10 August 2016

In an interview with Norwegian daily Aftenposten, Elisabeth Vik Aspaker, Norway’s Minister for European Economic Area (EEA) and EU Affairs said that:

“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.

This was then picked up by The Guardian and other UK outlets suggesting that Norway might veto the UK’s membership of EFTA. The comments are quite strange and somewhat premature given the early stage and sensitive nature of these negotiations.

The first point to make, however, is that it is not even clear if the UK will want to join EFTA (or re-join, as the UK was previously an EFTA member before it joined the EU in 1973). We, along with others, have recommend that it should – partly as a sign of continued engagement with Europe and partly as would be a quick way to secure a free trade agreement with Switzerland and Norway which account for 6% of the UK’s total trade (not a huge amount but together they account for a similar amount of UK trade to China).

Little changes if the UK joins EFTA

Looking at the rest of the Aftenposten article, Aspaker’s concerns seem to relate to the reduced weight of the EEA contingent within EFTA. As a reminder, EFTA is the agreement that governs relations between four countries: Switzerland, Norway, Iceland and Liechtenstein. It has nothing directly to do with the EU. The UK joining EFTA would not automatically mean it would also have to join the EEA. Likewise, the UK’s membership of EFTA would not impact on the make-up of the EFTA Surveillance Authority or EFTA Court, the supranational institutions which police the EEA Agreement but which do not apply to Switzerland.

So if the UK were to join EFTA, what would actually change in practical terms? Not all that much from what I can see. Yes, the UK would be by far the largest member and would therefore dominate intra-EFTA relations. But this would just mean the relations between the UK and the other four states, a small group and not of any great importance to any of its members (their respective relations with the EU are far more important).

One area of concern which was cited by both Aftenposten and The Guardian is that of trade, i.e. that if the UK were to join, EFTA’s other trade agreements, for example with the likes of Canada or Chile, would have to be renegotiated. However, both incorrectly suggest the UK would automatically get access to EFTA trade agreements. This is not the case, as each state has to sign up to these agreements individually (it is not a customs union after all) and the trade agreements are often conducted sector by sector with every EFTA member not necessarily signing up to every sectoral agreement.

For example, EFTA members have different agricultural policies/tariffs/quotas so they may not take the same approach. It is therefore unlikely that the UK would cause any problems for the existing EFTA agreements, and even future agreements can be agreed on slightly separate terms if needs be.

Concerns over the UK joining the EEA are more understandable

One area where it would make more sense for Norway to be concerned by the UK joining EFTA would be if it also joined the EEA and through that impacted on its relationship with the EU, which on the whole is more harmonious than that of the UK. But this would not happen merely by the UK joining EFTA. It would only have a say on EEA related issues if it were actually in the EEA. Decisions between EFTA’s EEA contingent are taken by consensus, so if one country wanted to stall the adoption of EU regulations then it could do so. But as we noted in our recent EEA briefing, this would trigger retaliation from the EU and would mean membership of the single market in that area would lapse until the regulation was approved.

One could imagine a situation where the UK were to block the transposition of new EU financial regulations, thereby triggering the exclusion of the entire EEA from the single market in financial services until it agreed to implement the regulation. But even if the UK joined EFTA, Norway would still have to approve it joining the EEA. It has been suggested (for example by Bruno Waterfield of The Times) that Norway actually wants the UK to join the EEA. They might, although I am not so sure about this for the reasons stated above. But even then, threatening to veto UK membership of EFTA would be a strange way to achieve this objective. Not least because the UK would have first have to join EFTA in order to join the EEA.

Norway can gain from the UK joining EFTA

The final point to make is that, arguably, Norway would gain from the UK joining EFTA. Specifically, the UK accounts for around 16% of total Norwegian trade – more than all the other countries outside of the EU with which it has trade agreements combined. 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 (although for the reasons cited above this should not be overdone).

All in all, this is a hard one to understand both in terms of substance and strategy from the Norwegian minister.