Norway Lashes Out at Trump While Embracing Trade Protectionism

(Bloomberg) -- The global trade turmoil is shining the spotlight on one of Norway’s biggest contradictions: it’s both a strong proponent of free trade and an avid protectionist.

Prime Minister Erna Solberg over the weekend lashed out at U.S. President Donald Trump for imposing tariffs, including on Norway’s aluminum exports. She said it was a “great paradox” that the U.S. is now the greatest threat to free trade while China is its biggest proponent.

Arne Melchior, senior researcher at the Norwegian Institute of International Affairs, said that while Norway has made a journey from being one of the world’s most protectionist countries in the 1980s to opening up for free trade, there’s one big exception.

“In the area of agriculture, Norway has one of the most restrictive trade regimes in the world,” Melchior said in a phone interview.

Norway has erected high tolls to protect its farmers, resulting in some of the world’s highest food prices and poorest supermarket selection. At the same time, it relies on the free flow of trade to ship vast quantities of oil and gas and salmon to global markets, helping it build a $1 trillion wealth fund. As a member of the European Economic Area, Norway is part of EU’s inner market, but has kept agriculture and fisheries outside of the agreement.

Bad Time

The chief economist at the Confederation of Norwegian Enterprise, the largest business association, said that Norway has built much of its wealth on trading with other countries and that it benefits from an even playing field. “As a small country with a unilateral resource base, we strongly depend on well functioning of international trade systems,” Oystein Dorum said.

The trade dispute comes at a sensitive time for Norway as the economy emerges from three years of sluggish growth following the collapse in oil prices in 2014.

The government is now seeking to avoid aluminum tariffs and Norway hasn’t received a temporary exemption like other countries.

Foreign Minister Ine Eriksen Soreide said in a speech on Thursday that the global trade framework was in “dire straits” because of unilateral measures taken by both the U.S. and China. The risk of losing 70 years of “global teamwork” will “hit us all,” she said.

A Ripple

With exports accounting for about 35 percent of gross domestic product, Norway’s central bank is also keeping a close eye.

Oystein Olsen, Norway’s central bank governor, said his biggest short-term concern right now is disruptions to trade. The timing would be awful for a global economic set-back given that most central banks are just starting to normalize policy after years of record low rates.

He dismissed seeing a paradox in Norway’s own policies. “There’s a reason behind Norwegian agriculture policy,” he said. “It’s just a ripple in the big picture.”

Melchior at the Norwegian Institute of International Affairs said it’s hard for Norway to look beyond its borders when it comes agriculture.

“It’s rarely mentioned that there are many jobs in Spain that would lose out on 300 percent tariffs on ham and cheese imports,” he said.

It will also be a hotly contested issue once talks start with the U.K. on a new trade deal after Brexit. Norway is the biggest exporter of natural gas to the U.K.

“This will be a problem in relation to any country with interests in agriculture exports,” he said. “You can meet yourself at the door.”

©2018 Bloomberg L.P.