David Cameron’s announcement that he intends to hold a referendum on the UK’s relationship with Europe has raised the prospect of the country leaving the EU. What would happen, however, if voters did choose to leave? Jóhanna Jónsdóttir assesses whether the UK could follow the example of countries like Norway and Switzerland in using the European Free Trade Association as an alternative to EU membership. She notes that while this would allow the UK to continue to participate in the single market, there are significant potential problems associated with the approach.
The UK’s membership of the EU has always been controversial and there are many who believe the UK’s interests would be better served outside of the Union. In his eagerly anticipated speech on Europe last week, David Cameron pledged that if he remains Prime Minister after the next election there will be an in/out referendum during the first half of the next parliamentary term. The promise of such a referendum has made the UK’s withdrawal from the EU a definite possibility, which raises an important question: what would happen if UK voters did opt to leave?
The member states of the European Free Trade Association (EFTA), particularly Switzerland and Norway, are often cited as states that enjoy prosperity and success without the burden of EU membership. Could the UK not follow their example? The UK was after all a founding member of EFTA and the driving force behind its establishment in 1960, although thirteen years later it decided instead to join the European Economic Community (EEC), as it was called at the time. At first glance a return to EFTA may sound like an ideal solution to Eurosceptics who want the UK out of the EU, but who can’t ignore the potential economic costs of leaving the internal market completely. However, those who delve deeper into the EFTA states’ relations with the EU may no longer see this as an attractive or viable course of action for a country such as the UK.
Today the remaining EFTA States participate (to varying degrees) in the EU’s internal market, while arguably retaining national sovereignty and control over key policy areas such as fisheries and agriculture, foreign and security policy and justice and home affairs. However, Norway and Switzerland, though both members of EFTA, have very different relations with the EU. The Swiss-EU relationship is based on a series of bilateral agreements which, according to the EU, are complex, unwieldy to manage and “have clearly reached their limits”. It can therefore be considered unlikely that the EU would be eager to duplicate such a system for the UK if it left the Union.
The EU has, on the other hand, been considerably more positive towards the European Economic Area (EEA) Agreement which allows the three other EFTA States, Norway, Iceland and Liechtenstein, to participate in the internal market. Access to the internal market, however, comes at a price as these states are required to adopt all EU legislation in relevant areas without access to the EU’s decision-making institutions. This includes provisions strictly related to the four freedoms (the free movement of goods, services, capital and persons) in addition to legislation in a variety of horizontal areas such as labour law, consumer protection, environmental policy, statistics and company law, which constitutes a large bulk of EU acquis. The EEA Agreement allows some access to the Commission’s expert groups and comitology committees but no formal access to either the Parliament or the Council. The fact that the EFTA parties to the EEA Agreement do not have a seat at the table means that their impact is undoubtedly limited.
The EEA does contain various clauses to formally protect the EFTA States against loss of sovereignty. For example, EU acts do not automatically become part of the EEA Agreement or the EFTA states’ national legal orders. Nevertheless, refusal to adopt EU acts could lead to a partial suspension of the EEA Agreement and so this is not generally considered a viable option. Indeed, almost two decades of experience has shown that unwanted EU legislation can be delayed, but not thwarted. Thus there are indications that the EEA functions as a supranational agreement in practice. Some might even go so far as to argue that in practice the EEA Agreement involves a greater loss of autonomy than EU membership.
It is true that the EEA/EFTA states have generally found that the benefits of the EEA Agreement outweigh the costs. However, lack of access to the EU’s decision-making institutions would arguably be a much larger price to pay for the UK due to its size and international standing. The UK is one of the EU’s largest member states. It has the resources to participate actively in all policy areas and it is an important actor when it comes to coalition building and Qualified Majority Voting within the EU. Losing access to the decision-making institutions, while still having to adopt EU legislation, would therefore be a substantial blow. True, if the UK did join the EFTA pillar of the EEA Agreement, the relationship between the EU and EFTA would become slightly less asymmetrical. Nonetheless, the EEA Agreement, at least in its current form, is very much a one-way street whereby the EFTA states follow the EU’s lead. Taking such a subordinate role would undoubtedly be difficult for the UK.
