Tuesday, 1 August 2017

EFTA: the cure to 'pay but no say'

In my blog post published earlier, I drew reference to Professor Grey's accurate condemnation of the idea that Britain will be able to strike a simple FTA with the European Union upon departure. His piece was largely informative, but for one passage in which he claims that Brexit means the UK giving up the 'perfect trade relationship it currently has as a member of the EU'. 

Here he is wrong. The reason why has, in fact, much to do with the ongoing detachment of the European Union and the EEA's rules, or to be more precise, its acquis. It's a process which has been in development for some years, and if Brexit is executed properly (which appears increasingly unlikely), the UK can play a central role in bringing into being a genuine and more equal single market. This, after the revitalisation of British domestic democracy, ought to be the major purpose of Brexit as far as the future of Europe and trade goes. 

One of the most common themes to Remain argumentation during the EU referendum was the idea that if we join EFTA, we pay but have no say. 'Pay with no say' quickly emerged as a recurring firing line and it was effective. I used to use it myself, back when I knew next to nothing about any of this. Today, though, I recognise how deeply flawed it is. The 'no say' part of the slogan is, as I will demonstrate, a clear deceit, which pretty much leaves the 'pay' part redundant. Though I should add that financial contributions of EFTA states are modest and paid for largely through the Norwegian exchequer. LeaveHQ worked out that upon rejoining EFTA, the UK's single market contributions would be reduced to around £100m yearly. And these EEA membership fees go towards funding EEA grants, which EFTA states participate in and benefit from fully. This seems to me a reasonable trade-off. I'd also argue that in order to suppress any domestic objection to continued payments, the difference between membership fees between EU and EFTA should perhaps go to some of the initiatives outlined by Vote Leave. Otherwise that beautiful bus was for nothing. 

More important, though, is the issue of influencing the rules which govern how we trade. At present, the acquis (regulatory code) which governs the functioning of the single market is partially the result of the co-determination between EU and EFTA instruments and largely the result of the adoption of international standards. Global and regional regulating bodies, such as UNECE, CODEX, the ISO and the WTO, are responsible for most regulation construction. And any simple examination of relevant international treaties will reveal this. The World Trade Organisation is a helpful indicator of this useful and inconvenient fact. 

And so to is the 1994 Agreement on Technical Barriers to Trade:

But it isn't just the WTO which has the credit for its standard-setting taken by Brussels. The European Union, shockingly honest and transparent on its website (knowing full well most won't bother to read it), openly admits to using hand-me-down regulation for the purpose of integration into the EEA acquis. 

The above is an example of mass adoption of vehicle standards for the purposes of trade within the single market. UNECE, much like a sizeable raft of international bodies, increasingly regulates on behalf of Brussels. As I look back, I wonder why Vote Leave didn't employ the globalisation and middle man argument much more. It would certainly have helped to distinguish us as the more moderate campaign, separate from the more toxic and xenophobic remnants of the Leave camp. Even in the case of the elimination of roaming charges across Europe, Christopher Booker wrote in the Telegraph back in April, the EU was advised multiple times to act by independent global authorities. All this appears to indicate that, fully acknowledging of its regulatory irrelevance, Brussels remains a busy and influential power for the purpose of political union. Everything else is just a useless gimmick. 

Which brings in EFTA, an intergovernmental rather than supranational body (the distinction is important). None of EFTA's states are constrained by common policies in international standard and regulation setting. Iceland speaks out for its interests, and need not compromise with, say, Liechtenstein. The intergovernmental structure of EFTA means that member states do not experience the rigidity and inflexibility that EU countries do at global bodies. This is what we mean when we say we 'get our seat back' at these organisations, of which the WTO appears most vital. The UK has sat quietly in international trade talks, fretting about harmony with twenty seven other countries. 

So what we see therefore is an odd parallel. The UK, a net contributor to the EU budget, pays substantially more in membership fees and is represented by the Commission at international level, while EFTA states pay markedly less in EEA fees and actively participate independently at global level. This very fact makes a complete mockery of the argument that as part of EFTA, the UK would 'pay but have no say' (in the rules of the single market). In fact, the more we examine the picture, the more it seems the reverse is true. Retaking our seat within EFTA is much better value for our money. The cure to 'pay but no say', I might suggest.

1 comment:

  1. 1. The whole EFTA/EEA argument is academic. The Brexiteers won't pay large sums, won't accept ECJ involvement and won't accept freedom of movement.
    The actual amount Norway pay is discussed in various places with different figures but for the UK it will still be billions and unacceptable as it solves 20% of my issues as border NTBs remain.
    It may even be higher than our current contribution minus rebate. //infacts.org/norwegians-pay-same-brits-eu-access/

    2. You simplify at every corner. The reality is whilst simply put regulation is broadly international in reality it is determined at a very detailed level in practice.
    Norway does have input but crucially has no deciding voice in EU regulations which in practice they must accept. In my business I don't care about the bulky EU acquis, but I do care about specific EU standards which classify product features down to the millimetre and are set by the EU and sometimes differ from US or other regional standards.

    3. Political reality based is that we can only reform the Single Market from within. The idea we can build an alternative or complementary system is just nonsense.

    4. Your solution is all about the EU Single Market and ignores the EU Customs Union (broad sense as linked to SM). Being in the SM helps me invoice and removes in-market barriers but it's not the largest part of trade in goods. The CU allows products to move smoothly without borders. As Brexiteers chase new (meaningless) global FTAs to deliver economic growth they will never accept the EU CET. This is unworkable for UK/EU trade in goods with because it replicates the situation I have today (on massive scale) in shipping to Norway (and returning products).


    D Morison