The European Economic Area
EFTA and the Swiss Option
Britain is the fourth largest economy in the world; we do not need to be part of a European Superstate. Besides there are positive alternatives for Britain with no detrimental effects to our democracy and ability to govern ourselves that should be vigorously pursued.
The European Economic Area
We could opt out of the EU, but remain within the European Economic Area. It comprises the 25 members of the EU as well as Iceland, Liechtenstein and Norway. It offers four freedoms of the single market - of goods, services, capital and people. Its members must adopt single market legislation but they are free of the CAP, the CFP, the fiscal and monetary policy, home affairs policy and foreign and security policy of the EU.
Its advantage is that Britain would not join in further political integration but would maintain access to the single market. However, we would have only a right to be consulted about future single market directives but in disputes about the interpretation of such legislation we would be bound by the jurisprudence of the ECJ. We would also have to pay into a number of cohesion and structural funds. There are merits in the EEA option but given the need for compliance with single market legislation and the ballooning budgets of the EU there would be significant burdens too. There are probably better deals on offer that can be achieved in the long-term.
EFTA and the Swiss Option
There is the Swiss option of a free trade agreement with the EU. Access to the single market entails more paperwork but the obstacles are not insuperable. Swiss exports to the EU constitute 63 per cent of its total exports and 15 per cent of Swiss GDP - much higher figures than ours. Growing trade for the Swiss has not required political integration and, importantly, they are not bound by single market legislation.
EFTA, the European Free Trade Association, is the option that promises to generate the ‘independence dividend’ estimated by the Civitas study to be in the region of £20bn to £30bn p.a.
It was created by the UK in 1960 specifically as a counterbalance to the Common Market. The other original signatories were Austria, Denmark, Norway, Portugal, Sweden and Switzerland. EFTA later expanded to include Finland, Iceland and Liechtenstein. Gradually its members have drifted away to join the EU, so that today all that remains of EFTA are Iceland, Liechtenstein, Norway and Switzerland (the first three being simultaneously members of the EEA).
As long ago as 1972, the EC signed agreements with EFTA members, setting up a free-trade area of over 300 million consumers. But nowadays the organisation is overshadowed by the EEA, to which all EFTA members bar Switzerland belong.
EFTA has concluded free trade agreements with Bulgaria, Chile, Croatia, Israel, Jordan, Macedonia, Mexico, Morocco, the Palestinian Authority, Romania, Singapore and Turkey. It is presently negotiating a free trade agreement with the Republic of Korea.
In early May 2004, in a desperate attempt to cow the British electorate, Pascal Lamy, then the Small Trade Commissioner, warned that if Britain dared to vote No in the referendum, the nation would become “like Switzerland”. Intrigued to discover what dreadful fate lies in store for the United Kingdom, The Daily Telegraph despatched Graham Turner to the Confederation to find out. He discovered a nation which was concerned at an unemployment rate of 4%, whose inflation rate had just risen (to 1%), and whose citizens are ‘burdened’ with a VAT rate of 7.6%. For a Swiss leader to even mention the EU is political suicide. Michel Dérobert, General Secretary of the Swiss Private Bankers Federation, said that he expected that in a few decades the EU would either collapse or mutate into a genuine free trade area. Edouard Brunner, one-time Swiss Foreign Minister and also ambassador to first Washington and then Paris, stated baldly that Swiss bankers will not lend to the EU because they have no idea where the money goes.
What are the debits on the balance sheet? There are two. In trading with the EU, the Swiss have to adhere to preferential rules of origin to distinguish products sourced from the free trade area and those that originate outside it. In practice, these can be complex and burdensome. Secondly, the Swiss option provides only for free movement of goods - not of services, capital or people. This would jar with many British people and businesses. As an existing EU member, we could well obtain a different and better agreement.
A third option would be to seek to join the North American Free Trade Association. It is already negotiating with the European Free Trade Association and with Chile. Its culture, distinctively Thatcherite, fits more neatly with Britain's experience than the corporatist dirigisme of the EU. The combination of low taxes, restrained public spending and labour flexibility in the United States and Canada has created 2 million more jobs per year than the European Union for 15 years. Moreover, measured over the last 25 years and allowing for German unification, the USA has created almost five times as many jobs as the EU. Newt Gingrich has signalled enthusiasm for British involvement in Nafta and as US anxieties about a fudged single currency and EU protectionism grow the link becomes daily a more serious proposition.
Intriguingly, as long ago as August 2000, the US International Trade Commission published a report entitled The Impact on the US Economy of Including the United Kingdom in a Free Trade Arrangement with the United States, Canada and Mexico, so clearly those on the other side of the pond have been considering the implications of the UK leaving the EU for nearly as long as have in Britain.
The other alternative is not to confine ourselves to one agreement but to use our position in the EU and our influence outside it to secure our interests. They are served by the widest possible free trade and international engagement. We have nothing to fear from global free trade, towards which the world is gradually moving, and everything to gain from it. The most important challenge for Britain is to build her trade relationships with North America, the Asia Pacific and China.
Allied to a crusading internationalism in trade and diplomacy is the self-confidence to preserve our own institutions. Where other countries have suffered dictatorship, civil war or foreign occupation the British experience has fortunately been different. What some see as insularity by Britain is a justified attachment to the way in which we run our affairs. Napoleon said that a nation's policy is determined by its geography. If that is so we do well to remember that Britain is not at the heart of Europe but on her western edge.
Policy needs also to be determined by successful history and present need. In the spirit of liberty, democracy and the pursuit of prosperity, we need for the second time since 1945 to reverse a ratchet. Keith Joseph and Margaret Thatcher identified the socialist ratchet that undermined our prosperity at home, lowered our esteem abroad and sapped our faith in ourselves. They set out to reverse that ratchet and they succeeded. Today the task is to recognise that there is a ratchet for European integration. As the federalist juggernaut speeds ahead, ever more power is taken from the peoples of Europe and handed to unelected bankers, bureaucrats and judges.
The people of Britain will never knowingly consent to be governed by those who do not speak their language, live in their country or depend upon their votes. The power of self-government, the right to hire and fire our rulers and the capacity to chart our own destiny are inalienable birthrights. They should not be traded in for a mess of pottage otherwise known as a back row seat at a show called "The Heart of Europe". Our destiny is surely as a self-governing nation, which trades freely with the world. The future is bright; the future is global. Our success in it is dependent upon the vision, self-confidence and calibre of our leaders, our businesses and our workforce.