Norway’s Bad Deal

Norway’s EEA agreement is held up as an example Britain should follow — but it has led to more than two decades of neoliberal policies.

Illustration by Raúl Soria

The Brexit process staggers on, and, from the outside, it looks no less of a mess than it does from the United Kingdom. But while UK newspapers are full of stories about European schadenfreude over Britain’s difficulties, watching the debate from Norway has been a rather different experience. This is because Norway’s own relationship with Europe has frequently been invoked as a model for Britain to follow, in contributions that have rarely taken account of how Norway’s deal is seen in the country itself, let alone what the Norwegian left thinks of it.

First, the basics. Norway, along with Iceland, Liechtenstein and Switzerland, is a member of the European Free Trade Association (EFTA), and through that membership is part of the European Economic Area (EEA). The membership means that we are part of the Single Market — with its free movement of persons, goods, services, and capital — and that we accept EU law into our jurisdiction, except in a narrow number of sectors that are exempt, such as agriculture and fisheries. Aside from some weak attempts at lobbying in Brussels, we have no say over the EU rules we implement, and we pay for the privilege, handing over roughly the same amount of money as the UK does today in relative terms.

Norway’s EEA agreement has been a source of disagreement in domestic politics since it was signed in 1992. It preceded the second of two referendums (the first was in 1972) where Norwegians rejected membership of the European Union itself. Votes were cast largely on a class basis, with poorer workers and rural people the base of the ‘No’ campaigns. But no sooner had the referendum failed than Norway found itself subject to the EU’s rules under the EEA. In truth, the agreement was never meant to be a lasting solution but rather a means of softening the ground for EU membership. Once that failed for a second time, however, it became permanent.

Today, the EEA is defended by many in Norway, particularly among its political elite, as a good deal that protects sovereignty and exports. But for the socialist left it is a significant impediment to progress, forcing right-wing policies onto Norwegian society against the popular will.

A Controversial Relationship

At the very least, one thing the EEA agreement has ensured is that the prospect of Norway joining the EU itself is now dead. In the latest poll, from June of last year, 70 percent of those polled were against membership. Opposition is widespread. This is clear in the centre-left Farmers Party, the Christian Democrats, as well as the two radical left parties, the Reds and Socialist Left, but also strong in most of the trade union movement, parts of the Labour Party, and now the right-populist Progress Party.

But opinion on the EEA agreement is more complex. This can be seen in its origins as a deal between the liberal and socialist wings of Norway’s powerful Labour Party. For the former, membership of the EU is a signifier of pro-Western politics and cultural cosmopolitanism. For the latter — in particular the trade union left — the EU represents a serious threat to the welfare state and workers’ rights. In many ways, a compromise emerged because it was the only thing that could keep these factions united.

But its consequences have been significant. The EEA agreement signs Norway up to the Single Market’s four freedoms — the free movement of persons, goods, services, and capital — placing huge barriers in the way of state intervention in the economy. It also ties Norway to EU rules on state aid, nationalisation, and public procurement. Since Norway signed the EEA agreement in 1994 it has implemented approximately 12,000 EU directives. There have been two significant controversies in this area in the last twelve months alone: the first, over the European Union’s Agency for the Cooperation of Energy Regulators (ACER), and the second over its fourth railway package.

In the case of ACER, the Norwegian left, including its largest trade union confederation the LO, came out against joining the energy union. The deal aimed to create a single market in gas and electricity functions across Europe. Its opponents argued that this would place Norway’s state-owned hydroelectric energy company in jeopardy. (Contrary to widespread belief, the electricity sector in Norway is dominated by hydroelectric power — state ownership of which has kept costs low for consumers.) A further EU pledge to harmonise energy prices across the continent as part of ACER made the proposals highly unpopular with the public: almost 60 percent were opposed while not even 10 percent were supportive. Nevertheless, ACER was implemented.

The reality is that although Norway has a veto over provisions in the EEA agreement, this veto has never been used. The situation was recently summed up by Kjetil Wiedswang, a commentator in Norwegian business paper Dagens Næringsliv, when he said ‘In the 24 years that Norway has been tied to the EU through its EEA agreement, it has never played hard. On the contrary, a succession of governments (on both the Left and the Right) have tied Norway ever closer to the EU through a steady stream of bilateral agreements on top of the EEA agreement.’

However, 2018 suggests that this acquiescence is under threat. The European Union’s fourth railway package — which has already provided an excuse for Emmanuel Macron’s neoliberal reforms in France — is receiving opposition in Norway. Its commitments to competitive tendering and liberalisation of domestic passenger services, as well as its rules against the same company running services and managing the infrastructure, are seen as major threats to the public rail system. After pressure from the country’s trade unions, Norway’s Labour Party came out against the package in June, promising it wouldn’t support it if it were to replace the Conservatives as the government. This saga is only just beginning and is likely to grow in political importance in the coming months.

