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

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<v Speaker 1>Hi, and welcome back to Bloomberg Benchmark, a podcast about

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<v Speaker 1>the global economy. This is a special bonus episode and

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<v Speaker 1>we're going to be talking about Brexit, but with a

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<v Speaker 1>Norwegian flavor. The so called Norwegian option for a post

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<v Speaker 1>Brexit Britain is something that's attracting quite a bit of

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<v Speaker 1>buzz and even some official interest. French President Oland raised

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<v Speaker 1>the prospect of Britain doing a Norway just yesterday. But

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<v Speaker 1>what is this Norwegian option and what does it mean

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<v Speaker 1>in practice and how different from EU membership would it be.

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<v Speaker 1>My colleague in d C Sileh Emotion knows a little

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<v Speaker 1>bit about this, having just returned from the better part

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<v Speaker 1>of a decade covering economics and government in Norway and

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<v Speaker 1>before that Britain. Selah, welcome to the show and welcome

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<v Speaker 1>back to the US, Hi, Dan, It's great to be

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<v Speaker 1>back and have your family arrived. Yet my son is

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<v Speaker 1>with me the restaurant on their way. So what is

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<v Speaker 1>this norwagean option for Britain. It feels a little obscure,

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<v Speaker 1>but perhaps it's not philosopye Well, Norway is part of

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<v Speaker 1>the e A, which is all of the EU countries

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<v Speaker 1>plus Norway. Lichtenstein and Iceland Um and those three countries

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<v Speaker 1>that are basically add on combine, they represent a little

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<v Speaker 1>bit less than six million people. So this a this

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<v Speaker 1>European Economic area you're saying, it's a decaf EU basically, yeah, okay.

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<v Speaker 1>And what does being a member of that entail as

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<v Speaker 1>opposed to being a full member of the EU. Well,

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<v Speaker 1>they do have access to the Single Market, they have

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<v Speaker 1>free movement of labor. What they don't have is a

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<v Speaker 1>voice when it comes to establishing EU laws and regulations.

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<v Speaker 1>For Norway, a very small country with lots of oil,

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<v Speaker 1>they joined the e A for access to the market

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<v Speaker 1>to you know, to sell oil. They probably don't need

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<v Speaker 1>the e A. But to bring up the oil they

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<v Speaker 1>needed skilled foreign labor and that came from different parts

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<v Speaker 1>of the EU. And they also need a way to

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<v Speaker 1>support their non oil economy and for that they definitely

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<v Speaker 1>need access to the EU. Now, the decaf EU also

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<v Speaker 1>involves the free movement of capital, that's right, okay. And

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<v Speaker 1>DECAF members also contribute to the EU budget. Yeah, Norway

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<v Speaker 1>spends roughly nine million dollars a year contributing to the

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<v Speaker 1>EU budget. But in return they have had to adopt

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<v Speaker 1>about use laws just to get access to the Single Market,

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<v Speaker 1>and those laws they did not have any direct access

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<v Speaker 1>to the debate or discussions behind making those laws. So

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<v Speaker 1>you have an inn, but you don't get any control

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<v Speaker 1>or have any influence over the terms of those in Yeah,

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<v Speaker 1>that's pretty much the case. Well again, I'm struggling to

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<v Speaker 1>see why serious people are bringing this up as an

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<v Speaker 1>option for Britain. What's the appeal? I mean, For one thing,

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<v Speaker 1>I would imagine that a lot of people in London

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<v Speaker 1>at this point probably want an option that will lessen

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<v Speaker 1>the blow of what they are now facing for members

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<v Speaker 1>of AFTA, which is the European Free Trade Association, which

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<v Speaker 1>is Norway and Switzerland, Iceland and Lichenstein for those members.

