Category Archives: EFTA

EFTA is not a stepping stone to EU membership

EFTA-logo
EFTA-logo.
Before the UK joined the EU (or rather the EEC as it was called at the time), it was a member of EFTA, and when Norway twice voted No to joining, they remained in EFTA. Because of this, I think many people think that it would be easier for Scotland to join EFTA than the EU after independence. It’s not as simple as that, however.

Let’s define a few terms before we start:

  • EFTA consists of four countries: Iceland, Liechtenstein, Norway and Switzerland. EFTA was originally a rival to the EEC, but today it basically contains a few countries that never joined the EU for various reasons.
  • The EEA (the European Economic Area) consists of all EU countries plus Iceland, Liechtenstein and Norway. It is the area in which the Agreement on the EEA provides for the free movement of persons, goods, services and capital within the European Single Market. All EEA countries adopt most EU legislation concerning the single market, however with notable exclusions including laws regarding agriculture and fisheries.
  • The EU Customs Union (the EUCU) is a customs union which consists of all the member states of the European Union (EU) as well as Turkey (apart from agricultural goods) and a few micro-states. The EFTA countries do not form part of the EUCU.

When people talk about joining EFTA, they probably mean joining the EEA, too (like Norway) – I don’t believe there are many fans of the Swiss solution in Scotland.

It makes sense to think of EFTA + EEA (the Norwegian/Icelandic solution) as being a reduced version of the EU – it basically means being part of the Internal Market, but being in charge of trade agreements, agriculture and fisheries yourself. Also, EFTA/EEA countries don’t take direct part in the EU’s decision-making processes (no members of the European Parliament, no European Commissioner, no EU employees, and so on).

If Scotland were currently a fully independent country, it would make perfect sense to join EFTA/EEA as a stepping stone to full EU membership. It would basically mean joining in two rounds instead of one, which might be easier for people to adjust to.

However, Scotland is not a fully independent country, and neither is the UK. We have been part of the EEC/EU for fully 44 years, and that changes everything.

If Scotland went for a Norwegian/Icelandic solution after independence, we would need to develop policies for agriculture and fisheries from scratch, and we’d need to set up trade deals, customs schedules, WTO membership, and many more things. Many of those things would take a very long time to set up – the standard assumption is that new trade deals take about a decade to negotiate. Incidentally, this is one of the reasons why Brexit is likely to become such a disaster — Westminster simply cannot set up these things quickly enough, so without a ten-year-long transitional period in place (which they’re refusing), the UK will fall back on the WTO’s standard terms, which will be disastrous, not least for agriculture.

In other words, if the people of Scotland wanted a proper Norwegian solution, it would probably take about a decade to set up after independence. During that decade, it would be really important for Scotland to remain inside the EU’s Customs Union.

By the way, it might be worth pointing out in this connexion that most Norwegian and Icelandic politicians don’t really like the EFTA/EEA solution. They can live with it, but they’d rather be in the EU. The main reason why Norway never joined the EU is because they’ve decided to spend a lot of their oil money on keeping their villages full of people, which implies subsidising their farmers (and keeping food prices higher) than the EU would allow. Iceland is so dependent on fisheries that it overshadows everything else; however, they’re now talking again about joining.

Anyway, back to Scotland. It’s quite possible that the EU will require us to apply for membership formally after independence, and although this is likely to be the fastest application process ever (because Scotland already ticks all the boxes for membership), it could still take a year or two. If Brexit happens a few months after the Scottish Referendum, we cannot be in limbo for that long. So Scotland should aim to to get membership of the EEA and of the EU Customs Union as a matter of priority after independence (hopefully it can be pre-negotiated informally beforehand).

Membership of the EEA and of the EUCU is not the same as the Norwegian solution, and it doesn’t really require membership of EFTA, either.

Once Scotland is a member of both the EEA and the EUCU, time is not of the essence any longer. We can afford to discuss membership terms with the EU in great detail, including getting a much better deal for the Scottish fishermen than what Westminster got, and if the deal on the table isn’t good, Scotland can look at negotiating its own trade deals and eventually leave the EUCU a decade or more after independence.

