Minister of Trade and Shipping Grete Knudsen

Norway - partner in the Internal Market through the EEA Agreement.

Seminar on Norway and the EEA Agreement
Brussels 20 November 1995

I would like to start by thanking you for this opportunity to be with you in Brussels tonight and say a few words about Norway's role in European cooperation and about our relations with the European Union.

I find this an excellent occasion to reiterate our ambitions for the ongoing process of European integration. We want to be part of that process. We want to be an active contributor to the process. And we are ready to take upon ourselves the responsibilities it requires. Norway's no to membership in the EU was not a no to responsibilities. I firmly believe that there is a huge potential for further European integration, and I believe that all European countries have a significant role to play - if the so decide. In that respect, Norway has decided yes. That is my point of departure tonight.
As the Russian philosopher Zinovjev said: "Man consist of his perspectives".

Let me therefore emphasize two important perspectives before I elaborate on tonights subject: Norway - a partner in the internal market through the EEA-agreement.

First; We must all undertake an Pan-European perspective when we talk about partnership and economic development on our continent these days. There is a close connection between economic sustainable development, trade welfare, stability and peace that cannot be overlooked.

Second; There is a common need to establish a link between local democratic popular participation and the development of international and supranational cooperation to meet the challenges of our time. We must so to say address the issue of democratization of democracy.

The fact that we said no to membership twice, both in 1972 and in 1994 makes us different. "Annerledeslandet", "The country with a difference", has become a widely used nickname for us in our own media. But I don't think we really are that different. Norwegian public opinion in EU-related matters is not unlike public opinion in most EU countries. When people in Europe are asked to give their opinion on EU matters, it usually ends up with one half voting yes and the other half no. Forty-eight per cent of Norwegian voters did in fact say yes to the EU, with all its so called "acquis communautaire", including the Maastricht Treaty, in the referendum. The difference between this result and the referenda in several EU countries is not very significant.

Nevertheless, there is no gliding transition into membership. It is either or. The consequences for Norway is that we are excluded from participation in fora where formal decisions with direct impact on us are made. In the practical sphere, however, the consequences are perhaps less noticeable. Our cooperation with the EU countries is already very substantial, and has considerable potential for development.

Tomorrow I will be chairing here i Brussels, the meeting of the Council of the European Economic Area. This agreement enables us to be fully integrated in the Single Market. Many of the Norwegians voted no to membership well aware that the EEA Agreement covers our basic needs for homogeneous rules and terms for economic development and trade.

As you probably know, the EEA was established by an agreement between the EFTA and EU countries. The agreement was signed in 1992 and came into effect on 1 January 1994. At that time Austria, Finland and Sweden were still members of EFTA, and the two-pillar system of the agreement was not too unequal, with 5 or 6 countries in the EFTA pillar and 12 countries in the EU pillar. After that, however, a great many changes and complications ocurred in a very short time. Switzerland had a referendum and said no to the EEA. Then Austria, Finland and Sweden left EFTA and joined the EU as of 1 January 1995. On the other hand, Liechtenstein decided to join EFTA, and became part of the EEA from 1 May this year.

In spite of these changes, and in spite of the present difference in size between the two pillars, with Norway, Iceland and Liechtenstein on the one hand, and the 15 EU countries on the other, The EEA will survive. The EEA agreement has been adapted to the new realities in a very pragmatic and flexible manner, and today it is fit and thriving. While we don't want to exaggerate our own importance, our relations with the EU are very close, and both the EFTA countries and the EU have agreed that the EEA is a useful instrument for maintaining and developing these relations.

On this point, allow me a small parenthesis. Why would Norway be an interesting partner? Self-assessment is always a risky business, but I take the risk: Norway is a modern society in all respects with strong democratic traditions. We are highly preoccupied with developments in Europe, and we are ready to play our part. We are in the forefront - also in nominal terms - in important areas such as energy, fishery and shipping. In short, I believe that we have something to contribute that makes it worthwhile for the EU and other European countries to cooperate with us.

The EEA agreement is, in size and substance, the most important international economic and trade agreement Norway has ever taken part in. I shall describe the various elements of the EEA in some detail, but first I would like to underline that the EEA agreement is a dynamic agreement. It contains a number of mechanisms for a continuous integration of new EU legislation into national law and it establishes a framework for further cooperation.

An important area of cooperation is the political dialogue in EEA format that is now being established. Tonight the foreign ministers of the EEA will meet in Brussels, and the political directors of the foreign ministries met in Madrid last week to prepare the ministerial meeting. Norway is aligning itself with EU foreign policy initiatives. And as a member of NATO and associate member of the Western European Union (WEU) we are closely following EU discussions on security and defense matters. In the political sphere, our involvement in the Middle East peace process is well known, and we are playing a significant role in the situation in former Yugoslavia. We share a border with Russia, and our relations with this major power are of interest to the whole of Europe. We are present and active in many regions, not least because of our considerable development assistance to parts of Africa, South Asia and Central America. Thus we feel that we can make a constructive contribution to the political dialogue also in a wider perspective than that of tonight's theme.

