Arne Mielken
- Jun 13, 2021
- 4 min read

Free Trade between UK, Norway, Iceland & Lichtenstein: How it works

Trading between non-EU European nations is free, but only if you watch the small print of the rulebook, argues Arne Mielken of Customs Manager Ltd.

Duty-free trade can save businesses in the United Kingdom, Norway, Switzerland and Liechtenstein many millions on an ongoing basis. This is one of the many perks of the trade agreement between the four countries.

Northern European nations Norway, Iceland and the UK are important trading partners and share neighbouring waters, important for fishing. Liechtenstein has an important financial services industry and had an important strategic location in Central Europe. Britain is Norway's top trading partner outside the European Union (EU). Reuters reported that total trade between Iceland and Britain was worth 651 million euros (558 million pounds) in 2020, with Iceland exporting fish, sheep meat and skyr, an Icelandic yoghurt. They further said that trade between Britain and Norway was worth 20.4 billion pounds ($28.81 billion) last year, making it Britain's 13th largest trading partner. Britain is Norway's top trading partner, primarily thanks to gas exports, and its third-biggest buyer of fish and seafood. https://www.reuters.com/world/uk/britain-post-brexit-trade-deals-with-norway-iceland-liechtenstein-2021-06-04/

The free trade agreement seeks to safeguard as close trade relations as possible following the UK’s withdrawal from the European Economic Area (EEA).

Norway, Liechtenstein and Iceland are so-called EEA EFTA countries. What does this mean?

Iceland, Liechtenstein and Norway, together with Switzerland, are part of another club: The European Free Trade Association (EFTA). This is a regional trade organization and free trade area. This means that trade between the four countries is also, in essence, free (again, if the rules are met).

The three nations are, in fact, the EEA EFTA States, EEA referring to the close ties they have with the EU by way of their membership in the European Economic Area (EEA). They are bound by the rules of the EEA and implement certain EU laws of the Single Market through the adoption of national law. The UK, as part of the EU, was also part of the EEA until 31 January 2020.

What is the free trade agreement all about?

The EEA EFTA States–UK free trade agreement is an ambitious, progressive and comprehensive free trade agreement. It covers the full range of trade in goods, services and investment, digital trade, capital movements, government procurement, intellectual property, competition, subsidies, small and medium-sized enterprises, good regulatory practices and regulatory cooperation, recognition of professional qualifications, trade and sustainable development. It also encompasses legal and horizontal issues, including dispute settlement.

What is agreed for good's trade?

The agreement ensures continued tariff-free trade for all industrial products, giving exporters continuity and certainty about trading conditions.

Seafood

For seafood exports to the UK, the agreement offers tariff elimination or tariff quotas that offer meaningfully improved market access for a number of Icelandic and Norwegian exports. The agreement also simplifies the tariff rate quotas for seafood. The UK government said reduced import tariffs on shrimps, prawns and haddock would cut costs for UK fish processing, helping to support jobs in Scotland, East Yorkshire and northern Lincolnshire. "We have given on cheese, but we got a little more on fish," Norwegian Prime Minister Erna Solberg told a news conference.

Agriculture

For agricultural goods, the parties have agreed to improved market access or tariff-rate quotas for a number of products while protecting sensitive products. The UK government says that "The agreement significantly cuts tariffs as high as 277% for exporters to Norway of West Country Farmhouse Cheddar, Orkney Scottish Island Cheddar, Traditional Welsh Caerphilly, and Yorkshire Wensleydale cheese. There are also tariff reductions and quotas on pork, poultry and other goods. UK wines and spirits, including Scotch Whisky, will also now be recognised in Norway and Iceland. The parties commit to reviewing market access for trade in seafood and agricultural goods every five years in order to consult on further liberalisation.

What about the complicated Rules of Origin?

Rules of origin are the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports.

Visit Rules of Origin Hub

Liberal rules of origin based on revised PEM

The Protocol to the Trade in Goods Chapter of the Agreement provides for liberal rules of origin, based on the European models revised “alternative” Pan-Euro Mediterranean Convention rules (PEM).

Full and extended cumulation possible

The provisions allow for full cumulation with the EU as well as extended accumulation with the EU and other European partners and the possibility for extending such provisions to other third parties under certain conditions.

Self-declaration of origin

The agreement foresees self-declaration of origin as the only proof of origin and

allows for the use of electronic signatures for the UK and authorization numbers for EEA EFTA.

Insufficient Operations and other general rules

The agreement preserves the traditional list of insufficient operations which do not confer origin accounting segregation may apply to fungible materials, and the non-alteration provisions stipulates activities that may be undertaken for originating products in third countries.

What about the product-specific rules?

The product-specific rules are modern, flexible and allow for simpler product rules, for instance, elimination of cumulative requirements, lower thresholds of local value-added, new double transformation for textiles (more finishing operations confer origin) and multiple-choice rules for chemicals (chemical reactions confer origin).