Since the UK voted to leave the EU, speculations about what will happen next have soared. Boris Johnson – the leader of the "Leave" campaign and potentially the next British Prime Minister – has stated that a relationship "based on free trade and partnership" may be the right kind of new model for the UK.
Among the options on the table for how new trade deals between Britain and the EU could be negotiated is the Norwegian model. Norway and two other countries (Liechtenstein and Iceland) belong to the European Economic Area (EEA), formed in 1994 to give non-EU countries access to the European free market. It is one of three established options for Britain now that they have voted to leave. The two other obvious possibilities are Switzerland's arrangement – a series of bilateral treaties with the EU – and the rules of the World Trade Organization.
How the Norwegian Model Works
Although the EEA countries are not EU members, they are part of the free market, which means there is free flow of goods, services, capital and labor across the borders of the member countries. In exchange for access to this market, the EEA countries must make financial contributions to the EU, and they still have to comply with EU regulations, even though they have neither voting nor veto rights in the European Council.
However, contrary to the EU, the EEA countries have sovereignty over certain areas such as fisheries, agriculture, and financial and foreign policy. In Norway’s case, having sovereignty over agriculture and fisheries – the latter being the country’s second biggest export – is very important both politically and economically.
Access to the the free market isn't cheap. According to the House of Commons Library, the contribution cost to the EU for Britain in 2013 was £128 ($171) per capita; for Norway it was £106 ($141).
The Bottom Line
Before the British referendum, many experts dismissed the Norwegian model as an alternative for the UK, mainly because the agreement requires free flow of people – and Norway doesn't have voting and veto rights, but is still subject to EU regulations.
This may be problematic for the UK, as two of the main arguments made by the "Leave" campaign were to slow immigration and regain Britain’s control over its own laws from bureaucrats in Brussels. By opting for the Norwegian model, "Leave" campaigners would effectively abandon two of its biggest campaign promises to voters – all while continuing to make significant financial contributions to the EU. While the Norwegian model could work, it might not be the solution Brexit supporters had in mind.