By Charles Brasted and Scott Macpherson, Hogan Lovells
What is the "Norway model"?
Norway is not a member of the EU, having voted against joining on two occasions. Its relationship with the EU has been vaunted as a possible model for a semi-detached UK; but what is that relationship? It is founded on Norway's participation in the European Economic Area (EEA) agreement with the EU, its various Member States, Iceland and Liechtenstein. The UK could not adopt the Norway model unilaterally. It would have to accede to the EEA agreement, which would require the unanimous agreement of the other EEA members.
The single market – but not as you know it
The EEA agreement allows Norway to participate in most aspects of the EU single market while retaining control of its agriculture, fisheries, customs and VAT policies. As a result, there are additional border requirements which can add cost and time to transactions with the EU.
The single market also requires free movement of people. Traditionally, free movement in the EEA is narrower in scope than the EU's citizenship provisions, for example in relation to derived rights of family members, although there has been a trend toward convergence with the EU rules. The EEA agreement also provides for an "emergency brake" on migration in circumstances of serious economic, social or environmental difficulties. In the event of this being used, other EEA members could be entitled to implement a suspension of preferential trade.
The price of access
Access to the single market does not come without cost. Norway currently pays roughly £623 million per year for its membership of the single market and other EU programmes. As a proportion of its GDP, this amounts to between 80-90% of the amount that the UK currently contributes towards the EU budget as a proportion of its own GDP.
Norway must follow the EU laws that relate to the operation of the single market.
As Norway is not an EU member it does not have a direct say in how these laws are made. However, under the EEA Agreement, at the pre-legislative stage the Commission must seek advice from experts of the EEA states for legislation that involves the EEA, giving Norway some input on policy, albeit no vote.
Despite the "democratic deficit" in relation to decision making, the model remains almost unanimously popular in Norway. It is unclear how much of this model could be successfully applied to the UK, which is used to playing a very active role in EU policy making, and has a larger economy that is substantially more focused on services and enjoys fewer natural resources than Norway.
Published in Estates Gazette's Autumn 2016 Global Investor Guide. Please click here to open the publication.