28 October 2015

Norway has greater manoeuvre than EU states in some areas

As the table below shows, via the European Economic Area (EEA) agreement, Norway is bound by EU legislation in a number of policy areas ranging from those strictly concerned with implementing the ‘four freedoms’ to so-called ‘flanking and horizontal’ policy areas which include social and employment policy and the environment. In addition, Norway also participates in EU justice and home affairs and some aspects of EU foreign policy on a voluntary basis.

However, Norway does retain its own agricultural and fisheries policies – key sectors of the country’s economy. Unlike EU member states, which are bound by a common eternal trade policy, it also has the freedom to negotiate its own free trade agreements with non-EU countries.

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EU regulation without representation

Despite, some greater flexibility over agriculture, fisheries and external trade, if the UK were to opt for a Norwegian-style relationship it would still be bound by great swathes of the EU regulation that rankles with businesses and the general public, but – and this is the crucial point – without any vote on it. We noted in our Brexit study that if the UK were to ‘become like Norway’ by joining EEA,  93 out of the 100 costliest EU-derived regulations would remain in place at a cost of £31.4bn per year (94.3% of the total cost). This is because many EU policy areas would continue to apply to the UK including financial services, social and employments laws, energy and climate change policies, and this is where the bulk of the regulatory cost stems from.

While the EEA Agreement includes provisions for the non-EU members to be consulted on new legislation, the EEA states have:

  • No veto in the European Council
  • No votes in the Council of Ministers – where national governments vote on EU legislation
  • No MEPs or votes in the European Parliament
  • No European Commissioner and no European Commission staff
  • No judges or staff at the European Court of Justice (ECJ)

Norway can theoretically refuse to implement EU legislation, but it has never used this power. Whilst it is a legitimate tool, it has major drawbacks limiting its practical effectiveness. Norway’s ‘right of veto’ does not stop the EU enacting legislation and, if it relates to product standards or financial regulations, for example, Norway cannot use the old ones to continue to export to the EU and can therefore find itself locked out of the Single Market in the areas affected.

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Despite lacking voting rights and full participation in the EU institutions, Norway must still make a sizeable contribution to the EU budget. Looking at its recent contributions, Norway pays €656m to the EU but gets back around €100m in science and research grants, which makes a per capita net contribution of €107.4. In contrast, Britain’s net contribution of around €9bn works out as €139 per capita.

EU free movement of people is central to Norway’s relationship with the EU

As a member of the EEA, Norway must apply the same free movement rules as EU member states, but has no vote on the rules. In Norway’s experience this actually results in far higher inward EU migration than the UK, when measured as a percentage of the countries’ total populations.

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Switzerland – outside the EEA and with its own specific EU relationship – also has to accept EU free movement and experiences higher levels of inward migration than the UK. So, neither Norway nor Switzerland’s relationships with the EU are a panacea when it comes to limiting EU migration.

If not Norway, what?

To be fair to the Vote Leave Campaign, they have said they are not advocating the ‘Norway option’ and that, “After we vote leave, we will negotiate a new UK-EU deal based on free trade and friendly co-operation. We will end the supremacy of EU law. We will bring back control including over trade deals and migration.”

A Swiss-style relationship is an alternative option as it is a straightforward free trade agreement (you can read more about these here), but the central issue those advocating withdrawal face – as we noted in our ten questions for the Leave and Remain campaigns – is articulating a model for the UK outside of the EU which balances continued access to the single market (particularly in services) and influence over the rules of the market on the one hand, with ultimate control over migration (i.e. not being subject to EU free movement of people) on the other. If this cannot be done, then life outside the EU will continue to look very unclear.