I’m perfectly happy for us to aim for EEA + EUCU membership as a stepping stone to EU membership, but we shouldn’t call it EFTA membership or a Norwegian solution, because it wouldn’t be.

Once we’re independent, it will be right and proper for the Scottish Parliament to discuss the pros and cons of EU membership versus mimicking Norway, and perhaps we should even have a referendum to settle the question. However, we need EEA + EUCU membership in the meantime.

Doing the same as Norway might be possible eventually, but it wouldn’t be a quick and easy solution, because we would need to develop policies for trade, agriculture and fisheries first.

I believe full EU membership would be much better for Scotland, but I’m quite happy to postpone this discussion till after #ScotRef. What is important at the moment is not to start aiming for a Norwegian solution already because we think it will be easy. Negotiating trade deals is extremely complex, and we shouldn’t leave the EU Customs Union without a full and frank discussion of the consequences.

What we should do is to aim to remain inside both the EEA and the EU Customs Union from Day 1, and then decide what we want to do. I hope and expect the EU will offer such a good membership deal that the choice will be obvious, even for Scotland’s farmers and fishermen.

Aiming for a Norwegian solution for Scotland would be disastrous

Røros - Sleggvegen
Røros - Sleggvegen.
Some people within the SNP are apparently thinking about aiming for EFTA membership instead of being a full member of the EU, according to The Times:

Senior [SNP] party figures want to adopt a Norway-style model under which an independent Scotland would stay inside the single market, but outside the EU, after Brexit, according to sources. They believe that this would allow Scotland to retain the benefits of the European single market while continuing to trade within the UK as it does now.

A poll published yesterday found that more than a third of people who voted for an independent Scotland in the 2014 referendum want to stay outside the EU. SNP strategists believe that this new approach would keep these voters behind their independence cause.

I think this would be a pretty bad idea for three reasons: (1) It would send the wrong message to the World; (2) it would prevent us from building a majority for Scottish independence; and (3) it would be an economic disaster.

Fortunately it seems the official position of the SNP hasn’t changed:


However, just in case anybody still thinks it sounds cool, here are the reasons why I’m firmly against it:

1. It would send the wrong message to the World

The nations of the World are currently having to choose between being part of the free world, headed by the EU and Canada, or being part of Trump’s and Putin’s alt-right-fascist dystopia that Theresa May wants to be a lapdog in. This is not the right time to be sitting on the fence.

Also, Scotland’s clear rejection of Brexit and Nicola Sturgeon’s clear message in favour of the EU have impressed and inspired governments in other EU countries, and there is a strong desire to help Scotland at the moment. Suddenly going lukewarm would send entirely the wrong signals.

2. It would prevent us from building a majority for Scottish independence

As I’ve argued before, the SNP traditionally had many members that were anti-EU (for instance in the fishing communities), and although they now form a small minority in the party, some of them are still prominent within the party (because they’ve been there for so long). They clearly don’t want to remain within the EU and I’m imagining they’re behind this story.

However, from an electoral point of view, there simply aren’t that many Yes-Leave voters left in the Yes camp (many of them have already drifted away and will now vote No), and promising an EFTA deal is unlikely to win them back.

There are many, many more No-Remain voters that could be convinced by a Scotland-in-the-EU campaign, and suddenly turning our back to the EU would make it much harder to win them round.

A Scotland-in-EFTA campaign would therefore be likely to limit our appeal to those who voted Yes last time, and we would lose again.

3. It would be an economic disaster

In many ways Scotland could live well with Norway’s current set-up, but the crucial problem is that we can’t get there without going through hell first.

The reason has to do with WTO membership, tariffs and all that.

As anybody who has read Ian Dunt’s excellent wee book about Brexit will know, becoming a full WTO member is a very hard process that can take years. You basically need to draw up a lot of schedules (lists of tariffs) and get unanimous agreement from all current WTO members. Also, you need to enter into a lot of bilateral trade agreements.