Indeed, in his speech David Cameron rejected the idea that the EEA or Swiss-bilateral agreements could be seen as potential models for the UK. Instead he argued that the UK should play a leading role within a reformed EU. In his vision, the single market would be at the heart of European integration. Any further political or economic cooperation could be pursued at the discretion of individual states, but not forced upon them. To many this may sound like an attractive solution, not only for the UK, but also for other European nations including perhaps the EFTA states. The question is: will it work in practice? The experience of the EEA shows that a focus on the internal market, while excluding other areas can be challenging. Over the years, the EU’s methods of legislating have become more comprehensive and acts are adopted which span different policy areas. In many cases some elements of an act are relevant to the internal market, while others are not. A strict separation between internal market and other issues may therefore be difficult to achieve. Thus, in addition to persuading the EU heavyweights to move forward with this plan, the challenge will be where to draw the boundaries.
For a more detailed discussion of the issues covered in this article see the author‘s contribution to the inquiry of the UK Parliament‘s Foreign Affairs Committee into the Future of the European Union.
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Note: This article gives the views of the author, and not the position of EUROPP – European Politics and Policy, nor of the London School of Economics.
Shortened URL for this post: http://bit.ly/UKEFTA
Dr Jóhanna Jónsdóttir received her PhD in European Studies from the University of Cambridge in 2010. She is the author of Europeanization and the European Economic Area: Iceland’s Participation in the EU’s Policy Process (Routledge, 2012).
“Access to the internal market, however, comes at a price as these states are required to adopt all EU legislation in relevant areas without access to the EU’s decision-making institutions”
Completely wrong. Norway influences EU legislation before the EU even begins to implement it by shaping it at the global level, where it has its own voice.
EU politics: in “Europe” and ruled by Norway
“more than 90 per cent of the regulations of the single market cover policy areas that are ultimately the province of global bodies, from the immense array of technical standards to the rules governing accountancy and the compiling of official statistics. Not only does Norway, acting in its own right, enjoy more influence on these international policy bodies than Britain; it also, as a member of Efta and the European Economic Area, even reserves the right to opt out of single-market rules that it considers damaging to its national interest. ”
This is part of a long line of arguments which seek to reduce everything the EU is involved in down to WTO rules and global agreements. In other words “free trade” is guaranteed by global agreements so there are no benefits to co-ordinating regulations/removing barriers to trade in the single market.
That’s a fairly outlandish argument given that if it were correct, we’d have established a de facto single market with half the world rather than just the countries of Europe (we clearly haven’t). It’s also contradictory in the sense that Eurosceptics like Christopher Booker have long argued that EU regulations damage British business; yet they’re also content to argue that the EU isn’t actually responsible for these regulations in the first place.
EU regulations matter and you can’t simply reduce them to global agreements – no matter how convenient it is for your argument. As Norway has no representation in the Council or the European Parliament, it has no direct say over what those regulations are. It’s also contentious at best to say that Norway has more influence in global negotiations than the UK does through the EU – WTO negotiations for decades have been dominated by the EU and the US, not Norway. We might have “8 per cent of the votes” in the Council but that’s never been a legitimate measure of the influence EU states actually have over decision-making.
“Norway influences EU legislation before the EU even begins to implement it”. Completely simplistic. Really think is so easy?
“As Norwegians do not participate in EU decision-making they have few incentives to openly discuss European affairs. The present model is a compromise between the “yes” and “no” camps, and most politicians to not want to rock that boat. The result is that debate on European integration is discouraged, dampened and distorted.”
In essence, the British Euroskeptics (mild or rabid) want to “transform” the EU into some version of the EEA.
As history showed, this proved to be a less-than-successful model … and since Euroskeptics take “pragmatism” and “rationality” as their model for judging a proper course of action, that should make them reconsider their “dogmatism”
well, one can dream ….
“As history showed, this proved to be a less-than-successful model …” As opposed to the much less than satisfactory EU, I suppose! As to success, what on earth are your parameters?
Successfully published and verified accounts, perhaps? Widespread happiness beyond the ‘trough’ with the status quo? Contentment at depleted democracy for member states?
1) The accomplishment of an aim or purpose.
2) The attainment of popularity or profit.
In the 50s, when Britain failed to convince other Western European countries to “simply” launch a free-trade area, rather than a political project of peace and reconciliation, it came to realize in the following years that it missed on a big opportunity to join in.
