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The pro-Brexit view

Single market access without ‘political union’ is secured under the EEA option”, Business for Britain, ‘Change or Go’, 17 July 2015.

What is the “Norway (EEA) option?” Exiting the EU but becoming a member of the EEA, together with Norway, Iceland and Lichtenstein, and of EFTA, together with the EEA countries and Switzerland.

What would it mean for the UK?

  • There is no automatic right for the UK to become a party to the EEA Agreement or a member of EFTA, so existing members would have a veto on the UK joining.[1] Norway has previously informally vetoed Slovakia’s attempted membership.[2]
  • To continue to benefit from access to the single market, the UK would also still be required to contribute financially to the operation of the EU, through a separate EEA Grant. Norway is the tenth largest contributor to the EU per capita: it paid per capita contributions of £106 in 2011, compared to the UK’s net contribution of £128 (i.e. after rebates).[3]
  • If the UK left the EU and instead contributed to the EU budget on the same basis as Norway, its contributions would fall only by around 17% (including rebates, but before taking into account the other financial benefits of EU membership such as agricultural subsidies).[4]
  • The EEA Agreement obliges the EEA States to uphold the EU’s four fundamental freedoms, including the free movement of people.[5]
  • The EEA Agreement does not cover Common Agricultural and Fisheries Policies; Customs Union, Common Trade Policy; or Common Foreign and Security Policy.
  • The EEA Agreement does not cover the area of freedom, security and justice (although Norway is permitted to voluntarily participate in some EU justice and home affairs matters, such as Europol). The network of information exchange on matters of national security, which the UK has as a result of its participation in EU-wide police and judicial cooperation, would likely have to be replaced by a network of bilateral agreements.
  • The UK would be required to adopt a range of EU legislation: over 11,500 EU legal acts have been incorporated into the EEA Agreement as of 2015.[6] This is determined by whether an EU act has EEA relevance. Although incorporation can be delayed in the most controversial cases, it normally goes ahead.[7]
  • However, the UK would lose all formal voting rights and ability formally to influence that legislation. Rules affecting trade within the single market are set at the EU level. Norway, Iceland and Liechtenstein have no seat around the negotiating table and no voting power – although they may be able to exert some “soft influence” through membership of committees. The UK would therefore not be adequately represented in decision-making and legislative processes that would have direct consequences for the country.
  • The EEA and EFTA States have no MEPs or votes in the European Parliament, no veto in the European Council, no votes in the Council of Ministers, no European Commission staff and no judges or staff at the Court of Justice of the European Union. EEA-EFTA State nationals may not work in the main EU institutions.
  • Once EU laws have been passed, if they have EEA relevance, the EEA Joint Committee works to apply them to the EEA-EFTA States.[8] At this stage, the ETFA countries may seek limited amendments (e.g. transitional arrangements or exceptions, geographic limitations); or can contest the inclusion of an EU act into the Annexes to the EEA Agreement (although this possibility must not be overstated, as it is extremely rare for it to even be raised).[9] However, this does not stop the EU enacting the relevant legislation, so those rules would still shape the rules of the single market in which the EEA-EFTA States trade.
  • Timely access to the single market for UK businesses depends on how quickly the relevant EU legislation is incorporated into the Annexes to the EEA Agreement. This in turn depends on its approval by all EEA-EFTA States – which may sometimes be delayed because of constitutional requirements, such as the need for national parliamentary approval. There is currently a delay of 6-24 months. If standards are not the same, due to delays caused by other EEA-EFTA States in the process of incorporating the EU legislation into the Annexes to the EEA Agreement, access to the single market may become limited – for example, for products that do not meet higher EU standards.
  • The UK would have access to the single market for trade in goods, but as things stand it would not have full access for financial services. This is because, at the time of writing, the EEA is making slow progress in incorporating EU legislation on financial services: as a result of the differences in regulation, access in some parts of the financial services sector is presently limited.[10]
  • If the UK does not get to determine the rules in the financial services sector, it is likely that the rules themselves will favour other markets. In other words, even in areas where the UK does have access, it may find itself at a disadvantage in a market where the rules have been designed to favour the EU’s own markets.
  • The UK’s obligations would be monitored by the EFTA Surveillance Authority (like the European Commission) and the EFTA Court. The EFTA Court is bound to follow decisions of the Court of Justice of the European Union and the EFTA Surveillance Authority normally follows EU Commission policy.
  • The EEA Agreement does not currently cover the work of the European Supervisory Authorities (ESAs), which may leave the UK financial services sector isolated[11]. More foreign banks operate in the UK than any other EU country, and more than half of the world’s largest financial firms have their European headquarters in the UK.[12]
  • The UK would no longer be covered by trade agreements entered into by the EU, but could join the existing EFTA trade agreements. EFTA has 25 free trade agreements covering 36 countries, compared to more than 50 countries that are covered by the EU’s trade agreements.[13]
The Norwegians’ view

