There’s been a lot of talk recently about the implications of independence for Scotland and its membership of the EU. As we’ve noted this week, the SNP has long acknowledged that the Scottish government would have to renegotiate terms of EU membership, but it’s highly unlikely that the EU would move to expel Scotland from the EU given the interaction between Scotland and the continent in goods, services, finances and people. As John Swinney recently noted:
“Scotland would not be applying for membership. Scotland is already a member of the European Union, our citizens are EU citizens today, we follow all of the EU relevant provisions that we are required to follow.
“So the key point is any negotiation would be taking place not to apply for membership, but for membership from within the European Union, which is the key distinction which has to be remembered in this debate.
“What we have always accepted is there has to be a negotiation about the detail and the terms of Scotland’s membership of the European Union, but crucially that will be taking place at a time when we are still part of the United Kingdom, still part of the European Union, of which we have been members for 40 years.
But if, just for the sake of argument Scotland was declared a new state and somehow cast out of this expansionist community, would it be the end? By being declared a box-fresh, brand-new nation Scotland would inherit all of the fixed assets and natural resources within our internationally-recognised borders, but none of the obligations of the old state – like a share of the national debt or being bound by international treaties.
Tempting, no? Sure, it would be awkward for a while, what with having to negotiate new treaties and being known as the only country in European history that the EU didn’t want in it, but there are alternatives to the EU.
And given the hypothetical opportunity, we also need to look at whether the EU is indeed the correct institution to be aligning our newly-independent nation with. An alternative but related strand of organisation was developed in 1960 by Norway and Switzerland, with Iceland and Lichtenstein joining later; it became known as the European Free Trade Association (EFTA).
In the 1990s EFTA worked with the EU to create the European Economic Area (EEA). The EEA unites the 27 EU member states and the EFTA states (except Switzerland) into an internal market governed by the same basic rules. These rules aim to enable goods, services, capital, and people to move freely about the EEA in an open and competitive environment, a concept referred to as the four freedoms.
In addition, the agreement covers cooperation in other important areas such as research and development, education, health, social policy, the environment, consumer protection, tourism and culture, collectively known as “flanking and horizontal” policies. It guarantees equal rights and obligations within the internal market for citizens and economic operators. It’s actually membership of the EEA that would ensure the necessary free trade and access to markets that Scotland will require as an independent nation, rather than membership of the EU.
For instance, we often hear about how the bulk of Scottish goods are sold in the rest of the UK and that upon independence we would be foreign suppliers. But this argument is deeply flawed since as long as the UK remains within the EEA, either as a member of the EU or by another means, then trade will continue undisturbed. Even the most rabid Tory anti-Europe diatribes don’t suggest leaving the EEA and it’s not surprising that they don’t. It’s the world’s largest free trade zone and membership brings great rewards to the economies of those involved. But you don’t need to be in the EU to be in the EEA.
Independence is the greatest opportunity to make sure that Scotland is a member of the international organisations that most benefit it, and as such it’s worthwhile to look at what would be the advantages of swapping membership of the EU for EFTA.
If Scotland wished to pursue another avenue by joining EFTA, what would the organisation have to say about that? We asked them:
To: Erik Andreas Mathisen (Senior legal advisor)
Subject: Entry requirements of the European Free Trade Association (EFTA)
I am writing to enquire about the entry procedures of EFTA and understand that you are the Senior Legal Adviser of the EFTA Convention.
This request is in relation to the upcoming Referendum vote on Independence for Scotland.
As you may be aware, Scotland intends to go to the polling stations in the Autumn of 2014 to decide whether to end the Treaties of Union of 1706 & 1707 between England and Scotland respectively.
In the event of a YES vote it would be intended that the next elections after this date (to be held in 2016) would be to elect a new government to the newly independent Scottish parliament.
What is not yet known is what policy that newly elected government would follow regarding membership of the European Union (if maintained after independence) or if the government would wish to apply to become part of EFTA (a popular alternative).
Are you able to provide me with information on what would be the process for Scottish application, timeframe and/or any other information that may be relevant?
I believe that in the run up to the independence vote it will be essential to assess the alternative outcomes and membership of EFTA is a definite possibility. In light of this I respectfully request your assistance and appreciate any response you provide.
Thank you for your time.
Reference is made to your enquiry of 10 September (below).
According to Article 56 of the EFTA Convention, any State may accede to the Convention, provided that the EFTA Council decides to approve its accession.
In essence, the issue of membership is first and foremost a political matter, which would have to be discussed and determined at the highest political and diplomatic levels between all countries involved.
