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Norway: Costs and Benefits of Joining the EU

Norway: Costs and Benefits of Joining the EU. Presented by: Anelia Ivanova Boryana Peneva Dobrodana Popova. 28 April, 2007. Outline. Country overview Macroeconomic data Analysis of the referendums External trade relations Trade policy Tariff policies EU-Norway trade relations

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Norway: Costs and Benefits of Joining the EU

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  1. Norway:Costs and Benefits of Joining the EU Presented by: Anelia Ivanova Boryana Peneva Dobrodana Popova 28 April, 2007

  2. Outline • Country overview • Macroeconomic data • Analysis of the referendums • External trade relations • Trade policy • Tariff policies • EU-Norway trade relations • Norway – Agricultural sector • Norway and the EU budget • Norway and capital flows • Conclusion

  3. Country Overview • Homogeneous population – around 4.6 mil. (2006) • Rich in natural resources - hydropower, oil and gas, fish, forests, timber, and minerals, 95% of this production is exported • History

  4. Macroeconomics • Norway - one of the richest countries in the world measured by GDP per capita (above the EU average). ($ 47,800 for 2006) • GDP growth - 3% (2006) • Cost of living is high, though – 25% higher than UK, 30% higher than US • Low unemployment (3.5%) • Low inflation - 2.3% • Norwegian Krone - strong currency (due to oil demand) • Good welfare system - retirement, medical care, and disability benefits to all

  5. Current Account Surplus

  6. The Referendums • Following the popular rejection of membership in 1994, the thengovernment declared that there would be no new legislative initiative in this respect for another10 years. • However, there is growing appreciation that Norway must strengthen its ties with the Union if it wishes to have a voice inthe future development of the enlarged EU and EEA.

  7. Benefits • Enlargement is likely to shift the EU’s centre of gravity farther to the east • belonging to larger economic group with more bargining power • internal solidarity principles between the EU members • Norway cannot influence internal EU developments due to its non-member status • lower prices for consumer goods, diversity and need for tolerance would need to improve • "foreign influence" in the shape of business innovation and built up industries not dependent on natural resources • access to this European market • antidumping issues for Salmon would be eliminated • Positive effect on tourism • free border crossing travel and additional trade advantages • Participation in an emerging political bloc: the EU is emerging as a counterbalance to the United States in foreign affairs, and Norwegian public opinion is usually not favorable to US foreign policy, in particular about the Middle East.

  8. Concerns • Loss of independence • Loss of control over natural resources - fish and oil • Some sectors, such as farming, will be negatively affected • EFTA provides wilth almost associate membership • EU still needs a lot of work before it is a united nation • Norwegians think of themselves as Scandinavians while the EU represents Europe. • Will lose independence in managing its fiscal and monetary policies • Loss of political influence because of the small population • Threat to cultural identity: Norwegian culture would be overcome by commercial interests.

  9. Other Concerns • By country - none in actual terms. In "emotional" terms- hesitant to enter union with larger states that have greater influence • FR, GR, UK dominate EU • Eastern Europe- because they are pooer countries and much of Noway's wealth would have to be spreadout among those countrie • Spain and fishing disputes • most EU countries support our membership; Iceland and Switzerland hope that we stay outside • Surrender of political sovereignty: Norway would have to amend its constitution to become a member of the EU

  10. External Trade Relations • the European Economic Area (EEA)=> access to the EU Single Market with free movement of goods, capital, services, and persons. • Both Norway’s and EU’s trade policies- based on the rules and agreements of the World Trade Organization (WTO) • Norway, together with Iceland, Liechtenstein, and Switzerland - a member of the European Free Trade Association (EFTA) based on cooperation arrangements. • Also one of the founding members of the General Agreement on Trade and Tariffs (GATT) and of the WTO. • A member of the Organization for Economic Cooperation and Development (OECD)

  11. Trade Policy Overview • In the mid -1970s- a major oil and gas producer • now the third largest exporter of crude oil after Saudi Arabia and Russia=>led to the complete transformation of Norway’s economy • Today the highest per capita incomes in the world • As a small and open economy, Norway is highly dependent on foreign trade. • Export and import in total constitute about 55 per cent of Norway's GDP =>one of the world’s most open economies!!! • Economic growth in recent years- due to higher oil prices, boosting the trade and current account surpluses (current account surpluses exceeded 19.2% of GDP in 2006!)

  12. Trade Policy Overview (2) • the 6th most important importmarket with 50.494 million euros after the USA, China, Japan, Russia, and Switzerland. - top three import partners: Sweden, Germany and Denmark • the 7th exportmarket with 27.511 million euros after the USA, Switzerland, China, Japan, Russia, and Turkey. - top three export partners: the United Kingdom, Germany and the Netherlands • A majority of Norway's trade has a duty-free basis under regional integration agreements. • Trade with the EU as the predominant activity: Norway's imports represent 5.38% of the total extra-EU imports, while its exports are 3,12% of the total EU exports.

