The ”Norwegian Model” of Association to the European Union: A Comparative Study of Important Consequences

Heidi Hjelseth Hansen

Student thesis: Master thesis


In this thesis the difference between being a highly integrated outsider to the EU as in the case of Norway, is compared to being a EU Member State as in the case of Denmark, Sweden and the United Kingdom. The focus are mainly on the power these countries have to influence the EU legislation that is affecting them, their annual financial contributions to the EU and other benefits and challenges in terms of trade and foreign direct investments. It was found that Norway is highly integrated with the EU through a number of agreements, in particularly through the EEA Agreement and the Schengen Association. The main differences between Norway’s agreements with the EU and these countries’ EU-memberships are that Norway is not a part of the EU common commercial policy, the EU customs union, the common agricultural policy or the common fisheries policy. Norway is not a part of the EMU either, but neither are any of the countries in comparison. Moreover, the EU Member States in this analysis have differentiated memberships due to voluntarily opt-outs from EU-policies. Denmark and the United Kingdom in particular have a number of opt-outs that makes them less integrated with the Union and which affects their power to influence. In the thesis it was found that Norway is experiencing a democratic deficit and consequently has major challenges compared to these Member States in regards to the power to influence EU legislation. However, it is not that easy for individual Member countries to have a significant influence either. Larger EU countries such at the United Kingdom often have more power to influence legislation in the Union, but also find it difficult at times when their interest diverges from other members. Smaller EU members such as Denmark and Sweden use different strategies in order to strengthen their power to influence legislation, such as building alliances or using most of their resources on niche policy areas. In terms of financial contributions, it was found that Norway has an advantage of being an outsider to the EU. The country contributes with a much smaller annual amount to the EU compared to these Member States. The EU countries contribute to the EU budget by a percentage mainly based on each Member States GNI (around 1%), whereas Norway contributes with financial mechanisms, payments for program and agency-collaborations and EEA/EFTA institutions among other things. If Norway was to become a part of the EU, the country would have to pay directly into the EU budget, and their contribution would be significantly higher due to the country’s high GNI. In regards to trade of goods and services it was found that trading with Norway can be considered more cumbersome, because of the differences in Norway’s trade policies compared to the EU’s policies. Norwegian exporters and foreign companies exporting to Norway have to go through custom procedures such as import and export declarations, including rules of origin for all exported goods and payments of VAT. These procedures are eliminated between EU Member States. Furthermore, Norway has higher average tariffs on imported goods and services compared to the EU average. They also have a more restrictive FDI policy compared to these EU countries. On the other hand, this does not seem to affect their trade and investments with other EU countries in a negative way. The analysis found that Norway is highly integrated with trade of goods and services and FDI with EU countries. Norway’s share of export to EU countries was larger than Sweden, Denmark and the United Kingdom’s shares of intra export of goods in 2013. Also when excluding oil and gas from the export, the share of Norwegian export going to EU countries still exceeded Sweden and the United Kingdom’s shares of intra export that year. However, Norway’s share of imports from EU countries was not as high compared to these countries’ intra imports. Only the United Kingdom’s share of intra imports was smaller than Norway’s share in 2013. In terms of trade of services on the other hand, Norway’s share of trade with EU countries was greater than Denmark and the United Kingdoms’ shares of intra trade in 2013. Clearly, Norway is highly integrated in terms of trading goods and services with EU countries. However, some studies have indicated that Norway’s total export could have been higher if the country had been a member of the EU. Moreover, it was further found that Norway’s total inward FDI stock represents a higher share of investments from EU countries compared to Denmark and the United Kingdom’s stocks. Furthermore, Norway’s outward FDI stock represents more investments from EU countries compared to all of these EU countries outward stocks. This implies that Norway is highly integrated in regards to investments with EU countries. However, Norway’s total FDI stocks are quite low in percentage of the country’s GDP compared to these Member States’, with the exception of Denmark’s inward stock that is smaller. But since Norway joined the EEA, they have liberalized their investment policy, and have experienced a higher growth rate of inward and outward FDI than most of these EU countries in recent years. Additionally, the country’s recent FDI flows have been much more stable and strong during the economic and financial turmoil. But even as Norway is well integrated in the EU and has great benefits with this association form in terms of trade and foreign direct investments, it is not likely that other countries will adapt the “Norwegian Model” any time soon. The model’s success is largely based on Norway’s resources, geography and history with the EU. Additionally, not many countries would accept the strong democratic deficit the country is experiencing due to this form of association to the EU.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
Publication date2015
Number of pages117