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<v Speaker 1>If the UK rejoins they were part of it until

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<v Speaker 1>the seventies. If they rejoined, it kind of brings a

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<v Speaker 1>bit more weight to this group of nations. And has

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<v Speaker 1>it served Norway will? I think it has? Um Norway

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<v Speaker 1>is a small economy. It can't really afford to not

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<v Speaker 1>be part of the e A and not open itself

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<v Speaker 1>up to Europe. Finance Minister C Vjensen, who leads the

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<v Speaker 1>Progress Party UM, which actually has a very strict stance

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<v Speaker 1>on immigration. She said in the last couple of days

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<v Speaker 1>to local media that she when the when Norway had

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<v Speaker 1>a reference um, she voted to join the EU. But

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<v Speaker 1>now she's saying, after having seen how that model has

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<v Speaker 1>worked out for them, she's happy with what they've chosen

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<v Speaker 1>and if asked today she would say, no, we should

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<v Speaker 1>not join. We'll get back to Norway's referendum in a second.

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<v Speaker 1>So what you're saying is that there is broad support

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<v Speaker 1>within the political community in Norway for things being just

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<v Speaker 1>as they are. Pretty much. The two larger parties, Labor

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<v Speaker 1>and the Conservative Party both have come out to say

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<v Speaker 1>that they support the model that they have. Now there

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<v Speaker 1>are some outliers. There's a small farming farming population in Norway.

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<v Speaker 1>They have a small party that's kind of dedicated to

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<v Speaker 1>what they want and they are kind of always unhappy

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<v Speaker 1>with the status quo. Is there a Nigel Farage in

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<v Speaker 1>Norway who stirs up trouble. I don't know if there's

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<v Speaker 1>a single person, but the farmers have been known to

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<v Speaker 1>bring their tractors and farm animals and cow bells to

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<v Speaker 1>the capital to make their statement. And what does that

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<v Speaker 1>look like, Well, they roll through the capital. They show

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<v Speaker 1>up at Parliament when it comes to negotiating producer prices,

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<v Speaker 1>and what they have is a lot of power. They

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<v Speaker 1>have some of the highest government subsidies in the O, E, C. D,

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<v Speaker 1>you know, support from the government for what they do.

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<v Speaker 1>Let's get back to the referendum, because that sounds familiar

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<v Speaker 1>to me. Did nor I have a referendum on EU membership? Yes? Twice.

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<v Speaker 1>Actually they had a referendum in nineteen seventy two and

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<v Speaker 1>then a second one in Was it closer the second time? No,

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<v Speaker 1>actually it was. It was a resounding no to stay

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<v Speaker 1>a separate nation, complete separate from the EU. What happened

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<v Speaker 1>was that two years before Ino, they joined the e A.

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<v Speaker 1>For our listeners, e A again is EU dcalf right,

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<v Speaker 1>That's what we're talking about, basically, And it's sometimes easy

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<v Speaker 1>to get lost in the alphabet soup of these things. Yes,

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<v Speaker 1>in Norway opted to start the process of becoming part

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<v Speaker 1>EU decalf They joined the e A, and two years later,

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<v Speaker 1>when they were asked in a referendum, do you want

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<v Speaker 1>to join the EU, they could afford to say no

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<v Speaker 1>because in their back pocket they already knew that the

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<v Speaker 1>e A process EU decalf had already started. There's some

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<v Speaker 1>history here prior to the referendums. My understanding is that

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<v Speaker 1>Norway was in line eligible the membership of the group

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<v Speaker 1>that preceded the EU, along with the UK and a

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<v Speaker 1>couple of other countries, and degoal shafted them. Is that correct?

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<v Speaker 1>That is true. I think it was actually a wrap

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<v Speaker 1>up of the UK, Norway and a couple of under

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<v Speaker 1>other countries that together he vetoed there. Did Norway get

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<v Speaker 1>thrown under the bus just because it was with the UK?

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<v Speaker 1>I don't know if I can say it was just

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<v Speaker 1>because of the UK, but they were definitely wrapped up

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<v Speaker 1>in that storm. So again, I'm struggling this EU DCALF.

