Report | Date: 2017-03-06 | Ministry of Foreign Affairs
The UK has decided to leave the EU. It will begin the withdrawal process by invoking Article 50 of the Lisbon Treaty by the end of March 2017. Norway will not be a party to the forthcoming withdrawal negotiations between the UK and the EU. However, we will be directly affected by Brexit, because the UK’s membership of the EU currently provides the framework for much of Norway’s cooperation with the UK.
First, negotiations will take place on a withdrawal agreement. After that, negotiations will begin on an agreement to regulate the future relationship between the UK and the EU. There is a two-year deadline for negotiating the withdrawal agreement, which may be extended if the parties agree on this. There will be a separate procedure for negotiating the new agreement to regulate the future relationship between the UK and the EU, and there are no deadlines for concluding this agreement.
It is the agreement on the future relationship between the UK and the EU and any transitional arrangements that are negotiated as part of the withdrawal agreement that will be of particular importance to Norway.
In the withdrawal negotiations, it is expected that the EU will give special priority to the UK’s financial obligations vis-à-vis the EU, border-related issues, and the accumulated rights of EU citizens. In addition, considerable attention will probably be paid to the relocation of EU agencies from the UK to other EU countries, and to other practical matters. For Norway, the question of EU citizens’ rights is of key importance, because it will have an impact on EEA/EFTA nationals living in the UK, and British nationals living in Norway.
Prime Minister May has made clear that Brexit means that the UK will leave the internal market, which Norway is part of through the EEA Agreement. As a result, Norway, like the EU, will have to redefine the framework for its relations with the UK in the areas that are currently regulated by the EEA Agreement. In addition, a number of other areas will be affected.
It is important for Norway to maintain the closest possible trade policy cooperation with the UK and the best possible access to the UK market. At the same time, we intend to maintain the EEA Agreement and Norway’s other agreements with the EU. After Brexit, the EU will still be our most important market and our closest partner.
Because Norway is so closely integrated into the internal market through the EEA Agreement, we are more than just an ordinary third party. It is important that the negotiated solutions are also in keeping with the EEA cooperation, where relevant. We are engaged in close dialogue with the EU on those parts of the forthcoming negotiations that affect the internal market. This includes possible transitional arrangements, and our wish to be consulted during the negotiations has been met with understanding. Ensuring that the EEA cooperation continues to function well after Brexit is in the interests of the EU.
We also have an ongoing political dialogue with the UK. It is important to stress that until the UK leaves the EU and EEA, our trade relations with the UK will be regulated by the EEA Agreement. However, we are ready to discuss our future trade cooperation with the UK in specific terms as soon as the situation permits.
An overview of some key areas for Norway that will be affected by the forthcoming negotiations is given below.
Brexit raises a number of questions of significance for Norway, particularly in the areas of security, trade, Norwegian citizens’ rights, justice and home affairs cooperation, environmental and climate cooperation, fisheries management, transport, and research. It will also have consequences for policy development and for forms of cooperation in Europe. It is likely to create opportunities for Norway, but will also pose challenges.
The UK is one of Norway’s most important partners in Europe, including in the area of foreign and security policy. It will continue to play a key military role after Brexit. NATO and the British Armed Forces are the cornerstone of the UK’s security policy. But the UK has also made active use of its membership of the EU in the context of security policy. It is unclear how security cooperation between the EU and the UK will develop after Brexit.
It is expected that the UK will continue to attach importance to the UN, NATO, and multilateral defence cooperation. For Norway, it is important that the UK continues to cooperate closely with European partners to address the foreign and security policy challenges facing the European continent.
It is in Norway’s interests that the countries of Europe join forces in taking greater responsibility for Europe’s common security. This could also help to strengthen transatlantic ties. It will be important to follow developments in the cooperation between the EU and the UK in this field closely, also with a view to safeguarding Norway’s interests in our foreign policy cooperation with the EU.
The UK is one of Norway’s most important partners for trade in goods, services and investments. Exports to the UK account for just under a fifth of Norway’s total exports of goods and services. The UK is Norway’s most important trading partner in goods, and Norway’s third most important trading partner if oil and gas are not included. In 2015, the total value of Norway’s trade in goods with the UK was NOK 208 billion, of which exports from Norway accounted for NOK 168 billion.
