Outside and inside Norway s agreements with the European Union

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1 Outside and inside Norway s agreements with the European Union Karen Helene Ulltveit-moe Professor, University of Oslo Member of the EEA review committee

2 Background On 7 January 2010, the Norwegian Government appointed a broadbased independent committee to undertake a thorough, research-based review of the EEA Agreement. The mandate of the Committee called for a comprehensive and thorough review of the political, legal, administrative, economic and other social consequences of the EEA Agreement.

3 The report The report has four main parts and 28 chapters (900 pages!). Part I: Main Features gives a brief introduction to the agreements governing Norway s relations with the EU and an account of the historical development of Norway s association with the EU. Part II: The Development and Functioning of Norway s Agreements with the EU Part III: The Significance of the EU Agreements for Important Areas of Society Part IV: Conclusion

4 Main message Norway s relations with the EU are governed by a number of agreements;the most important being the EEA agreement Norway has seen "extensive Europeanisation" in the past 20 years despite being outside the EU implications for domestic and foreign policy and most sectors EU law has been incorporated into around 170 (of 600) Norwegian statues and approx 1000 Norwegian regulations ¾ member: Norway has incorporated approx three-quarters of all EU legislative acts into Norwegian legislation. The past 20 years: Norwegian authorities neither can nor wish to isolate Norway from ever closer and binding integration processes in the EU Norway is far more closely associated with the EU than most people realise. Unusual form of association: association without membership. Norway s association with the EU has not been the model for others

5 Main message cont d Norway is neither completely outside nor fully inside inherent structural tensions and problems, but has worked much better than many expected. Large economic benefits, but great democratic deficit since Norway has to adopt EU policies "without voting rights". A kind of national compromise since Norway decided it did not want to join the EU. The EEA has ensured a stable and relatively predictable framework for relations with the EU, Norway s most important economic partner. The EEA is an expensive/ reasonable/cheap agreement Norway s net conribution: 0.11 % of GDP Sweden s net contribution: 0.35% of GDP Germany s net contributio: 0.37% of GDP

6 Implications of the EEA for the Norwegian economy and business sector An account of Norway s participation in the internal market and economic development in Norway since the EEA Agreement entered into force. Describes and analyses the economic relations between Norway and the EU during the period of the EEA Agreement: economic integration and interdependence internal market and the four freedoms Economic development GDP for mainland Norway increased by 60 % employment rose by around 25 % unemployment fell from nearly 6 % in 1993 to 2.4 % in 2011 Norwegians purchasing power increased substantially the welfare state was further developed

7 Implications of the EEA for the Norwegian economy and business sector Many reasons for the positive development Norway s oil and gas activities the Norwegian/Nordic model the EEA Measuring the impact of the EEA difficult from a methodological point of view only one of many factors and difficult to measure in isolation but the majority of the committee find that EEA contributed significantly to the positive economic development.

8 Economic development The stylized facts on Norway

9 Figure 14.1 Unemployment in Norway and selected countries (percent)

10 Figure 14.2 Annual growth in GDP (Yearly average based on constant 2000 USD) 12.0 % 10.0 % 8.0 % 6.0 % 4.0 % 2.0 % %

11 Figure 14.3 GDP per capita relative to EU EU 15 Sweden Norway Switzerland Greece Germany United Kingdom

12 Figure 14.4 Current account (% of GDP) for Norway and selected countries Percent

13 A significant and asymmetric economic relationship between EU and Norway Norway is a small open economy, heavily dependent on international relations. The EU and the EU member states are our most important partners trading partners and account for most of the foreign investment in Norway. The majority of Norwegian imports come from the EU (64%) and the majority of Norwegian exports (81%) go to the EU. Approximately two-thirds of Norwegian private sector investments are in the EU, while around two-third of the stock of foreign direct investments into Norway originate from EU investors The Government Pension Fund Global has invested half its capital in the EU (bonds, stocks and real estate). Since the enlargement of the EU and thereby of the EEA in 2004, Norway has been one of the countries in the EU/EEA that has received most labour migrants from Eastern Europe per capita In 2009, 87 % of all labour migration to Norway came from the EU.