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<v Speaker 1>It seems like the UK has gone through an awful

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<v Speaker 1>lot of trouble. There's been an awful lot of market upheaval,

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<v Speaker 1>There's been an awful lot of political turmoil and capital spent,

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<v Speaker 1>maybe just to arrive at a place that's not that different. Well,

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<v Speaker 1>the EU decalf option is one of many that have

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<v Speaker 1>been thrown out there. I don't know if the Leave

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<v Speaker 1>campaign really had this in mind when they were making

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<v Speaker 1>promises to voters in the UK. If this is one

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<v Speaker 1>way of going. I think now it seems like it's

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<v Speaker 1>one of those situations where they're scrambling to find the

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<v Speaker 1>best solution in a messy situation. Now Norway has oil

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<v Speaker 1>and lots of it. Did that give the Norwegians the

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<v Speaker 1>feeling that, well, okay, it's not to the end of

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<v Speaker 1>the world, because we're still rich in commodities. You know,

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<v Speaker 1>by the nineties they probably could say that. In the

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<v Speaker 1>late sixties seventies they were still discovering oil, trying to

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<v Speaker 1>figure out how to bring up this oil, trying to

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<v Speaker 1>get enough labor force support to to sort of logistically

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<v Speaker 1>do everything. By the nineties they knew that they had

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<v Speaker 1>a lot. In the early two thousands and late two

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<v Speaker 1>thousands or you know, recently they have found even more oil.

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<v Speaker 1>By now they have an eight d billion dollars server

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<v Speaker 1>in wealth fund that gives tiny little Norway a lot

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<v Speaker 1>of leverage. You know that that sovern Wealth Fund is

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<v Speaker 1>Europe's largest investor. And the funny thing is that now

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<v Speaker 1>Norway could have a bit of power just through its

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<v Speaker 1>membership on the FTA Council if the UK wants back

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<v Speaker 1>into the European Free Trade Association for some kind of

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<v Speaker 1>EU decalf Norway has a say in that and is

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<v Speaker 1>the norwagean economy evolving in ways that make the EU

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<v Speaker 1>more or less appealing because you know, underlying most political sentiment,

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<v Speaker 1>there's an economic shift definitely. You know Norway more and

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<v Speaker 1>more needs the EU s support. Norway has kind of

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<v Speaker 1>reached its peak in its oil boom. Now it is

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<v Speaker 1>really looking to drive growth in non oil will industries.

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<v Speaker 1>Ever since the Brexit boat, I mean it was very unfortunate.

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<v Speaker 1>The day of the Brexit vote, the Norwegian Central Bank

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<v Speaker 1>had a rate decision where they came out very positive.

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<v Speaker 1>They took one rate cut off the table, and that night,

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<v Speaker 1>you know, spurred a lot of conversation that maybe zero

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<v Speaker 1>rates are ahead for Norway because they really need the UK.

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<v Speaker 1>Exports a lot of gas to the UK. They need

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<v Speaker 1>a good relationship there, and in the meantime they need

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<v Speaker 1>to find a way to support their economy. They're not

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<v Speaker 1>oil economy which relies on the EU. Well, sell, this

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<v Speaker 1>has been helpful. I really appreciate you joining us in

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<v Speaker 1>this bonus episode of Bloomberg Benchmark. Are you going back

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<v Speaker 1>to Norway for the summer vacation? I will be in

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<v Speaker 1>d C for the Timmer. I'm looking forward to it

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<v Speaker 1>and thank you all for listening to Bloomberg Benchmark. We'll

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<v Speaker 1>be back next week. Until then, you can find us

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<v Speaker 1>on the Bloomberg Terminal and Bloomberg dot com, as well

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<v Speaker 1>as iTunes, pocketcast, stitch, and Google Play. Why do they

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<v Speaker 1>take a minute to write and review the show so

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<v Speaker 1>more listeners can find us? You can get me at

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<v Speaker 1>at Daniel masst c and our guest Celea at Celea

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<v Speaker 1>most in s A L e h A m O

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<v Speaker 1>h s I N talk to you soon.