As regards further formal requirements, any new member state would have to apply to become a party to existing EFTA free trade agreements (Article 56(3)).
The last country to join EFTA was Liechtenstein, which acceded in 1991. However, Liechtenstein was associated with EFTA already from its establishment in 1960 due to its close links with Switzerland.
You will find more information, including the text of the EFTA Convention and existing free trade agreements, on our website http://www.efta.int/ (under “Legal Texts” and “Free Trade”, respectively).
Erik A. Mathisen
Senior Legal Adviser
EFTA – European Free Trade Association
The response is pretty clear; Scotland could apply to join subject to meeting the basic requirements, but would need to be approved by the existing members (Norway, Switzerland, Iceland and Lichtenstein). But what are the basic requirements and would the EFTA members see advantage in accepting Scotland? To answer the first question let’s look at Article 56 of the EFTA Convention.
ARTICLE 56 – Accession and association
- Any State may accede to this Convention, provided that the Council decides to approve its accession, on such terms and conditions as may be set out in that decision. The instrument of accession shall be deposited with the Depositary, which shall notify all other Member States. This Convention shall enter into force in relation to an acceding State on the date indicated in that decision.
- The Council may negotiate an agreement between the Member States and any other State, union of States or international organisation, creating an association embodying such reciprocal rights and obligations, common actions and special procedures as may be appropriate. Such an agreement shall be submitted to the Member States for acceptance and shall enter into force provided that it is accepted by all Member States. Instruments of acceptance shall be deposited with the Depositary, which shall notify all other Member States.
- Any State acceding to this Convention shall apply to become a party to the free trade agreements between the Member States on the one hand and third states, unions of states or international organisations on the other.
So the basic requirement is to agree to sign up to the existing free trade agreements that the organisation has already agreed upon between the member states and also with external states. We’re already signed up for some of these through the EU and our membership of the EEA but there are other agreements to think about as well.
EFTA’s third-country policy is designed to safeguard the economic interests of its member states, to support and reinforce the process of European and interregional integration, and to contribute to worldwide efforts to liberalise trade and investment. Combining the contractual framework that the EFTA states have with the EU and the free trade agreements that EFTA has with third countries, approximately 80% of EFTA’s total merchandise trade is under global preferential trade arrangements that cover a range of topics.
EFTA’s third-country policy was initially established in 1990 to mirror the EU’s external economic relations approach after the end of the Cold War. In 1995, the EFTA ministers decided to extend the reach of preferential trade relations, geographically beyond Europe and also substantially by including, in addition to trade in goods and protection of intellectual property rights, areas such as trade in services, investment, competition and government procurement.
The first broad-based EFTA free trade agreement was concluded in 2000 with Mexico. Since then, more such agreements have followed, and EFTA is continuing to expand its network with partners around the world. Currently, in addition to membership of the EEA, EFTA has twenty four free trade agreements (covering 33 countries) with the following partners:
Albania; Canada; Chile; Colombia; Croatia; Egypt; Gulf Cooperation Council* (GCC); China (and Hong Kong separately); Israel; Jordan; Republic of Korea (South); Lebanon; Macedonia; Mexico; Montenegro; Morocco; Palestinian Authority; Peru; Serbia; Singapore; Southern African Customs Union (SACU); Tunisia; Turkey; and Ukraine.
*GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates)
On the face of it, Scotland has a lot to gain by signing up to EFTA, with its membership of the EEA and global trade agreements to assist Scottish business – most notably the free-trade agreement with Canada that we currently don’t have as part of the EU. But these aren’t the only benefits Scotland would get out of membership.
The Scottish business community may benefit as EFTA generally produces less regulation each year than the EU, and reducing the burden of compliance could boost the economy by reducing the cost of doing business. Further to this, the membership “fees” for EFTA are significantly lower than those of the EU (<70%) and include the added bonus of the organisations accounts being signed off annually so that the public can be confident that the money is going where it’s supposed to.
The mot significant downside is that EU Common Agricultural Policy (CAP) and Common Fishery Policy (CFP) funding would be lost. However as this was largely traded away by Westminster in order to secure the much vaunted “rebate”, so the effect wouldn’t be as severe as is sometimes thought, and the money saved from reduced fees could be redirected to these causes. Of far more significance would be gaining control once more over the running of our own fisheries, farming, justice system and home affairs.
For instance, by having control over its own fisheries Norway was able, through annually negotiated fisheries arrangements, to allow the EU to fish their territory in return for stringent quotas and access to EU waters. These annual agreements allow for the setting of Total Allocated Catches (TACs) for joint stocks, transfers of fishing possibilities, joint technical measures and issues related to control and enforcement.
