Transcript NorwayPresentation

Norway:
Costs and Benefits of Joining the EU
Presented by:
Anelia Ivanova
Boryana Peneva
Dobrodana Popova
28 April, 2007
Outline
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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
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
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
Current Account Surplus
The Referendums
• Following the popular rejection of
membership in 1994, the then
government declared that there would be
no new legislative initiative in this respect
for another 10 years.
• However, there is growing appreciation
that Norway must strengthen its ties with
the Union if it wishes to have a voice in
the future development of the enlarged
EU and EEA.
Benefits
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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.
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.
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
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)
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!)
Trade Policy Overview (2)
• the 6th most important import market with 50.494 million
euros after the USA, China, Japan, Russia, and
Switzerland.
- top three import partners: Sweden, Germany and Denmark
• the 7th export market 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.
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.”
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.
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!
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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_1134
29.pdf
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 307
286 ha, (1 501 452 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
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 StateAid regulation
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.
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
The importance of Europe
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Foreign direct investments. Geographical distribution. 1998-2004. Total. NOK million
1998
1999
2000
2001
2002
2003
2004
Total
240 196
341 263
409 753
499 126
505 676
551 872
543 358
Europe
175 277
254 172
285 627
303 971
324 590
356 145
329 840
Denmark
35 716
34 726
37 502
39 971
38 833
45 629
37 115
Sweden
38 794
65 087
77 601
67 652
78 303
87 734
93 639
Netherland
21 994
20 832
22 485
32 203
32 134
34 644
47 436
Great Britain
25 483
77 013
77 664
73 619
60 582
66 408
27 343
Belgium and Luxembourg
11 480
11 351
20 590
11 837
13 972
19 591
12 538
Africa
1 126
10 599
9 666
15 046
15 331
25 173
34 434
America
55 427
65 345
86 695
132 652
121 674
118 845
112 301
Central America
3 292
5 278
8 030
18 821
18 205
16 517
14 317
South America
2 668
9 438
23 606
19 631
16 880
18 913
17 705
Asia
7 468
10 146
26 466
36 098
28 662
37 504
54 525
Oceania
899
1 000
1 300
11 360
15 420
14 205
12 258
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!
Sources
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ttp://ec.europa.eu/trade/issues/bilateral/countries/norway/index_en.ht
m
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/E
N/reports/90082.pdf
http://www.fide2006.org/TOPIC3/Ext.%20Rel.%20Norway%20Frankli
n.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
Questions ???