The EEA agreement also establishes a basis for cooperation on home affairs and judicial matters. In this area it is the Schengen Agreement that has so far been the most important issue for us, and we are now starting negotiations with the Schengen countries to discuss the position of Norway and Iceland. The Nordic countries want to safeguard their close cooperation on free internal movement of persons that has existed for 40 years. It would be a setback both symbolically and in practical terms if passport control is reintroduced on the borders between the Nordic countries after so many years. The need for a comprehensive cooperation agreement with the Scengen group of countries illustrates how closely we are in fact linked with the EU, especially since Sweden and Finland became members of the EU.

In today's world, globalization is a characteristic of almost all aspects of society. Trade, economy, security, environment, social policy - they are all elements of a larger, and integrated whole. Policies in one area have to be compatible with policies in other areas. Still, different instruments are applied to pursue concrete policy objectives in the respective areas. As far as the EEA Agreement is concerned, its main purpose is to ensure that Norway is fully integrated into the EU Single market. Norwegian industry now competes with companies from the EU countries on an equal basis both in the EU and in Norway. It is a priority both for me as minister and for the Government as a whole, to ensure viability of the Agreement and particularly full and equal access to the European market for Norwegian industry.

The success of the EEA will depend upon the uniform implementation and application of the common rules in all EEA States. In somewhat broader terms, it will also require that all countries concerned evolve politically along the same lines, and that the basic priorities for common action are retained. To ensure uniform implementation, a two-pillar system of surveillance and enforcement of obligations has been established. This entails that the EU Member States are supervised by the European Commission, and that the EFTA States that are party to the Agreement are monitored by the EFTA Surveillance Authority (ESA). With regard to its surveillance function, the ESA has been given powers corresponding to those of the Commission. A two-pillar structure has also been established with respect to the judicial control mechanism, with the EFTA Court operating in parallel with the EC Court of Justice.

One could call the EEA Agreement and advanced and extended free trade agreement covering most aspects of the economy. It does not, however, include the EU common agricultural policy, fisheries policy, or external trade policy.

As part of the Single market Norway is strongly affected by EU legislation. In order to ensure that our interests are reflected in the new rules governing the market, we are entitled to participate in the development of new legislation. Our participation is limited to expert and working groups established by the Commission, whereas we may relate to the subordinate bodies of the Council through the EEA Joint Comittee. Thus we participate in decision-shaping, but are excluded from the actual decision-making, which has such direct relevance for us. As a logical consequence of this, it is our ambition to furter improve our consultation mechanisms with the EU.

The EEA agreement so far functions well. It is the shared responsibility of both the EFTA pillar and the EU that will secure that it continues to do so also in the future. There is broad consensus in Norway in favour of the EEA in spite of the occasional dissenting voice. The EEA is extremely important to Norwegian business and industry. We are convinced that the EEA also benefits the EU, and we anticipate active involvement from the EU pillar in accordance with the agreement. Practical cooperation with the Commission is very close and positive. The French presidency was very helpful in our efforts to accommodate Norway in the new situation after the NO vote. The present Spanish and the forthcoming Italian presidencies have also shown a cooperative spirit. We interpret their positive attitude as a very good indication of the general attitude in the EU. In particular, we are confident that our relations with Denmark, Sweden and Finland will continue to be very close, in spite of our separation on the EU question.

Although the EUs attitude to the EEA is generally positive, we are well aware that Norway itself is probably the country with the greatest interest in a smoothly functioning EEA. The Government is making a special effort in this regard. Our intention is to remain a stable part of the internal market. All new and relevant EU lelgislation will under normal circumstances be incorporated into Norwegian law in a rapid and expedient manner.

So far I have touched on our participation in the internal market, and our dialogue with the Union under the second and third pillars of the Maastricht treaty. The EEA agreement also provides an opportunity for full Norwegian participation in the EU programmes for research and technology, education, culture, tourism, the environment, social policies, small and medium-sized enterprises, etc. We intend to be very active in these fields. Our full participation in the fourth framework programme on research has been particularly encouraging. The acceptance rate for projects initiated in Norway is in fact above the average for the EU as a whole.

Many other fields of cooperation can also be mentioned. In this forum it is a particular pleasure for me to inform you that we are participating in regional cooperation with the EU countries. We have been invited by Sweden and Finland to participate in programmes under INTERREG II, and the Government has now decided to make fairly substantial allocations to six different INTERREG programmes that cover the whole of our long border with Sweden, Finland and Russia. The Barents programme, where Norway, Sweden, Finland and Russia all participate, is perhaps of particular interest. It is the first INTERREG programme that involves two third countries.

Local government is a very important element in Norwegian society and its political culture, and this is perhaps one of the factors that explains our NO to membership. The strong tradition for regional cooperation in the border regions with Sweden and Finland has its roots in local initiatives. We are pleased to see that the EU is contributing to a strengthening of this cooperation, and we think that our model, with its actice local involvement, could be of interest to other border regions in Europe. We look forward to participating with the EU in developing the cooperation around the Baltic and the North Sea as well.

