Britain’s Norway Option on EU Faces Political Reluctance in Oslo

(Bloomberg) -- Joining the European Economic Area would be an obvious way for the U.K. to retain access to the European Union's single market should it go ahead and leave the bloc.

But in the EEA's biggest member, Norway, questions are now being asked about the advantages of allowing the much bigger North Sea neighbor into an accord that in many ways has been tailored to the needs of the Scandinavian country and its other members -- Iceland and Liechtenstein. Concerns have been raised by the prime minister and the finance minister, and also by the leader of the Labor Party, the biggest group in opposition.

Signing up to the EEA would allow the U.K. to stay within the internal market and keep the trade ties that are the key to its prosperity. While much of EU law would need to be adhered to, including the free movement of people, it would also provide some freedom from the Brussels bureaucracy that has been vilified by those who successfully lobbied for a so-called Brexit.

Norwegian Industry Minister Monica Maeland says it's far from a clear-cut case that Norway should welcome the U.K. into the broader European Free Trade Association.

“Britain must first clarify its position,” she said in an e-mailed answer to questions. “Then the EU must decide how they want to work with this and then we need to decide on our position. So it's too early to decide on a possible expansion of EFTA.”

Paying Up

The U.K. position is unclear as the nation's political scene has descended into chaos after Prime Minister David Cameron decided to step down. But during campaigning in the U.K.'s in-or-out referendum, the Norwegian option was deemed unpalatable by many "Leave" supporters, since it doesn't stop the free movement of people and would essentially tie the country to the EU without giving it any influence in the bloc.

Norway has adopted about 75 percent of the EU's laws, yet has little say in what those laws are. It also pays the bloc about 860 million euros ($954 million) a year for the privilege of accessing the internal market.

A U.K. entry would shift the balance of the agreement, which doesn't cover the EU's agriculture and fisheries policies, the customs union, trade policy, foreign and security policy, justice and home affairs or monetary union. The concern is that the U.K. could want changes in the accord and use its clout to drive them through.

Gas Exports

Norwegian Labor Party leader Jonas Gahr Stoere said that the U.K. will likely find its own way to connect to the inner market should it actually leave the EU. He said it's Norway's responsibility to ensure the EEA's stability and integrity.

“We're unlikely to want to change the agreement which has evolved over more than 20 years,” he said in an e-mailed response to questions. Stoere was part of negotiating team that helped form the accord more than 20 years ago.

The country is now hoping that it can negotiate with the U.K. in parallel to any talks with the EU on its future trade ties. For both, the stakes are high since the U.K. buys about 62 percent of its natural gas from Norway.

“Great Britain is an important trading partner for Norway and the EFTA,” said Maeland. “It's important we keep good relations with the British. The EEA agreement has looked after this in a good manner and will continue to be in effect until the U.K. formally leaves the EU.”

(An earlier version of this story was corrected to fix spelling of Liechtenstein.)

--With assistance from Sveinung Sleire To contact the reporter on this story: Jonas Bergman in Oslo at jbergman@bloomberg.net. To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Nick Rigillo