Written by JUSTIN STARES
Wednesday, 09 November 2011 08:28
There are on the face of it many advantages to a free trade agreement with the EU over full membership. If Britain were to withdraw from the union, but remain in the European Economic Area or the European Free Trade Association, it would neither participate in the much maligned Common Agricultural Policy – nor the equally criticised Common Fisheries Policy. It would also fall outside of the common foreign and defence policies so detested by some Eurosceptics.
The UK would find itself in the same position as Norway, which enjoys the four basic freedoms of the common market – free movement of goods, services, capital and people – with only a fraction of the regulatory headache. Britain would no doubt be at home within the pragmatic institutions of Europe’s free trade area. The EFTA surveillance authority and the EFTA court are strong enough to enforce commercial competition rules, but do not have the integrationist zeal of the European Commission and the European Court of Justice. And EEA countries – currently Norway, Lichtenstein and Iceland – have their own free trade agreements with the rest of the world. The EEA is, essentially, a “lite” version of the EU – without the political baggage. Such an arrangement would not prevent the UK from choosing deeper European cooperation, if it so wished. Norway, for example, shares management of fish stocks with the EU and also applies Schengen rules on the free movement of people. Norway participates in EU research programmes and “cooperates” – on a voluntary basis – on union initiatives from consumer protection to education and culture.
More important still, the cost savings of switching from the EU to the EEA would be significant, it is claimed. According to the Bruges Group, a Eurosceptic think-tank, the UK would within the EEA reduce its regulatory burden by more than two-thirds, resulting in the creation of a large number of jobs. “A reduction from 1,000 to 300 regulations per year, is a 70 per cent reduction. Since EU regulations are estimated at 5 per cent of GDP, this would be comparable to a massive tax cut on business, equivalent to about 3.5 per cent of GDP for businesses and other organisations; thus making exporters competitive in more sectors,” Hugo van Randwyck wrote in his paper “EFTA or the EU”, published by the Bruges Group earlier this year. Given that Britain is already in the EEA, it would only take “weeks” to make the switch between the two blocs – van Randwyck argues.
But are there any downsides? For Norway, there is one big disadvantage: the country has little influence on EU decision-making. “The commission consults member states in expert committees when developing new internal market legislation,” explains Atle Leikvoll, Norway’s ambassador to the EU. “Experts from the EEA/EFTA states take part in these committees,” Leikvoll tells PublicServiceEurope.com. “When the commission proposal for new legislation is submitted to the European Council and the European Parliament for discussion and approval, the EEA/EFTA states may give joint comments on the draft legislation. But the EEA/EFTA states do not take part in the formal approval process.”
Norway basically has to accept and implement single market laws without any real say as to their content. Once a commission proposal is launched, there is no Norwegian member of the council to put forward amendments and there are no MEPs from the country to defend national interests or those of individuals and industry. Although EEA members do, technically speaking, have the right to veto EU legislation- this power is hardly ever used. “It’s a suicide clause really,” says one insider. “If the EEA countries used it, the EU would start to ask what point there was in having this agreement at all.” There is also a price to pay for Norway’s privileges. Oslo contributes more than €284m a year to Europe’s “social and economic cohesion” – a large chunk of change for a country of less than five million people. Norway is one of the largest contributors. So how much would the UK be obliged to pay if it renegotiated its arrangement with the rest of the EU? The union might not even be prepared to let Britain downgrade its membership. And would UK industry really want to sit on the sidelines, while its internal market laws were drawn up? In the final analysis, retreating from the EU into the EEA/EFTA would not be such an easy decision to make.