Britain is right to reject EEA membership: As an Icelander, I should know

Hjörtur J Guðmundsson
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Daily Life In Reykjavik
Even outside the EU, the sovereignty of countries like Iceland is steadily being eroded (Source: Getty)

The British government is absolutely right to reject remaining a member of the European Economic Area (EEA) after leaving the European Union.

The government is also quite right to say that, by leaving the EU, Britain will at the same time exit the EEA, which includes all the EU member states plus three of the European Free Trade Association (EFTA) members: Norway, Iceland and Liechtenstein. After all, in order to be a part of the EEA, a country must either be a member of EFTA or the EU.

While the EEA Agreement is a better choice than EU membership when it comes to both sovereignty and trade, its disadvantages have become increasingly harmful over the years. There is growing pressure on the sovereignty of the three EFTA countries in question, for example, and trade with other countries has become more difficult and costly – in some cases as good as impossible. Furthermore the agreement is simply a product of the past.

The EEA Agreement was originally considered by some of the senior politicians involved in negotiating it as a sort of waiting room for countries that might join the EU. It was in fact the predecessor of the EU’s pre-accession programme later designed for EU candidates. The worst thing about the EEA Agreement, however, is that it behaves like the EU itself in the area it covers when it comes to pushing for more and more political, social and economic integration.

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The EEA Agreement means the EFTA/EEA countries are subject to most of the EU legislation covering the bloc’s internal market and therefore indirectly the EU integration process in that area. This was recently highlighted by a representative from Norway. Like EU membership, the EEA Agreement demands transfer of national sovereignty to supranational institutions. While the institutions in question are run by EFTA and not the EU, they are expected to mirror the decisions made by the European Court of Justice and the European Commission.

The latest EU demand is that the EFTA/EEA countries must become subject to its newly-formed financial authority. The EFTA/EEA countries have already accepted this after it was agreed that EFTA will ensure compliance within their borders. However, Iceland’s most senior legal experts in this field have concluded that EFTA will in fact only be a middleman to make it appear as if the EFTA/EEA countries are not accepting EU authority.

Much has happened since the EEA Agreement was signed back in 1992. The WTO had not been established then and the only alternatives were free trade agreements that dealt solely with trade in goods. Comprehensive free trade deals have since become the modern way of liberalising trade. Both the EU and EFTA quite obviously prefer such agreements when it comes to trade with countries around the world and EFTA has furthermore been upgrading older deals to that level.

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While the EEA Agreement doesn’t strip the EFTA/EEA countries of their freedom to strike their own free trade agreements with countries outside the EU, their EEA membership does make trade with the likes of the United States difficult due to trade barriers caused by the EU legislation they have to adopt. After all the EU is a customs union which has the main purpose of protecting domestic production from outside competition and is as such the very opposite of free trade.

Due to the EEA Agreement, goods that do not meet EU regulations cannot be imported to EFTA/EEA countries without very costly measures to fulfil those requirements, and often it’s not possible at all. This is true regardless of whether the individual or company in question is trading with the EU or not. This has led to less trade between the EFTA states and the US, for example. It’s ironic that an agreement with the stated aim of promoting trade between EFTA countries and the EU is making access to other markets more difficult.

By leaving the EU but remaining in the EEA, Britain would therefore continue to be subject to both the EU integration process, and thus decisions made by the European Court of Justice and the European Commission, albeit indirectly, as well as trade barriers caused by EU legislation. I assume the majority of British voters were rejecting these things in the EU referendum last year, so it is quite hard to see how continued EEA membership would fulfil what the people voted for.

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Coming from a country with a long experience of the EEA while outside the EU, I simply cannot recommend that path to Britain, either as a temporary transitional arrangement, as some have suggested, or as a permanent one. As the late Milton Friedman put it: “Nothing is so permanent as a temporary government programme.”

Britain can most certainly do far better than what the EEA Agreement offers which is precisely what the British government is aiming for.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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