14 Figure 14.5 Norway and the EU (2009): asymmetric interdependence Share of immigration Share of import Share of export Share of inward FDI Share of outward FDI Norway EU

15 Figure 14.6 Internal EEA trade (export +import): EEA countries trade with other EEA countries as share of total trade (2010) 90.0 % 80.0 % 70.0 % 60.0 % 50.0 % 40.0 % 30.0 % 20.0 % 10.0 % 0.0 %

16 Figure Trade development: Norway EU vs. Internal EU trade (1999=100) Import from the EU Intra-trade EU Export excl oil and gas to the EU Export to the EU

17 Figure 14.7 Foreign direct investments in and out of Norway (2009) in billion NOK Other countries EU Inward FDI to Norway Outward FDI from Norway

18 Figure 14.9 Government Pension Fund Global investmentshare in Europe in % 60 % 50 % 40 % 30 % 20 % 10 % 0 % Equities Fixed income securities

19 Figure14.15 Inward and Outward Foreign direct investment (Stock based on , in million USD) Million USD Inward FDI to Norway from the EU Outward FDI from Norway to the EU

20 Figure FDI to and from Norway : the role of the EU 80 % 75 % 70 % Norwegian outward FDI to the EU (as % of total outward FDI) EU inward FDI to Norway (as % of total Inward FDI to Norway) 65 % 60 % 55 % 50 % 45 % 40 %

21 Figure FDI between Norway and the EU versus intra-eu FDI (1999=100) Outward FDI: Norway to the EU Intra EU FDI Inward Inward FDI: the EU to Norway

22 Figur Growth in immigration from EU15-countries (1998=100) Immigration to Germany Immigration to Sweden Immigration to Norway Immigration to Switzerland 0

23 Figur Growth in immigration from new EU members (1998=100) Immigration to Germany immigration to Norway immigration to Sweden Immigration to Switzerland

24 Figure Share in employment of employees according to background and industry (incl registered and non registered immigrants) Employment activities Construction and utilities Restaurants and hotels Manufacturing Mining and quarrying Business services Engineering services and real estate All industries Primary industries Transport and storage Personal services Health- and social services Education Wholesale and Retail ICT, financial and insurance services Public administration, defense and social insurance Other Nordic countries Western-European EU countries Eastern European EU countries

25 Figure Structural change driven by migration from EU Employment growth and migration (total employment growth in persons on right axis) All industries Other private services Public services Construction and utilities Manufacturing and mining Retal, wholesales, restaurants and hotels Transport and storage Other Nordic countries Western-European EU members Eastern European EU members Employment growth

26 Impact of the EEA on Norwegian business and economy EEA A stable and predictable framework for Norwegian business Intra-EEA trade, FDI and migration has triggered and allowed for increased specialisation and structural change and thereby more efficient resource allocation and economic gains. In relative terms: trade with EEA approx the same as in 1994, but since then, Norwegian export has increased by 40 percent Intra-EEA trade has increased even in times where the emerging markets have been on the rise But: forgone trade opportunities? Recent research find a significantly bigger positive effect on trade from EU membership than from EEA association

27 Impact of the EEA on Norwegian business and economy Trade creation within the EEA has led to structural change and adjustment costs, but probably been less costly than expected. Smooth and slow changes as compared to those triggered by the opening of WTO to the East Trading with similar countries gives more modest gains but also less pain and lesser problems of redistribution EEA migration has provided labour force necessary to sustain economic activity in the private and public sector Lack of knowledge about the EEA agreement and uncertainty about how stable relative to EU membership has probably had a negative impact on business development and FDI

28 Impact of the EEA on Norwegian business policy Examines how the EEA Agreement affects the Norwegian Government s business policy An account of the EU/EEA rules on state aid, public procurement and competition Key questions raised are: To what degree does EU/EEA law limit the Norwegian authorities freedom of action? How much freedom of action do they still have? And how can it best be utilised? Key answers are: EU and EEA legislation has a major influence on Norwegian business policy BUT: EU and EEA legislation (i.e. state aid and competition) aimed at fostering competition and productivity is in line with business policy reforms that pre-dates the EEA agreement EEA business policy relies on pan-european understanding that the industrial policy of the 70s and early 80s did not work Significant degrees of freedom The EEA agreement allows the government to tie itself to the mast

29 Impact of the EEA on the Norwegian labour market Deals with the consequences of the EU/EEA for the labour market and working conditions in Norway. Examines the development of workers rights in Norway under the EEA, and the impact of the EU/EEA on the system of collective agreements and the degree of organisation. Focuses particularly on the scale and consequences of the dramatic increase in labour migration within the EU/EEA since Discusses the measures taken to adapt the Norwegian model to this situation and how it has led to new constellations of interests and new dividing lines. The consequences of the EU/EEA for the social partners and the balance of power in the labour market are also analysed, and Norway s participation in the EU social dimension is described. Bottom line: If anything more positive than expected The norwegian model has survived Challenges ahead due to a generous welfare system

30 Thank you!

Outside and inside at the same time? Lessons from Norway for Brexit. Karen Helene Ulltveit-moe

Outside and inside at the same time? Lessons from Norway for Brexit Karen Helene Ulltveit-moe Professor, University of Oslo Member of the Executive Board of the Norwegian Central Bank Member of the EEA