• Toby Irwin

The EFTA Route.

Updated: Nov 27, 2018

The British decision to withdraw from the European Union and subsequent negotiations have made one trend particularly clear; Britain has a desire to maintain an economic partnership but distance itself from political integration. How can this be achieved? The consensus seems to be that this is not possible, I do not believe that this is true.

London, the largest financial centre in Europe.

The European Economic Area (EEA) is the system in which Britain is aiming to remain a part of whilst still withdrawing from the EU. Currently, two blocs make up the EEA: the EU and the EFTA. The EFTA (European Free Trade Association) is composed of Norway, Iceland, Switzerland and Lichtenstein. It is this group that Britain should join. Or to put it more accurately, re-enter.

Britain was part of the EFTA (alongside other member states Austria, Denmark, Portugal and Sweden) until 1972, when it left to join the European Union and, as a result, the EEA. In hindsight, it would have been more beneficial for the UK to remain where it was, for the EFTA in fact joined the EEA itself throughout the 1970s with a number of treaties. Put simply, Norway, Iceland, Lichtenstein and Switzerland joined the EEA without dilution of their sovereignty to Brussels. This is very significant. Crucially, it allows EFTA access to the EU single market while also allowing third party treaties to be signed elsewhere in the world. This is the optimum solution that should be pursued by the UK. For example, EFTA members currently have free trade agreements with countries such as Canada, Mexico, India, South Korea and Turkey. The UK can do even better than this when it comes to bilateral treaties thanks to an independent pound sterling, a deregulated, vast consumer economy, and (arguably) the largest financial services sector in the world.

While on the topic, it should be clarified why the UK cannot be both in the EU and the EFTA. This is due to the EU’s operation of an exclusive customs union which prohibits individual member states from striking bi-lateral treaties with other states. The EU negotiates trade deals as a bloc, EFTA states do not.

How might this be countered? Indeed, it is not as straightforward as it seems. In the referendum campaign, and ever since, the prospect of a ‘Norway’ style deal has been belittled and largely discarded as a result of incorrect statistics. What are the reasons given against the EFTA solution? There are three:

Firstly, contributions to the EU would continue in exchange for access to the single market. Yes, this is true. In the same way that any country contributes financially to any international organisation. However, it would be far lower than what is paid currently. The London School of Economics investigated this in 2016. As a share of GDP, the UK was contributing around 0.25% to the EU. For comparison, Italy and the Netherlands paid 0.29% and 0.36% respectively. EFTA members Norway, Lichtenstein and Switzerland paid 0.16%, 0.03% and 0.02% respectively. Also, for the record, this plays well into UK-EU cooperation in the future. Contributions to the EU should be negotiated carefully to continue access to important European programs such as Erasmus exchange and Horizon 2020. This will vary the size of future contributions.

Secondly, to maintain participation in the Single Market would mean playing by the EU rulebook while having no say in its creation. Incorrect. Claims are made that around 75% of EU rules would be kept following withdrawal and the UK would have no say in their creation. Not only is the number of regulations closer to 10% but it also discounts the fact that the UK would continue to have a role in the negotiation and planning phase, just not the voting stage.

Third and finally, claims are made that the free movement of goods, commodities and services is only possible when accompanied by free movement of labour. Clearly, since immigration was one of the key determinants of Brexit this cannot be allowed. However, Lichtenstein currently participates in the EEA and yet still has negotiated a cap on EU migration. Therefore, when claims are made that labour movement is inseparable from goods and services this is incorrect.

So, the United Kingdom should re-enter the EFTA. This will allow the participation in the EEA, allow trade deals to be struck abroad with new allies and booming BRIC(S) economies and also fulfil on the demand for an end to political integration. Switzerland acts as the final example. It participates in the EEA, exports over 5 times as much to the EU as the UK does and yet still has maintained political independence and has had all treaties negotiated bi-laterally. Britain can do even better.

The drawbridge of scepticism should be lowered. It is my belief that all free market liberals should be in favour of this approach. This can be achieved through open collaboration instead of inward looking integration. European allies will remain so, while London can look to the Commonwealth, North America and emerging powers to forge new relationships. For further reading to back up this point, see this article from the Institute of Economic Affairs (IEA) on how a US-UK trade deal would be struck very quickly once released from the constraints of the Customs Union.

At the time of writing, Toby Irwin is a second year student at the University of St Andrews. He is studying Modern History and International Relations. Areas that interest him the most are UK defence strategy and foreign policy.

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