Legal Challenges

Despite the then-Prime Minister Gro Harlem Brundtland promising that Norway’s veto was ‘there to be used’ when she signed the EEA, the country has only ever come close to a veto once. This was in 2011 when the trade unions and the rank-and-file of the Labour Party fought against the Third Postal Directive, which imposed a market for postal services. The grassroots won, and the Labour government agreed to veto the directive. However, they delayed the process until the next election, which the Right won, and the whole veto was withdrawn. The campaign was particularly memorable for a speech made by Tore Eikeland, a Labour youth leader who would die shortly after in the Utøya massacre. His barnstorming contribution to the Labour Party conference addressed the effect market erosion of postal services would have on Norway’s isolated and elderly, something which has sadly since come to pass.

But Norway’s problems with the EEA have gone beyond the opening up of sectors for privatisation, or state and municipal supports to industry and public welfare being deemed in breach of competition law. The agreement has also ensured that it is difficult to regulate the labour market in favour of workers. This was always the intention of the country’s pro-business right. When the EEA agreement was discussed in parliament in 1992, the Progress Party supported it on the basis that ‘it was a disadvantage that the wage differences in Norway were so small,’ and that ‘a free labour market within the EEA would increase the inequalities in Norway.’

This is not to say that the Norwegian left has taken an anti-migration stance. Certainly, it has recognised the injustice of the great inequalities between EU countries that force lower-paid migrants into competition with Norwegian workers. But the Left has always made sure to argue that this is not the workers’ own fault. The trade unions, even under ferocious pressure from a rising populist right, have stood by the slogan: ‘Yes to labour migration, no to social-dumping’. This, however, has not turned out to be an easy mantra to live by.

In Norway, there is no national minimum wage. Instead we have collective agreements in different sectors, securing higher wages and better working conditions. The downside of this is that in workplaces with no labour representation, management can pay and do whatever they please. To compensate for that, we have a law that makes it possible to turn collective agreements into compulsions for all businesses of a certain sector. This was a crucial measure to help incorporate the unorganised, and other EU workers, into decent pay and conditions. Through this law several sectors such as construction, shipyards, road transportation, and hospitality have effective minimum wages and work standards.

In the shipyards, the law was introduced in response to deteriorating conditions. In 2003, a major national scandal revealed that Polish workers were earning as little as £2.80 per hour. In 2008, eastern European workers were discovered not only being underpaid, but stowed together in containers on a freight ship outside Bergen. The new law set a minimum wage, and decreed that the employer had to pay for travel expenses, housing, and food supplies for foreign workers coming to Norway. The employers’ association, NHO, was not happy about this, and, together with eight shipyards, sued the board that decides on collective agreements. They lost all the way to the High Court, whose verdict stated that if workers had to pay their own travel and accommodation expenses, it would make the minimum wage hollow and discriminate against workers coming from abroad.

Labour had won, or so it thought. But the NHO took their lawsuit to the EFTA Surveillance Authority (ESA), claiming that the High Court’s decision was in breach of the EEA agreement. In European Court, they won.

A similar situation arose at the historically tough and precarious docks. To make employment more stable, the 1973 ILO convention allows dockworkers to be registered and then have a preferential right to load and unload the ships. The ILO convention had been part of Norwegian law since 1976, but was superseded by the EEA agreement. The problems with this didn’t become apparent until the Danish company Holship appeared in a Norwegian harbour in 2013 with their own lower-paid workers. They insisted that the preferential right of registered workers conflicted with the right of an EU company to establish itself freely in another Single Market country. Holship dragged the agreement to the ESA court and unsurprisingly, Norwegian law was deemed in breach of the EEA agreement and the dockworkers lost their organised labour market. These two verdicts were used by the employers’ association as a battering ram to break down workers’ rights in other sectors.

The employers’ association has sent more than twenty Norwegian collective agreements to Brussels for review, based on an EU directive on temporary agency work that Norway is required to implement. There is also the Posted Worker Directive, controversial across Europe as it allows for workers employed in lower-wage countries to be sent directly to work on a temporary basis in higher-wage countries. This has been used repeatedly to circumvent Norway’s powerful trade unions and the basic employment standards they have won.

A Flawed Model

It is, of course, up to the British left to determine its own approach to the ongoing Brexit negotiations. But casting Norway’s EEA agreement as a progressive solution seems short-sighted. Not only has it meant more than two decades of neoliberal laws that undermine the welfare state and the workers’ movement, it has also in practice been undemocratic.

Our EEA agreement may have been designed as a compromise to keep the Norwegian Labour Party together but, in reality, it has guaranteed a frequent spectacle of deep and bitter disagreement. Already, the debate over the ACER energy union has seen the Labour Party tear itself apart in public, alienating a significant portion of their voters. Now the party has to balance the European Court’s verdict on travel and accommodation, strongly opposed by the unions, and their own fierce defense of EEA membership. They do this by saying that the agreement is not the problem, instead it is the employers’ association NHO’s decision to use the rights it provides them. Is all this worth it for the sake of access to the Single Market? Perhaps, but surely it is time for the socialist left to think about moving beyond such dismal alternatives.

As the shambles of the Brexit negotiations roll on — and after the xenophobic arguments put forth during the referendum campaign itself — it’s easy to understand why many on the left are casting around for solutions like Norway’s. But it should be seen in its proper context: put simply, the deterioration of Norway’s much-vaunted welfare state shows just how difficult it is to pursue left-wing policies while obeying Single Market rules and EU directives. For those hoping that a Corbyn government might succeed, the ‘Norway model’ is an outcome to be avoided rather than emulated.