The UK is the most important single market for the export of services from Norway, and the most important single foreign market for the Norwegian shipping industry. In 2015, the total value of Norway’s trade in services with the UK was NOK 94 billion, of which exports of services from Norway accounted for NOK 46 billion.
The UK is the seventh most important country for Norwegian foreign direct investment, and the second largest foreign investor in Norway. The majority of British investments in Norway are in the oil and gas sector. The Government Pension Fund Global has made substantial investments in the UK (totalling NOK 772 billion at the end of 2015), and Norges Bank has its biggest investment management office outside Norway in London. Around a quarter of the Government Pension Fund Global’s property portfolio is invested in the UK.
Once the UK has left the EU, the EEA Agreement will no longer form the basis for trade between Norway and the UK. If no new agreements are in place by then, the four freedoms (free movement of goods, services, capital and people) will no longer apply, and will no longer provide the legal framework for our trade relations with the UK.
Norway will have to enter into new bilateral agreements with the UK when the UK leaves the internal market and the EEA. Given the extent of our trade with the UK, as well as our far-reaching economic integration, the future agreements will have to be far more comprehensive than existing WTO rules or a traditional trade agreement. A new agreement with the UK could be a bilateral one, or it could be an agreement between the EEA EFTA countries and the UK.
It will take time for new, permanent agreements to enter into force. Possible transitional arrangements will therefore be important to prevent any unnecessary discrimination or protectionist measures. Negotiations between the EU and the UK on any future agreements and transitional arrangements could have a major impact on the nature of the future bilateral relationship between Norway and the UK. It is therefore important for Norway to be involved in discussions on common solutions between the EU and the UK in areas that affect the internal market.
Financial services and capital market
The financial sector in the UK is important for the financial services offered both in Norway and in the rest of Europe. London is one of two global full-service financial centres. Over 75 % of the other EU countries’ capital market transactions go via London. Key Norwegian actors use the financial market in London to obtain funding and channel investments. Much of the trade in Norwegian kroner (NOK) takes place in London.
Under the EEA Agreement, financial undertakings from an EEA country are free to establish operations in other EEA countries, and can also freely offer their services in the other EEA countries. This is made possible by the common EEA passporting rules, which mean that a single authorisation from a financial undertaking’s national regulatory authority is sufficient (a single ‘passport’). Some Norwegian companies have subsidiaries or branch offices in the UK, or provide cross-border services in the UK. In the same way, many British companies provide services in Norway.
A continuation of the current single passport regime seems less likely in the light of the UK Government’s clarification of the terms it is seeking for new agreements with the EU. The kind of agreement the UK will be able to achieve if it loses its financial passporting rights remains to be seen, as does the impact this will have on the UK financial market.
As long as the UK financial market continues to be an influential international financial hub, access to it will be important for the Norwegian financial sector and financial market, and by extension for the Norwegian economy. Steps to reduce uncertainty about the consequences of the UK leaving the EEA will be important for the financial markets. For example, transitional arrangements that will apply until a new basis for cooperation is in place should be clarified at an early stage.
Norwegian citizens’ rights
Around 20 000 Norwegian citizens live in the UK, while around 14 500 British citizens live in Norway (figures from 2015). Under the EEA Agreement, Norwegian citizens have the right to move freely between all countries in the EEA, and, within certain limits, the right to work and live in the whole of the EEA, including the UK. Citizens of the UK enjoy the same rights. In addition, some groups of non-working Norwegian citizens also enjoy the right to free movement, including students, people who receive regular benefits (pensioners and recipients of social security benefits), and people who have sufficient funds of their own.
Once the UK has left the EU and the EEA, the right to free movement of people between Norway and the UK will no longer apply. The EEA rules on the coordination of social security systems (which ensure equal treatment with respect to the right to social security coverage and the right to transfer benefits to another country) will no longer apply to the UK. The right to study in the UK will no longer apply. Due to an exception under the EEA Agreement, the UK already charges higher tuition fees for Norwegian students in the UK than for British students and students from EU countries.