We [Norway] are fully integrated into the EU single market as members of the EEA, but what we don’t have is the right to vote on those regulations that are incorporated into our law when they are made by the council of ministers”. Vidar Helgesen, Norwegian Minister for Europe.

If you want to run the EU, stay in the EU. If you want to be run by the EU, feel free to join us in the EEA”. Nikolai Astrup, spokesperson on European Affairs for the Norwegian Conservative Party.


 

  1. Article 128 EEA Agreement – http://www.efta.int/legal-texts/eea.
  2. Pat McFadden & Andy Tarrant, What would ‘out’ look like?, November 2015, quoting evidence presented to the Independent Norwegian Committee (INC), set up to review the workings of the EEA – http://www.policy-network.net/publications/4995/What-would-out-look-like.
  3. Based on 2011 data. House of Commons Library, Standard Note SN/EP/6730, The Economic Impact of EU membership on the UK, 17 September 2013, page 25 – http://www.parliament.uk/briefing-papers/sn06730.pdf.
  4. Ibid.
  5. Article 1 EEA Agreement – http://www.efta.int/legal-texts/eea.
  6. EFTA website: http://www.efta.int/eea-lex.
  7. The legal basis for incorporation is Article 99–104 EEA Agreement – http://www.efta.int/legal-texts/eea. The whole process of incorporation typically takes 20 to 30 weeks under the standard procedure (there is also a fast-track procedure and a simplified procedure). However, there can be long delays: if there are adaptations, they need to be approved by Council of the European Union, which can add another 3-6 months. If one or more countries have the need for parliamentary approval, there is typically a delay of another 3-6 months. For example, the EU and EEA countries have been negotiating for the past two years to find an appropriate supervisory mechanism for financial services legislation.
  8. The EEA Joint Committee is the body which coordinates the EFTA Standing Committee and the European Commission’s European External Action Service.
  9. Once an act is part of the Annexes to the EEA Agreement, an EEA-EFTA State may not imply implement it but must make it part of the national legal order (Article 7 EEA Agreement – http://www.efta.int/legal-texts/eea). If it does not, the States risk legal proceedings brought before the EFTA Court by the EFTA Surveillance Authority.
  10. Full access to services is provided for in Articles 36-39 EEA Agreement – http://www.efta.int/legal-texts/eea: Article 36 provides that “Within the framework of the provisions of this Agreement, there shall be no restrictions on freedom to provide services within the territory of the Contracting Parties in respect of nationals of EC Member States and EFTA States who are established in an EC Member State or an EFTA State other than that of the person for whom the services are intended”. However, the EEA is making slow progress at incorporating certain EU regulations on financial services that were introduced post-2008, which has led to a significant difference between the legislative regimes governing the financial services sector in the EEA-EFTA States and those in the EU.
  11. It is envisaged that in the future the EFTA Surveillance Authority will be given the power which the ESAs hold in the EU, and will work in partnership with the ESAs to carry out supervisory tasks.
  12. Speech given by Mark Carney, Governor of the Bank of England, The European Union, monetary and financial stability, and the Bank of England, 21 October 2015 – http://www.bankofengland.co.uk/publications/Pages/speeches/2015/852.aspx.
  13. EFTA free trade agreements – http://www.efta.int/free-trade/free-trade-agreements.