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After Brexit: What do we know about EFTA?

After Brexit: What do we know about EFTA?

The EFTA/EEA option is more complicated than many think.

Once the initial shock of the June 2016 ‘Brexit’ referendum subsided, a fair amount of discussion turned, understandably, to what sort of future relationship Britain hoped to build with the European Union (EU). The choices were – and remain – seemingly endless: Norway or Switzerland, Canada or Ukraine, Turkey or Singapore. Of these, the arguably most talked-about is the first: the ‘Norwegian option’.

Oslo’s involvement in and relationship with the European integration process has always been something of an oddity. Like Britain and Denmark, it sought in the 1960s and 1970s to join the European Economic Community (EEC) – the forerunner of today’s EU. Unlike Britain and Denmark, however, Norway never acceded in 1973. In a public referendum on 25 September 1972, a small majority of the electorate – 53 per cent – opted to remain outside the Brussels fold. This vote was confirmed some two decades later during the wave of EU enlargement that saw Austria, Finland and Sweden join the EU. This time, a little over 52 per cent of people voted not to join. Reasons for both the 1972 and 1994 outcomes are many and varied, but geography, history, fear over the loss of autonomy (Norway only became a sovereign nation in 1905), and Norway’s economic and social welfare structure, were all likely to have played a role.

What EEA membership means

Ever since, Norway, together with Iceland and Liechtenstein, has somewhat uncomfortably occupied a sort of ‘half-in, half-out’ position. Via the European Economic Area (EEA), Norway is a member of the EU’s single market facilitating the freedom of movement of goods, services, capital and people. Norway is also part of the Schengen common travel area, security bodies like the European Defence Agency, the EU’s border force, Frontex, and its law enforcement agency, Europol. It contributes to the EU budget by way of development grants designed to aid socio-economic change in less-developed regions of the EU. Unlike full EU members, though, it has no formal say in relevant EU policies, although it does have ‘decision shaping’ influence – especially in areas in which, like energy, it has vested interests and specialist knowledge. Norway isn’t part of the EU’s customs union. Nor is it subject to the EU’s common agricultural and fishing policies.

On the face of it, EEA membership might seem a simple, technical procedure. Recent research reckons however that Norway’s relationship is far more complex. It is governed by around 120 separate treaties and agreements. And Norway’s relationship with the EU as an outsider is arguably deeper than Britain’s has been as a full member.

In part because of this, and in particular because EEA membership permits freedom of movement, British prime minister Theresa May was quick to rule out Britain adopting a Norway-like arrangement. Others, such as Conservative MPs Nick Boles and Oliver Letwin, and Stephen Kinnock, a Labour MP and son of former leader Neil Kinnock, are among its greatest advocates. In recent days, current Labour leader Jeremy Corbyn has apparently also expressed an interest in the so-called ‘Common Market 2.0’ plan.

The basis of the EEA

Somewhat overlooked in this discussion is that, to be in the EEA, a country needs first to be a member of one of two organisations: the EU or another institution entirely, the European Free Trade Association (EFTA).

EFTA is about much more than the EEA, though. In fact, it was established in 1959–60 as an intergovernmental alternative to today’s EU. The EEA, by contrast, was only negotiated in the 1980s, and the EEA agreement was only signed in 1992.

On the face of it, EFTA is nothing more than an economic organisation. Indeed, it was established as a competitor of the EEC. Its looser, industrial free trade remit contrasted sharply with the ideas of political unity and federalism implicit in the Community’s founding text, the Treaty of Rome. Britain helped establish EFTA and was by far its biggest and most significant member state until it left in 1973.

Today, though, we still know little about how EFTA functions.

It is true that EFTA remains a largely commercial body. Its four members – Norway, Iceland, Liechtenstein and Switzerland – cooperate to maximise opportunities for international trade with the help of a secretariat based in Geneva. Together they have negotiated 44 free trade agreements or declarations promising to improve trade cooperation.

Beyond economics

EFTA is sometimes seen as a failure. But it has in fact more than met is central aim of establishing free trade among its members and, more generally, between all the countries of Western Europe. Beyond this, my own work has sought to recast EFTA as something more than a pure economic, free trade grouping but one that was politically significant. One of the most important findings of this research is that EFTA members, historically, had a tendency to help ‘democratise’ countries against the backdrop of the cold war. In 1961, for instance, EFTA states facilitated Finnish association because there was a concern that Moscow’s political influence over Helsinki was growing, and that the Finland’s economy was becoming ever more dependent on trade with Soviet Russia. Behind this action was the perennial fear of a communist ‘takeover’ of a country that, economically, socially and culturally, was otherwise Western. Finland eventually became a full member in 1986.

In the 1970s, meanwhile, EFTA countries turned their attention inwards as its members sought to contribute to the stability of one of their own: Portugal. Well before Portugal joined the EU, it too was a founder member of EFTA. Portugal’s transition to democracy, ushered in by the April 1974 Carnation Revolution, was hailed by its EFTA counterparts as the long-overdue overthrow of the authoritarian Estado Novoregime developed by António de Oliveira Salazar. And yet, this welcome was tempered by concern about the stability of the fledgling democratic government and the risks presented by both communist and right-wing reactionary forces. Through a mixture of practical and monetary support for new and existing firms and spending on state infrastructure projects – including support for upgrading Lisbon’s metro – EFTA members hoped to expand the industrial sector, support jobs, raise living standards and ultimately undermine those wishing to destabilise the emerging democratic administration.

Still more important, by the 1980s EFTA agreed a series of formal economic and trade links with Eastern European countries like Poland, Hungary or Czechoslovakia. EFTA was convinced that it had a role to play in helping undermine the communist stronghold in these countries and, following the collapse of the Berlin Wall, in helping ease these formerly authoritarian states into democratic ways by integrating them into the Western market system.

Conclusion

Why is all this important? First, it tells us that EFTA had more of an impact on European politics than is sometimes credited. Second, it shows that organisations can change and transform: foreign affairs were never part of EFTA’s competences, but its members clearly sought to use the framework that gave rise to their own economic cooperation to influence the world around them. Third, the story here has contemporary relevance. Even a loose trade body like EFTA can have broader political implications. Put simply, leaving the EU for the intergovernmental ‘simpler ways’ of an organisation like EFTA is not as straightforward as it might immediately seem. If Britain does end up (re-)joining EFTA, politicians and public alike ought therefore first to acquaint themselves with the sort of organisation EFTA was and became, and what this might mean for Britain today and in the future. For, as we know, not knowing the full implications of a decision can have rather troubling implications.