issue is – thanks to a Norway-style EEA-agreement – still unsolved.

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