Christopher Howarth is a senior researcher working in the House of Commons. Prior to this he worked for Open Europe, as a Conservative Foreign Affairs Adviser and senior researcher to a Shadow Europe Minister.

EFTA – a fine organisation, but with little relevance to the question of EU/EU trade

The European Free Trade Agreement, (EFTA) is a fine organisation.  It regulates trade between Iceland, Lichtenstein, Norway and Switzerland, with a combined population of 14 million – highly developed economies with a proximity and friendly disposition to the UK. We should do business with them. However, as much as we may like the EFTA, and wish that it rather than the EU had become the main trading mechanism on our continent, it did not. Post-Brexit, it has little relevance to the bigger question of UK/EU trade.

The The European Economic Agreement (EEA) is a very different beast, yet often confused with the former. The EEA is an agreement struck by three of the EFTA states (all bar Switzerland) to trade with the EU. The EEA agreement is based on rule-taking and harmonisation of laws set by the EU under the effective supremacy of the ECJ. David Cameron and Nick Clegg rightly warned against it as an alternative to EU membership.

If we re-joined the EFTA (we left in 1973), we could trade on good terms with the EFTA four. Alternatively, we could strike one or separate agreements with the individual members. From issues as diverse as North Sea fishing, energy and Swiss access to UK & EU financial services markets, there are common interests. It is in all sides’ interests to cooperate. If we joined ETFA we would have a framework for these discussions, and combine our interests when negotiating with the EU. EFTA membership might help – but it is not a precondition for cooperation.

Interestingly, given the UK/EU discussion, the EFTA convention commits its members to free movement of people, but whether this would be enforced is difficult to tell. But then perhaps this is not a bar on us joining: there is unlikely to be a deluge of prosperous Icelanders or Norwegians – conditions there have improved since the time Eric Bloodaxe felt compelled to move to migrate to York to find a job worthy of his skill set.

Joining EFTA might potentially help with our external trade agreement. However, while EFTA states often (but not always) negotiate together in external trade, and have often had more success than the EU, the UK has more complex interests and might be seen by the EFTA states as an elephant in their trade boat.

Whatever the conclusion on the relative merits of UK membership of EFTA, it would not solve the bigger issue for the UK – trade with the EU27.

The EEA is not a model for the UK

The EEA was designed as the entrance lobby to the EU, and consequently is not designed for, or acceptable for, a state that is leaving. The agreement is based on rule-taking and conformity. EEA states accept EU rules and the European Court. While for a small state there may be an argument that in the EU it would have little influence, so having even less outside in the EEA is of little consideration. This would not wash for the UK: we have a larger economy, more options and no need to accept regulations doled out to our democracy by the famous (and antiquated) fax in Brussels. It would not suit us domestically and hamper our efforts to conclude trade deals globally.

ECJ Authority and Enforcement over the EEA

The question of EEA rule-taking is made worse by the fact that the EU is ultimately in charge of the interpretation and enforcement of the rules it makes.

While for the EU, the Commission and the European Court of Justice (ECJ) enforce the EU rules, for the EEA states the EFTA Court and the EFTA Surveillance Authority (ESA) do the same. The ESA, accepts complaints, enforces the rules and can take cases to the EFTA Court, where EU member states can and often do “intervene”. The EFTA Court has next to no leeway in how it interprets the EU rules, and chooses not to use it. That the EFTA Court slavishly follows the ECJ is unsurprising: the EEA is based on the harmonisation of rules (rather than mutual recognition). The ECJ is a far larger body, has far more cases and is conveniently only 400 metres away.

In a recent lecture in Parliament the President of the EFTA Court, Professor Carl Baudenbacher, argued that in law the “EFTA Court is bound to follow/take into account relevant ECJ case law, whereas the ECJ is free”. However, in this lecture he was being overly optimistic: he would, after all, be overjoyed to have the UK join his Court and supply new cases and resources. Previously he has argued more succinctly that: “the drafters of the EEA Agreement formulated homogeneity rules which essentially bind the EFTA Court to follow relevant ECJ case law. On the other hand, there is no written provision which would oblige the ECJ to take into account relevant EFTA Court case law.”

Since the EFTA Court invariably follows the ECJ, whatever leeway the EFTA Court has is in effect zero. As Lawyers for Britain concluded: “It is very hard to see in what sense we could be said to have gained any measure of control over our own laws after leaving the EU.”

An ‘EEA light’ deal would be just a fig leaf covering over a transfer of control to the EU

While the EEA in practice allows for the practical implementation of harmonised EU laws and case law under a large fig leaf to preserve the EEA states’ sovereign modesty, there are those who are reportedly suggesting extending the fig leaf to the UK.

This extension is being called the “EEA light” and would allow for practical ECJ supremacy and the harmonisation of laws. While many trade agreements, such as the EU/Canada trade agreement, allow for ‘adjudication’, the suggestion here seems to be to keep current and future EU law, and thus the EU Court. This would no doubt replicate a version of the ESA – perhaps called the UK Surveillance Authority? – and a UK/EU Court following ECJ case law. We would accept EU laws as they developed without a say.

The difference between ‘adjudication’ and ECJ supremacy is a fundamental one and goes to the very nature of what we may agree with the EU. With one former Treasury adviser claiming that there is no “clear divide” between the two, there is evidently (for educational purposes) still a need to revisit the referendum campaign. The electorate voted to take back control of our laws.

The White Paper on Brexit promised to “bring an end to the jurisdiction in the UK of the Court of Justice of the European Union.” The meaning of this is quite clear and correct, we cannot accept, there is no logic in accepting, EU laws and case law over which we have not influence. Cameron understood this; the Remain camp used to understand it. Creating a complex system by which EU law is passed directly into UK law with a fig leaf disguising our subservience is the old way – it is the EU way. It is not a way followed in the majority of the world’s trading nations, including when they conclude EU trade agreements. It would be odd indeed if it was resurrected for the UK.