The UK will no longer be covered by the EU Qualification Directive, which regulates mutual recognition of qualifications in a range of regulated professions, such as electrician, doctor, nurse, teacher, and head of kindergarten. This could have consequences for Norwegians studying in the UK, and for the recruitment of UK-educated personnel in Norway, particularly health service personnel. In 2015, 25 British citizens were given authorisation as health personnel in Norway. Altogether, 119 people with qualifications from the UK were authorised as health personnel in Norway in the same year.
After Brexit, Norwegian patients who receive healthcare in the UK will no longer be able to apply for their costs to be reimbursed under the EEA rules (cf. the EU Patients’ rights directive), and the same will be the case for British citizens who receive healthcare in Norway. Norwegian holders of a European Health Insurance Card will no longer have the right to receive necessary medical treatment on the same terms as UK citizens during temporary stays in the UK (this right is set out in the EU Regulation on the coordination of social security systems).
Today, Norwegian consumers benefit from the EEA rules on consumer protection when entering into agreements with businesses in the UK, for example when shopping online, spending holidays in the country or staying for an extended period of time.
It will be important for Norway to ensure that Norwegian workers, students and other Norwegian citizens are able to live, work, study and spend time in the UK after the UK leaves the EU and the EEA, and that British citizens will have the same rights in Norway.
It will also be important to ensure that there are good transitional arrangements for Norwegians who are already living, working, or studying in the UK until a new agreement is in place. For EU citizens living in the UK, this issue will probably be dealt with in the withdrawal agreement or in the follow-up of this agreement. We will seek to be involved in the development of solutions in this area.
Norway cooperates closely with the UK on energy issues. Norway exported more than 30 billion standard cubic metres of natural gas to the UK in 2016, equivalent to around 40 % of UK gas consumption. In 2015, the total value of Norway’s oil and gas exports to the UK was around NOK 135 billion.
The UK is the most important market for the Norwegian petroleum-related supplier industry. In 2016, exports from the Norwegian supplier industry to the UK totalled NOK 36 billion. Due to Brexit, there is some uncertainty about the future framework conditions in the UK market.
Norway’s Statnett and the UK’s National Grid are currently constructing a subsea electricity cable between Norway and the UK. The project is expected to be implemented and run as planned, and is not expected to be affected by the Brexit process. When Statnett’s cable becomes operative in 2021, the Norwegian electricity market will be directly affected by developments in the UK electricity market.
Any changes in the UK’s climate policy could have an impact on the UK’s imports of energy from Norway. However, so far the UK has opted for more stringent regulation of CO2 emissions than the EU. As a result, the use of natural gas for power production has proved more economically viable in the UK than in many other EU countries.
Justice and home affairs
The Norwegian police and judicial system cooperate closely with the UK within the framework of EU legislation on civil matters and criminal matters, and on the surrender of individuals suspected or convicted of crimes. However, these areas are also regulated by other international rules that will continue to apply to both Norway and the UK after Brexit, providing the basis for continued cooperation.
When the UK leaves the Dublin cooperation, migration flows between those countries that are still part of the Dublin system and the UK may be affected. The question of which country is responsible for examining an application for protection (first country of asylum) is then likely to arise – a question that today is regulated by the Dublin Regulation.
After Brexit, effective police and judicial cooperation will continue to be important, as will close cooperation in the asylum field.
Large sea areas under UK fisheries jurisdiction are contiguous with Norwegian waters, and the UK will be a key stakeholder in fisheries management in the North-East Atlantic when it leaves the EU and is no longer bound by the EU common fisheries policy. This applies in particular to the management of shared stocks in the North Sea and the coastal state negotiations on the stocks of the pelagic species Norwegian spring-spawning herring, mackerel and blue whiting.
The most central issues will include establishing new arrangements for allocating fishing quotas between the EU, Norway, and the UK, regulating reciprocal fishing rights in each other’s zones for joint fish stocks, and establishing a new system for the agreement on the exchange of Barents Sea cod quotas for quotas of other species in EU waters, which has been adopted under the framework agreement between Norway and the EU.