Norway is a rich country. We have an economy which is advanced and competitive in most respects, with the exception of agriculture. We have considerable natural resources - fish, minerals, hydroelectric power, forests, oil and gas. We have the fourth largest merchant fleet in the world. Our oil production has reached almost 3 million barrels a day, making us the second largest oil exporter in the world. We have a highly internationalized economy, close to 50 per cent of our GNP is exported, and close to 50 per cent of our consumption is imported. In comparison with the rest of Europe, only the Netherlands has a higher percentage. And, more than 80 per cent of our exports are to the EU.

The Norwegian economy has been experiencing a sharp rise in production and demand since the second half of 1993. While growth in 1994 was mainly fuelled by private consumption, housing investment and exports, investment in the mainland corporate sector and exports are expected to be the main driving force behind growth in 1995. Preliminary figures show that mainland GDP grew by 3,9 per cent in 1994, while total GDP, bolstered by a substantial increase in petroleum production, grew by 5,1 per cent.

The growth in GDP for the economy as whole, including petroleum and shipping, is estimated at 5 per cent in 1995 and 3,5 per cent in 1996. This is higher than previously projected, mainly due to the higher than expected increase in petroleum production. Average growth for 1997-99 for the mainland economy is estimated at 2,5 per cent. Employment is estimated to increase by 1,5 per cent (30,000 people) in 1995, but is expected to slow down to about 1 per cent in 1996. In 1995 unemployment is expected to fall to 5 per cent, 0,4 percentage points below the average for 1994.

The Government is aiming at a fiscal policy that is sustainable in the long term. The Budget for 1995 shows a surplus of 1,5 per cent of GDP compared with a deficit of 0,2 per cent in 1994. These figures can be compared with the Maastricht criterion for central government net borrowing, which is 3 per cent of GDP. Our gross debt was 48 per cent of GDP at the end of 1994, which is well below the Maastricht criterion of 50 per cent.

Our economy is strong and conditions are conducive to further growth in output and employment. If we had joined the European Union, Norway would today have been the only country besides Germany and Luxembourg to qualify for the third stage of economic and monetary union. The Government is now pursuing a fiscal policy which is even tougher than it would have been if we had joined the EU. We aimed to fulfill the Maastricht criteria and still leave a considerable margin. In the present situation, this will strengthen monetary policy and the exchange rate and thus contribute to keeping interest rates low.

Combined with Norway's integration in the internal market via the EEA, this opens up rich possibilities for economic cooperation. Our NO to membership in the European Union does not prevent us from making use of these possibilities. We hope you will all look on this as an invitation.

There is no alternative to European cooperation for Norway. We have always been, and will always be Europeans, and thereby we share the responsibility for Europe's development. A main task will be to make a contribution to constructive political and economic development in Central and Eastern Europe. Increasing the volume of trade with the eastern parts of Europe is one of the most productive ways to promote stability in these countries. But more than ever, European cooperation is synonymous with the European Union. Most of the Nordic countries are members. Through the entry of Eastern Germany and Austria the Union has already been extended eastwards, and many more countries are knocking on the door.

If we compare the Norwegian NO in 1972 and in 1994, we can see obvious similarities. But there are also important differences. The social democratic government that I belong to, fought with great conviction for membership in 1994. Unlike the social democrats in 1972, we have continued to govern the country after the referendum, and we continue to promote Norway's active participation in European cooperation. It is the view of my government that our priority issues, such as transparency and openness, equal status for men and women and consumer policy can best be promoted within a European framework. We must foster greater understanding of the importance of the internationalization process and the necessity of increasing the focus on intergovernmental and supranational cooperation.

Both politicians and people in general feel that there is no alternative to European cooperation. There is almost universal support for Norway's active involvement in almost all structures of European cooperation except the Union itself. Through the EEA we are fully integrated into the internal market and we have access to a large number of EU bodies and enjoy formal and informal dialogues with others.

Membership of the Union is out of the question for the time being. Opinion polls even show that the proportion of NO, among voters who have made up their minds has increased significantly since the referendum. However, another opinion poll a few months ago showed that Norwegians are in favour of close relations with the EU. Confronted with the statement "Even if Norway did not become member of the EU, Norway should cooperate as closely as possible with the EU and EU countries", 70 per cent said they agreed completely, while 22 per cent said they agreed to some extent with the statement.

To conclude, we are closely linked to Europe in all fields. The EEA agreement makes business with Norway as easy as with any EU country. We believe we have much to learn from you and that we have a great deal to give back in exchange, examples of which I have tried to convey to you tonight. I am confident that you will all contribute to removing the remaining obstacles to increased cooperation in the future.

If man consists of his perspectives, as Zinovjev suggested, let me suggest: Look to Norway!

Thank you for your attention.