  13. Trade Policy Overview (3) • Shipping - one of the most developed traditional economic activities (the second largest source of export revenues for the country). • one of the top three seafood-exporting nations in the world. • Fisheries-still a sensitive issue; fish market regulated through bilateral agreements; EU subjects Norwegian fishermen to dumping salmon charges=> loosing competitive advantage on the world fish market Conclusion: The main goal of Norway’s trade policy - the development and support of “an open, liberal and predictable trading environment,” with sustainable development as the priority + the achievement of “a closer European integration and multilateral liberalization.”

  14. Tariff policies against non-EU states • Tariffs on industrial products -current average less than 5.6 per cent • Post-Uruguay Round intensive reductions on agricultural tariffs. • more competition in selected agricultural sectors => to bring domestic prices (often higher than established international prices) in line with prices in neighboring countries. • The forestry sector/wood products- with increased tariffs and supported by subsidies, grants, tax credits and concessions, some with a regional assistance dimension. • Since 2002 products in textiles and clothing from the least developed countries benefit from a duty-free entry, without quantitative restrictions.

  15. EU - Norway trade relations: NB!!! Norway’s export market has expanded even more => a crucial role of the EEA (European Economic Agreement) for preserving the access of Norwegian goods to the Single Market! • Norwegian exports’ share on the EU market- 86% of the total Norwegian export • Norway's exports to the EU - different industrial products and other goods such as around 56% mineral products/fuels, oil, iron, steel, base metals such as aluminium mostly, machinery and equipment, and fish. • EU imports to Norway - 76% of the total imports coming to Norway. • EU exports to Norway- around 30% machinery and electrical equipment, chemicals, vehicles and transport equipment, capital goods, plastics and rubber, iron, and steel. • EU-Norway trade in services- Norway’s share of total EU trade in services 3.1% (the most active sectors: shipping and commercial and financial sectors) • EU-Norway trade in terms of energy http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113429.pdf

  16. Norway – Agricultural Sector • Almost 3/4 of Norway's land is unproductive and less than 4% is under cultivation due to harsh climatic conditions. • Total cropland (000 ha),1999 - 877 – Norway – only 0.3% of total EU 307286 ha,(1501452 ha in the world) • Agriculture contributes less than 2% to the GDP. Norway imports more than 50% of its food products. • Norway subsidizes small farmers • Donor of economic aid – 1.4 bill. In 2004

  17. Norway and EU budget • high imports of agricultural products => if joining the EU, net contributor to CAP • CAP subsidies are allocated to large farmers and Norway is dominated by small and medium sized farms • Concerns about the consequences of liberalization of agricultural subsidies to comply with CAP regulations and State-Aid regulation

  18. Foreign Direct Investments • no specific policy to promote foreign direct investments • inflows have more than doubled the past decade • Inward investments are bigger in the primary (petroleum and mining) than in the tertiary sector but the difference has decreased in the past decade • growth in outflows since 1994 have been stronger than growth in inflows • FDIs have varied strongly over the years since annual data tend to be influenced by major single operations, particularly in the oil and gas sector since the early 1970s • In October 2002, Norway abolished a surcharge on investments, "Investeringsavgiften”. The surcharge of 7 % (originally 13 %) had been identified by the business community as an obstacle to investments in Norway. • Some restrictions on foreign investments remain in the fisheries sector, which is extensively regulated.

  19. FDI and EU • The greatest increases in Norwegian outward investments have taken place outside the EEA. • The EU countries' share of FDIs in Norway has increased significantly since the EEA Agreement entered into force but flows vary much year to year

  20. The importance of Europe

  21. Conclusion The debate cannot be viewed in black and white. There are benefits and costs for Norway to join the European Union. At this point in time though, the costs outweigh the benefits. It is uncertain how the EU will handle the integration of the new members from Eastern Europe. Additionally the political integration is still under way. Having this in mind, it is best for Norway to wait. Maintaining the status quo is the best option: an open trading regime with the EU, but no political subordination to the EU’s institutions!

  22. Sources • ttp://ec.europa.eu/trade/issues/bilateral/countries/norway/index_en.htm • http://ec.europa.eu/trade/issues/bilateral/countries/norway/index_en.htm • http://secretariat.efta.int/Web/legaldocuments/ • http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113429.pdf http://www.eu-norway.org/policyareas/trade+policy/ • http://www.norway.org/policy/trade/trade/general.htm • http://www.wto.org/english/tratop_e/tpr_e/tp35_e.htm • http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressdata/EN/reports/90082.pdf • http://www.fide2006.org/TOPIC3/Ext.%20Rel.%20Norway%20Franklin.pdf http://www.imf.org/external/np/ms/2007/032607.htm • http://aei.pitt.edu/6945/01/ingebritsen_christine.pdfhttp://ec.europa.eu/comm/external_relations/norway/intro/index.htm • http://ec.europa.eu/trade/issues/bilateral/countries/norway/index_en.htm • http://www.dlapiper.com/norway/content/overview/ • http://www.norges-bank.no/english/monetary_policy/in_norway.html • [23:58:46] Dani Popova says: http://en.wikipedia.org/wiki/Norway_and_the_European_Union

  23. Questions ???

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