It will be vital to develop agreements on fisheries management that include the UK. The UK needs to be included in framework agreements setting out the principles for cooperation between the various parties and for annual agreements on the management of shared stocks in the North Sea and for the major pelagic stocks.
In the future, it will be necessary to negotiate agreements for dividing quotas in the North Sea between the parties.
Climate and environment
Norway and the UK have a common interest in pursuing an ambitious, market-based climate policy. However, it is reasonable to say that the UK has generally had a lower level of ambition than Norway in other areas, for example the development of EU environmental rules. The stance the UK will take on these areas in global environmental arenas, once it has left the EU, remains to be seen. It is not clear how the UK will respond to further development of the EU climate and environmental legislation, which until now, under the EEA Agreement, has been shared to a large extent.
Any differences that develop will have implications for climate, environment and trade. Norway considers it vital for the UK to continue to maintain a high level of environmental protection and rules that support an effective climate and environment policy, and as far as possible, for these to be the same for the UK, Norway and the EU. Norway will advocate joint solutions for the EU, the UK and Norway, and cooperation in bilateral, regional and multilateral forums on environmental and climate issues. It will also promote cooperation on other issues, including trade, where this is relevant.
Brexit may have an impact on the EU 2030 climate and energy framework, including the legislation that will be decisive for Norway on joint fulfilment with the EU of the emission reduction commitments. If the UK withdraws from the joint EU commitment, this could lead to changes to the proposed effort-sharing decision for emission cuts in the non-ETS sectors. If the UK leaves the EU emissions trading system (EU ETS), this could have ramifications for the emissions trading market and, in the long term, for the design of the emissions trading scheme. After Brexit, a new agreement with the UK will be crucial for climate and environmental policy as well. It will be important to make sure that a new agreement promotes green growth and takes climate change and environmental considerations into account.
Transport and communications
Large volumes of goods and large numbers of people are transported between Norway and the UK. This transport is currently regulated by the extensive EEA transport legislation. This legislation aims to ensure equal conditions of competition, and includes rules on safety, climate and environment, and passengers’ rights. In the field of electronic communications, common consumer rights apply, and there are common rules on international roaming.
The 1979 agreement between Norway and the UK relating to air services will apply in full on the day the UK leaves the EU (some of its provisions already apply, where they confer broader rights than those that apply to the aviation sector in the EEA). The 1979 agreement was originally very restrictive. It has been amended a number of times to make it less so, but it still does not give the same opportunities as the EEA Agreement.
In 2015, 97 785 tonnes of goods were imported to Norway from the UK by road, and 11 475 tonnes were exported. The carriage of goods by road is regulated by EEA rules, but was previously regulated by a 1970 bilateral agreement between Norway and the UK.
Matters relating to safety, environment, emergency preparedness and qualifications and working conditions at sea are also regulated by international rules that apply independently of the EEA Agreement (for example IMO and ILO rules and port state measures). Norway cooperates with the UK on the exchange of maritime traffic data, and the EU and EEA countries bordering the northern part of the North Sea and the northernmost Atlantic have adopted an agreement on the exchange of maritime surveillance data. Both the UK and Norway are parties to this agreement. Through the EU SafeSeaNet, Norway receives information on dangerous and polluting goods carried on board ships leaving ports in the UK and due to call at Norwegian ports or to transit through Norwegian waters.
To the extent possible, Norway will seek to maintain the same rights and opportunities in the transport sector as those provided under the EEA Agreement today.
Shipping must be adequately dealt with in a new agreement with the UK. If the UK does not continue to participate in SafeSeaNet after Brexit, a bilateral agreement on the exchange of maritime traffic data will be needed between Norway and the UK.
When the UK leaves the EU and the EEA, providers of electronic communications services will need to negotiate new agreements on international roaming.
Universities and research institutions in the UK are attractive partners for Norwegian researchers. The UK is currently one of the two principal participants in Horizon 2020, the EU research and innovation programme. Whether the UK will be linked to EU cooperation on research and innovation after Brexit, and if so, how, is therefore a question of great importance for Norway. Norway will seek to maintain close research cooperation with the UK.