Is Norway's `EU Decaf' a Post Brexit Lifeline?

the prospect of Britain doing a Norway just yesterday. But what is this Norwegian option and what does it mean in practice and how different from EU membership would it be. My colleague in d C Sileh Emotion knows a little bit about this, having just returned from the better part of a decade covering economics and government in Norway and before that Britain. Selah, welcome to the show and welcome back to the US, Hi, Dan, It's great to be back and have your family arrived. Yet my son is

with me the restaurant on their way. So what is this norwagean option for Britain. It feels a little obscure, but perhaps it's not philosopye Well, Norway is part of the e A, which is all of the EU countries plus Norway. Lichtenstein and Iceland Um and those three countries that are basically add on combine, they represent a little bit less than six million people. So this a this European Economic area you're saying, it's a decaf EU basically, yeah, okay.

And what does being a member of that entail as opposed to being a full member of the EU. Well, they do have access to the Single Market, they have free movement of labor. What they don't have is a voice when it comes to establishing EU laws and regulations. For Norway, a very small country with lots of oil, they joined the e A for access to the market

to you know, to sell oil. They probably don't need the e A. But to bring up the oil they needed skilled foreign labor and that came from different parts of the EU. And they also need a way to support their non oil economy and for that they definitely need access to the EU. Now, the decaf EU also involves the free movement of capital, that's right, okay. And DECAF members also contribute to the EU budget. Yeah, Norway spends roughly nine million dollars a year contributing to the

EU budget. But in return they have had to adopt about use laws just to get access to the Single Market, and those laws they did not have any direct access to the debate or discussions behind making those laws. So you have an inn, but you don't get any control or have any influence over the terms of those in Yeah, that's pretty much the case. Well again, I'm struggling to see why serious people are bringing this up as an

option for Britain. What's the appeal? I mean, For one thing, I would imagine that a lot of people in London at this point probably want an option that will lessen the blow of what they are now facing for members of AFTA, which is the European Free Trade Association, which is Norway and Switzerland, Iceland and Lichenstein for those members. If the UK rejoins they were part of it until the seventies. If they rejoined, it kind of brings a bit more weight to this group of nations. And has

it served Norway will? I think it has? Um Norway is a small economy. It can't really afford to not be part of the e A and not open itself up to Europe. Finance Minister C Vjensen, who leads the Progress Party UM, which actually has a very strict stance on immigration. She said in the last couple of days to local media that she when the when Norway had

a reference um, she voted to join the EU. But now she's saying, after having seen how that model has worked out for them, she's happy with what they've chosen and if asked today she would say, no, we should not join. We'll get back to Norway's referendum in a second. So what you're saying is that there is broad support within the political community in Norway for things being just as they are. Pretty much. The two larger parties, Labor and the Conservative Party both have come out to say

that they support the model that they have. Now there are some outliers. There's a small farming farming population in Norway. They have a small party that's kind of dedicated to what they want and they are kind of always unhappy with the status quo. Is there a Nigel Farage in Norway who stirs up trouble. I don't know if there's a single person, but the farmers have been known to bring their tractors and farm animals and cow bells to the capital to make their statement. And what does that

look like, Well, they roll through the capital. They show up at Parliament when it comes to negotiating producer prices, and what they have is a lot of power. They have some of the highest government subsidies in the O, E, C. D, you know, support from the government for what they do. Let's get back to the referendum, because that sounds familiar to me. Did nor I have a referendum on EU membership? Yes? Twice. Actually they had a referendum in nineteen seventy two and

then a second one in Was it closer the second time? No, actually it was. It was a resounding no to stay a separate nation, complete separate from the EU. What happened was that two years before Ino, they joined the e A. For our listeners, e A again is EU dcalf right, That's what we're talking about, basically, And it's sometimes easy

to get lost in the alphabet soup of these things. Yes, in Norway opted to start the process of becoming part EU decalf They joined the e A, and two years later, when they were asked in a referendum, do you want to join the EU, they could afford to say no because in their back pocket they already knew that the e A process EU decalf had already started. There's some

history here prior to the referendums. My understanding is that Norway was in line eligible the membership of the group that preceded the EU, along with the UK and a couple of other countries, and degoal shafted them. Is that correct? That is true. I think it was actually a wrap up of the UK, Norway and a couple of under other countries that together he vetoed there. Did Norway get thrown under the bus just because it was with the UK?

I don't know if I can say it was just because of the UK, but they were definitely wrapped up in that storm. So again, I'm struggling this EU DCALF. It seems like the UK has gone through an awful lot of trouble. There's been an awful lot of market upheaval, There's been an awful lot of political turmoil and capital spent, maybe just to arrive at a place that's not that different. Well, the EU decalf option is one of many that have

been thrown out there. I don't know if the Leave campaign really had this in mind when they were making promises to voters in the UK. If this is one way of going. I think now it seems like it's one of those situations where they're scrambling to find the best solution in a messy situation. Now Norway has oil and lots of it. Did that give the Norwegians the feeling that, well, okay, it's not to the end of the world, because we're still rich in commodities. You know,

by the nineties they probably could say that. In the late sixties seventies they were still discovering oil, trying to figure out how to bring up this oil, trying to get enough labor force support to to sort of logistically do everything. By the nineties they knew that they had a lot. In the early two thousands and late two thousands or you know, recently they have found even more oil. By now they have an eight d billion dollars server in wealth fund that gives tiny little Norway a lot

of leverage. You know that that sovern Wealth Fund is Europe's largest investor. And the funny thing is that now Norway could have a bit of power just through its membership on the FTA Council if the UK wants back into the European Free Trade Association for some kind of EU decalf Norway has a say in that and is the norwagean economy evolving in ways that make the EU more or less appealing because you know, underlying most political sentiment,

there's an economic shift definitely. You know Norway more and more needs the EU s support. Norway has kind of reached its peak in its oil boom. Now it is really looking to drive growth in non oil will industries. Ever since the Brexit boat, I mean it was very unfortunate. The day of the Brexit vote, the Norwegian Central Bank had a rate decision where they came out very positive.

They took one rate cut off the table, and that night, you know, spurred a lot of conversation that maybe zero rates are ahead for Norway because they really need the UK. Exports a lot of gas to the UK. They need a good relationship there, and in the meantime they need to find a way to support their economy. They're not oil economy which relies on the EU. Well, sell, this has been helpful. I really appreciate you joining us in this bonus episode of Bloomberg Benchmark. Are you going back

to Norway for the summer vacation? I will be in d C for the Timmer. I'm looking forward to it and thank you all for listening to Bloomberg Benchmark. We'll be back next week. Until then, you can find us on the Bloomberg Terminal and Bloomberg dot com, as well as iTunes, pocketcast, stitch, and Google Play. Why do they take a minute to write and review the show so

more listeners can find us? You can get me at at Daniel masst c and our guest Celea at Celea most in s A L e h A m O h s I N talk to you soon.