Ian Dunt argues convincingly that this will be almost impossible for the UK to do quickly, so it must be even worse for Scotland. To take but one example, do we really expect that Trump’s America will offer Scotland a trade deal that is in our interest?

If Scotland is a full member of the EU, we remain part of the EU’s customs union, which means that everything will work just like before.

In theory, we could form a customs union with the rUK after independence, but we would then depend on the deals they make (with Trump and assorted dictators from all over the World) – and although these might be better than the deals we can make ourselves, they’re likely to be worse than the very good agreements that the EU has negotiated over the years. Also, forming such a customs union would mean that we might not be able to tick the boxes for EEA membership.

This is because EEA countries have zero tariffs internally, but there are no guarantees that Westminster will achieve such a deal. The only way ensure that we fulfil the EEA rules is by having our own deal, but as I argued above, that would most likely be disastrous.

Here are some more details about it from a factsheet about the EEA produced by EFTA (PDF):

The EEA Agreement provides for a free trade area covering all the EEA States. However, the EEA Agreement does not extend the EU Customs Union to the EEA EFTA States. The aim of both the free trade area and the EU Customs Union is to abolish tariffs on trade between the parties. However, whereas in the EU Customs Union, the EU Member States have abolished customs borders and procedures between each other, these are still in place in trade between the EEA EFTA States and the EU, as well as in trade between the three EEA EFTA States. Furthermore, the common customs tariff on imports to the EU from third countries is not harmonised with the customs tariffs of the EEA EFTA States.

The EEA Agreement prohibits tariffs on trade between the Contracting Parties. Therefore, all products, except certain fish and agricultural products, may be traded free of tariffs within the EEA. In order for a product to obtain preferential treatment under the EEA Agreement, it has to originate in the EEA. The EEA Agreement therefore contains rules of origin that determine to what extent a product must be produced or processed within the EEA in order to obtain status as a product of EEA preferential origin.

It’s clearly a better option to remain within the EU’s customs union. (Norway has had a hundred years to enter various trade deals, so we cannot simply expect to get the same deal as a new country.) It wouldn’t even be good stepping stone to full EU membership – it would be insane to spend a decade negotiating trade deals just to bin them immediately afterwards.

Also, I simply don’t believe that staying outside the EU’s fisheries policies is really that important to most Scots. The problem at the moment is that Westminster haven’t represented Scotland’s fishermen well in Brussels (they’ve prioritised the interests of the financial industry instead), and once we get a seat at the table there, we can negotiate better terms and conditions.

Conclusion

Going for continued full EU membership after independence is clearly a much better solution that aiming for EFTA membership for a lot of reasons. Of course we must hope that the EU negotiates a great trade deal with the rUK, but it’s much better to emphasise that from the inside (together with Ireland) than to try to create a bespoke solution that will please no-one and ruin Scotland along the way.

In EFTA while part of the UK?

Today there have been rumours on Twitter that the Scottish Government is investigating whether Scotland can join EFTA (and thus the Internal Market) while being part of the UK:

It's a bit like the Reverse Greenland solution, but joining EFTA instead of the EU. However, as far as I can tell, the obstacles are the same:

  1. EFTA and the EU cover a lot of policy areas that aren't currently devolved to Scotland, so Westminster will either have to devolve a lot more to Holyrood very quickly, or they'll have to represent Scotland and EFTA/EU meetings. (See also this blog post by Kirsty Hughes on some of the potential complications.)
  2. It's not clear at all that EFTA and/or the EU are interested in having a non-sovereign member.

As I wrote in my old blog post above Reverse Greenland, I think it's fine Nicola Sturgeon is looking into this, but I really don't think anything will come of it.

Scottish independence is a better and much more straightforward solution for everybody involved. I don't see what we'd gain by jumping through ludicrous hoops simply to postpone the next Indyref. Let's just get on with it!