Instead, it tried to compete with its professed theory of “free-trade only, no political or regulatory harmonisation” with the EFTA … however that experiment lasted only a few years before Britain (and the other EFTA members) realized that the EEC was registering better growth, political integration and had a real future.
In short, Britain’s vision got pawned !!
Even now, nobody in Europe’s governements but British Euroskeptics want to join EFTA or revert to a relationship akin to EFTA. And that’s because free-trade area without common regulation is an economic dead-end 😉
On the contrary, current EFTA members want to upgrade their relationships with the EU into full partnership, except that their voters are split down the middle (Norway, Iceland, Switzerland).
And that’s why I can say that Britain’s EFTA vision of the EU is a less-than-successful model ….
When the British government will authorize external auditors to verify its Whitehall accounts, and of all city councils, while publishing on time all its yearly receipts, I guess it’ll make sense to compare how each administration performs.
In the meantime, I’ll simply direct you to the UK Ministry of Defense to see what bloated corruption is really like ….
As for democratic legitimacy, you got nerves to criticize anyone when coming from an unelected monarchy, unconstitutional government, whose main parties (only 3, despite more than 7 registered political groups !!!) are elected first-past-the post with less than 60% of the electoral population (the Tories received a bit less than 30% of the total electorate).
It might be seen as legitimate from would-be autocrats, but if anything, that’s what I call a real democratic deficit ….
1) The accomplishment of an aim or purpose.
2) The attainment of popularity or profit.
Unemployment levels anyone? Belgium demonstrates today; it was like watching a history programme from the UK Thatcher years. Everyone else in the EU is happy of course.
“current EFTA members want to upgrade their relationships with the EU into full partnership, except that their voters are split down the middle (Norway, Iceland, Switzerland).”
So, do they or don’t they? It seems far from certain.
If you have actual evidence that the UK Ministry of Defence shows more bloated corruption than the EU I’d love to see it! Meanwhile our unelected monarchy doesn’t interfere with the folly of our elected representatives, perhaps that’s why we love them.
I don’t know where you’re from Thierry, but it doesn’t have true democracy.
geez … you really want to play that game ?
The EU is an international organisation overseeing 500ml+ individuals, with a combined GDP of €15tr+
out of the €120bn annual budget of the EU, administration expenditures (pensions included) represents around €9bn (7.5%). For the past decade, auditors have confirmed years after years that EU funds have correctly been accounted for. When it didn’t, the responsibility was for late or incorrect sending of documentations by national agencies of each member states (none were perfect, UK included)
Improper or corrupt practices account for around 0.3% of EU budget funds, that is around €360ml.
Its main areas of expenditures are the Common Agricultural Policy and the Regional Development
Now, let’s check the UK government books :
UK is a federation of 63ml+ individuals for a GDP around €1.8tr
out of the £682bn (€820bn+) annual budget of the UK government (city councils excluded), administration expenditures represents between £32bn and £73bn depending on how you assess pension liabilities.
However, not all the £682bn budget for 2012 is earmarked for spending : between £80bn and £140bn are specifically for interests debt payment and financial liabilities.
That’d put the administrative ratio between a low 5.3% and a high 13.4%. An average of 9.35% being on par with EU administration.
The official MoD’s budget is around £30bn (€36bn), but it understates the level of government support for the defence industry.
There are no comprehensive studies (at least in the public domain) to evaluate the waste, corruption and overspending resulting from MoD and governmental dysfunctions : it’s only on a project by project, and after the deed has been done
here are a few samples for your knowledge :
As per EFTA members, governments of Norway, Switzerland and Iceland have said publicly that they want to join.
But opinion polls show populations split down the middle about membership. It is interesting to note that citizens don’t seem to worry too much about lack of democratic deficit from having to enforce most EU regulations without having representations in their framework.
Your monarchy is constitutional.
Your government branches are not.
It’s quaint to claim that a constitutional head of state shouldn’t interfere with an unconstitutional government in any self-respecting democratic system.
But maybe, you don’t like check and balances : at least of the kind that is open and transparent, from an institutional point of view.
I’m a Swiss living in Ireland for the past 12 years.
If I recall correctly, Norway’s polling averages about 85% against joining the EU. Not really split down the middle.
While I still assume some of the instruments are cracked (why else would you run a
script when a device launches?), they do have all the options and functionality of their properly licensed counterparts.