The net effect of this agreement was that Norway obtained 204,982 tonnes of various species in the EU zone and in Greenland waters, in exchange for some 88,809 tonnes for the EU in Norwegian waters. (A situation that is mutually beneficial despite the mismatched numbers, as emphasis is placed on harvesting different stocks of fish by both groups.)
At present however, Scotland is part of the CFP and as such our waters are open to all in the EU. In 2012 the biggest fishers of Scottish waters are not the Scots, but the Spanish and Danes. A huge fleet of more than 10,000 of Spain’s 17,500 vessels are located on the Spanish northern coast between Portugal and France and are ideally placed for taking advantage of the North Sea and Atlantic. Similarly, Denmark with only 4,000 boats still hauls in over 25% of the total EU catch, and the Spanish are not far behind. Between them they dwarf Scotland’s entire fishing fleet of just 2,096 active fishing vessels, which are also generally smaller.
Another issue that’s raised frequently as a negative of EFTA is that you also need to implement some EU directives as part of the EEA obligations. This does not mean however, that EFTA members are forced to enact legislation they have no say over, as there are mechanisms to provide influence on the drafting of EU regulation. The EEA agreement allows for input from the EFTA countries before any new legislation is adopted. This process can be by EFTA experts in EU sub-committees or the submission of EFTA comments – these are ‘decision-shaping’ mechanisms.
EFTA states, however, do not participate in the voting in council, but since the EU has an increasing number of areas which are decided by qualified majority voting – ie no need for unanimous agreement – in this instance it matters little if Scotland is in EFTA rather than the EU since, in either case, it would need to put forward a convincing argument to get other EU members on board. (Having the ability to put forward our own case to influence EU regulation is a luxury we presently don’t get within the Union, so again even this is would still be an improvement on the status quo.)
Through our existing membership of the EEA (via the EU) we’re already compliant with all of the relevant EEA legislation that EFTA requires and transfer would be a relatively smooth process, likely able to be undertaken in a matter of months. But would Scotland be an economic fit for EFTA? To answer this let’s first look at the industrial competences of each member state compared to Scotland.
Switzerland: banking, insurance, machinery, chemicals, watches, textiles, precision instruments, tourism and other service sectors
Lichtenstein: banking, electronics, metal manufacturing, dental products, ceramics, pharmaceuticals, food products, precision instruments, tourism, optical instruments and other service sectors
Norway: petroleum and gas, food processing, shipbuilding, pulp and paper products, metals, chemicals, timber, mining, textiles, fishing and various other manufacturing and service sectors
Iceland: fishing, fish processing, aluminium smelting, ferrosilicon production; geothermal power, hydropower, tourism. To which we can also add health technology, medicinal and medical products, IT and communication technology, and other service sectors.
Scotland: petroleum and gas, refining and chemicals, electricity, banking, insurance, financial services, tourism, IT and communication technology, videogame programming, electronics, life sciences, research and development, creative industries, shipbuilding, fishing/processing, farming, food processing, textiles, contact and shared service centres, and other service sectors
There are crossovers in most industries between Scotland and the other members. For instance, Scotland’s banking, insurance, financial service, and IT sectors lend themselves well to co-operation and coordination with Switzerland and Lichtenstein while fishing, fish processing and IT also serve interests for Iceland and Norway.
In addition to the above, oil and gas, energy, refining, and chemical industries complement the abilities and interests of Norway and would make EFTA one of the main energy providers to the EU. As such any negotiations about new EU law could see the issues raised by EFTA in the ‘decision shaping’ mechanisms being given greater consideration by EU members.
So on the balance of probability; it would seem more likely than not that EFTA would wish to see Scotland become a member of their trading community – a view that seems to be borne out by the recent article in the Scotsman where Tore Gronningsater, EFTA senior information officer, was reported as saying that if Scotland leaves the EU then it would be welcome to apply.
The truth is that even if we decided to go down the EFTA route, it’s likely that we’d experience more problems trying to leave the EU than we ever would by trying to stay, given how much money and effort the EU is throwing at desperately trying to hold onto bankrupt Greece. At the end of the day, it’s almost comically absurd to imagine the expansionist, energy-hungry EU kicking energy-rich Scotland out of the club while Denmark and Spain’s fishermen nervously eye the empty holds of their trawlers.
But membership of EFTA would be mutually beneficial for Scotland and the existing member states. While there seems little real doubt (as opposed to politically-motivated scaremongering) that the realpolitik dictates Scotland being welcomed as an EU succession state, it’s important that we debate the pros and cons of remaining in the EU at all when there’s a friendly alternative right on our doorstep.