1. The “Norway model“

in Economics 2018 · EN · Europe 2018 · Finance 2018 · Great Britain 2018 · Nation 2018 · Skepticism 2018 198 views / 6 comments
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BALTICS    Germany     Great Britain  Europe    

GEOMETR.IT      debatingeurope.eu


*  Anxious Brits and frustrated Europeans

After the Brexit referendum, anxious Brits started frantically Googling the term ‘Norway model’. This wasn’t because they were desperately looking for the latest fashion photoshoot from their favourite Scandinavian supermodel. It was because the economic future of their country is going to depend, to a large extent, on the type of future trading relationship Britain follows with the European Union.

The “Norway model” means having access to the EU Single Market via an organisation called the European Free Trade Association (EFTA). This is a regional trade organisation consisting of four European states: Iceland, Liechtenstein, Norway, and Switzerland.

EFTA countries can trade and do business with EU countries, mostly free (though not entirely free) of tariff and non-tariff barriers. They do this through an international treaty called the Agreement on the European Economic Area (EEA). Well, except for Switzerland, of course, which instead has access to the Single Market via a series of bilateral trade agreements.

Confusing? No wonder people had to Google it. To complicate things even further, Britain was originally one of the founding members of EFTA, which had been set up in 1960 as an alternative to the European Economic Community (an organisation that would later become the EU). Britain left EFTA in 1973 when it joined the EEC.

What do our readers think of this alphabet soup of acronyms? We had a comment sent in from Monique, arguing that the only “economically viable” solution for Britain (whose whole economy has developed within the EEC / EU for over 40 years) is membership of the Single Market via the EEA and EFTA. In other words: the famous ‘Norway model’. Is she right?

To get a response, we put Monique’s comment to David Phinnemore, Professor of European Politics at Queen’s University Belfast. What would he say to Monique?

I think, yes, there’s a very strong argument to say that the best possible outcome for the UK, if it does leave the EU, is to remain in the European Economic Area, and probably to secure that through EFTA. The question is whether that’s something that is politically acceptable within the current British debate. At the moment, the clear indications are that the UK government is intent on leaving the Single Market, and therefore seems to have ruled out the EEA option. Whether one can say it’s the only ‘economically viable’ option is open to question, because I think there are a lot of options there and they are probably all equally viable. But I think most people would argue that the UK’s economic interests, if they’re not going to be served by staying in the EU, are best served if the UK stays in the Single Market through the European Economic Area.

For another perspective, we also put Monique’s comment to Sieglinde Gstöhl, Professor of International Relations and Director of the Department of EU International Relations and Diplomacy Studies at the College of Europe in Bruges. How would she respond to Monique’s comment?

Well, that’s a very interesting question. Should the UK ‘re-join’ the EEA? Because [Britain] was actually a founding member of EFTA in 1960, and joining the EEA requires EFTA membership because it’s one of the two pillars of the EEA, with the EU being the other pillar. So, it would be a ‘re-joining’.

It would certainly be economically interesting, but the problem I see is a political one on the UK side, because it would not fit the red lines the [British] government has put forward. It would come with the free movement of persons in the EEA, and also there would be another court taking decisions, similar to the Court of Justice of the European Union, namely the EFTA Court of Justice… 

Next up, we had a comment from Odtaa, who lists all of the drawbacks of EFTA membership for Britain. He argues that the UK will have to obey all EU regulations without a say over their creation, will still be part of freedom of movement within the EU, and will still have to pay cash to the EU. Is Odtaa correct about all that?

Tarquin is actually correct, Liechtenstein is an EFTA country and therefore has access to the Single Market through the EEA, and when it comes to the free movement of persons, there is a special solution in place, which is very much linked to the fact that it’s a tiny territory, it has 37,000 inhabitants, of which about one-third are foreigners in the resident population, and when it comes to the work force it’s an even bigger share, as 60% of people working in the country are foreigners. So, that was one of the reasons to allow for quantitative restrictions regarding the free movement of persons in the EEA for Liechtenstein. 

No other country has this special solution, and it’s also not really an opt-out because Liechtenstein participates; people can move there if they get a residence permit, and half of them are attributed by a ballot, so basically it’s a bit like the Green Card lottery in the United States, and the other half are distributed by the authorities as such. The arrangement does not concern work permits, it only concerns residence permits. Liechtenstein is located between Austria and Switzerland, so a lot of people [work in Liechtenstein] and commute [from Austria or Switzerland], or even from Germany, and there are no restrictions on family reunion. So, if you have a work permit, you can also bring your family members… 

I think the UK is just too big, and while this could be a model for countries like Andorra, it certainly cannot be for the UK…

* The publication is not an editorial. It reflects solely the point of view and argumentation of the author. The publication is presented in the presentation. Start in the previous issue. The original is available at: http://debatingeurope.eu

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  1. “I could give you a list of things the European Union is doing and say that’s cherry-picking … there’s no point in getting into a tit-for-tat exchange,” he said, emphasizing that both sides would benefit from a free-trade deal

  2. So all those European Fishermen in the North would be unemployed and the EU Farmers would be demanding billions in compensation whilst pouring manure over all their politicians.
    The 27 countries in the EU are between a rock and a hard place. Even worse for them they have had a person who only knows one word, Non and seems to take delight in saying it, appointed to get them a good deal.

  3. The strategy of which seems to be get as much money as possible to compensate the farmers and fishermen for long enough for the national politians to retire.

  4. Norway is doing very well with its resources and exemplary social support for its citizens, including EU and non-EU migrants. The British government can only be ashamed of not proving such, neither for their poor citizens, nor for EU migrants. The rabid British government knows only one thing for decades: banksters in London. This is the tragedy of the UK!

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