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After ‘Brexit,’ How Could Britain Benefit Economically from Norwegian Model? | ASHARQ AL-AWSAT English Archive 2005 -2017
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Oslo’s fish market. Norway’s trading relationship with the European Union allows it to protect its fishing grounds. David B. Torch for The New York Times

New York Times

Hokksund, Norway- Sigurd Braathen worked for a lifetime to build his family’s industrial company into a profitable venture with sales across Europe.

Then, an environmental diktat from Brussels threatened to outlaw half of his company’s energy-efficient water heaters, even in his home country of Norway.

To make his products compliant, Braathen had to revamp his factory at a cost of 5 million euros.

“The worst part was, Norway had no influence over the matter because we aren’t a member of the EU,” said Braathen.

“But Norway still must do whatever Brussels decrees.” A similarly conflicted future appears to await Britain.

As the political chaos after Britain’s vote to leave the European Union starts to subside, one of the most pressing issues for the country’s new leader is how to keep doing business with the bloc’s vast single market of 500 million consumers.

Many are pointing to fjord-flecked Norway as a possible model for the way forward.

Theresa May, who became Britain’s new prime minister on Wednesday, has said she wants to get the best deal possible to safeguard the country’s industrial base and its services industry since if they falter, the country’s economy risks falling off a cliff.

A Norwegian-style deal has its advantages. Norway is outside of the bloc, but it can trade easily with its members through a construct known as the European Economic Area.

The hitch is that Norway, in exchange for the trade deal, must allow the free movement of people — a principle that May, who has vowed to clamp down on immigration, may not fully concede.

“Britain will probably do a Norway-lite, where it will have to cede some market access in return for the right to place some controls on free movement,” said Simon Tilford, deputy director of the Center for European Reform in London.

“But once the costs become apparent, there will be more of a debate in the UK about whether it’s enough, and the politics will get really toxic.”

In some ways, Norway can relate to “Brexit,” as the British exit is known.

This verdant Scandinavian country, population five million, voted twice to stay outside the European Union in heated referendums that also turned on issues of sovereignty.

Moreover, life outside the European Union is nice. Norway is a wealthy nation, with vast natural resources including oil, farmland and teeming fishing grounds along 400 miles of rugged coastland.

Oslo, the capital, has upscale stores, tidy homes and a Royal Palace — a reminder of why Norwegians value independence.

Clean hydropower fuels a wide range of products, from high-speed trains to Braathen’s water heaters.

However, there are trade-offs. To access Europe’s single market, which Britain still seeks, Norway pays hundreds of millions of euros a year into the bloc’s budget.

It is also required to accept every law that Brussels adopts, like the one that threatened Braathen’s business, without getting to vote on them.

Crucially, it must also allow citizens from the European Union to pass freely through its borders, meaning it does not have control over immigration, a pivotal issue for British voters who wanted out of the bloc.

As a result, Norway has even higher per-capita immigration than Britain.

“It is an integration without representation: You get access to the market, but you don’t get a voice,” said Ulf Sverdrup, the director of the Norwegian Institute of International Affairs and the author of a report tallying the cost to Norway outside the European Union.

“For a country like Britain, if you have ambitions to be a leader in Europe, it’s not a good thing.”

Britain has other options, but they are hardly more palatable.

It could negotiate trade deals with 27 remaining member nations, as Switzerland did. Nevertheless, that would be a lengthy mess.

Otherwise, it could follow Canada’s approach, striking deals for trading goods but limiting services, which could hit Britain’s vaunted financial industry.

Elsewise, the European Union might decline to strike any deal, creating uncertainty in Britain and around the world.

In a meeting this week between the United States Treasury secretary, Jacob J. Lew, and the Chancellor of the Exchequer, George Osborne, Lew urged that both sides demonstrate “flexibility” in their discussions.

“A highly integrated relationship between the EU and the UK is in the best interests of Europe, the United States and global economic growth, stability and security,” he said.

The easiest thing, analysts say, is to just join the European Economic Area like Norway.

That arrangement gives Norway sovereignty over two crucial industries that were the focus of Brexit campaigners.

The country is free to pursue protectionist policies for its farmers and fishermen, for instance by slapping import tariffs of more than 270 percent on cheese from Europe.

Yet, it would not let Britain coddle one of its biggest industries — finance.

As a European Union member, Britain has been able to foil attempts by France and Germany to curb or siphon business by vetoing certain measures, like a proposal to impose a single tax on the region’s financial sector.

London also won a victory at the European general court against a European Central Bank rule that would have moved trading of securities priced in euros to countries that use the currency.

It would have meant a huge loss of business for the banks that have turned the City, the center of finance in London, into Europe’s financial capital.

Outside of the European Union, Britain would be left to do what Norway does: lobby hard behind the scenes and hope that its voice is heard in Brussels.

“It goes without saying that exerting influence in a cooperation bloc such as the EU, where we are not a member anymore, is challenging,” said Elsbeth Sande Tronstad, Norway’s deputy minister of European Economic Area and European Union affairs.

Britain, as Europe’s second-largest economy and a political powerhouse, would probably still have much more sway than tiny Norway. But, the risks are there.

“Outside the EU, the UK would have to give up its current significant influence over EU decision-making and become a rule-taker rather than a rule-maker,” the British Treasury said in a study published before the referendum.

From his perch in Hokksund, a bucolic industrial town nestled among emerald forests and dark fjords west of Oslo, Braathen has seen the consequences.

Founded by his grandfather in 1932, his company benefited greatly from being able to sell products throughout Europe with little interference.