Richard Gupwell is Stourbridge Labour’s new Political Education officer. Richard has lived and worked in Brussels for the majority of the last 45 years, starting off as an intern with the European Commission before becoming an administrator for the Secretariat-General of the Commission, and then a political adviser to the Socialist Group in the European Parliament. He also co-founded the European Institute for Asian Studies (EIAS) in 1989.
Back in June, before the referendum, Richard wrote an essay on the UK’s place in the European Union. Recently, he kindly made his essay available for the party to circulate. Reproduced below is the section of the essay that is most crucial for us to understand going forward given the outcome of the vote – the market options available to the UK during exit negotiations with the EU.
After the referendum, Shadow Chancellor John McDonnell laid out Labour’s negotiation demands: defending workers’ rights, protecting EU residents in the UK and vice versa, continuity of a single market, a seat at the European Investment Bank and EU passporting rights for the UK’s financial services.
It is important that as Labour members we fully comprehend the related issues, and so we are extremely fortunate and appreciative to have Richard’s expertise in Stourbridge CLP.
The Option of the European Economic Area
The United Kingdom can retain access to the European Single Market either by continuing to be a Member State of the European Union or by being within the European Economic Area without being a Member State of the European Union. The countries which are inside the European Economic Area, without being EU Member States, are Iceland (population 321,857, Gross Domestic Product, in 2012, €10,628 million), Liechtenstein (population 36,842, GDP, in 2011, €4,383 million) and Norway (population 5,051,275, GDP, in 2012, €388,866 million).
After the European Economic Community (EEC) had been established between Belgium, France, Germany, Italy, Luxembourg and the Netherlands, in 1957, with the aim of together creating a “common market”, the United Kingdom and six other countries (Denmark, Norway, Sweden, Austria, Switzerland and Portugal) established the less ambitious European Free Trade Association (EFTA), in 1960. When the United Kingdom, Denmark and Ireland joined the EEC, in 1973 (having originally applied to join in 1961), the EEC then negotiated individual free trade agreements with the remaining members of EFTA.
However, when, in the mid-1980s, the EEC, by now enlarged to include Greece (in 1961) and Spain and Portugal (in 1986) then took steps to develop the “common market” into a real European Single Market, to come into effect at the beginning of 1993, the remaining EFTA member countries (including new members) requested that their free trade agreements be developed, in order to allow them to have access to the new Single Market. The result was the European Economic Area Agreement, of December 1993, signed between the EEC and its Member States, on the one hand, and Austria, Finland, Iceland, Liechtenstein, Norway, Sweden and Switzerland, on the other. Subsequently, Austria, Finland and Sweden became Member States of what was now the European Union, while the people of Switzerland voted in a referendum not to join the European Economic Area (EEA).
Membership of the EFTA/EEA is a kind of half-way house to being a full Member State of the European Union. It provides these three EFTA member countries with the free movement of goods, services, capital and people, with the EU rules governing competition and state aids, as well as other EU regulations and directives, being applied. It also provides cooperation with the EU for research and technological development, information services, education and training and youth policy, employment and civil protection and other EU programmes. However, it does not cover participation in the EU’s Common Agricultural Policy or the Common Fisheries Policy, nor the Common Foreign and Security Policy, nor the Justice and Home Affairs Policy (although these can be covered by individual bilateral agreements with the European Union). Moreover, the EFTA/EEA member countries are obliged to contribute towards the EU Budget, in order to participate in the reduction of economic and social disparities within the EEA. Several thousand legislative acts of the EU have been extended to the EFTA/EEA countries, although these three countries do not participate in the EU Institutions – the Commission, the European Parliament and the Council – which adopt this legislation and, therefore, they have no real influence on the framing of the laws, which they then have to respect.
While some in the Leave Campaign have referred to this option, others have dismissed it because EFTA/EEA membership includes the free movement of people, which means that citizens of EU and EFTA/EEA countries would still have the right to come to the United Kingdom in search of work.
The alternative to EFTA/EEA membership, which would have to be first negotiated with the European Commission and then accepted by the EU Institutions and all the Member States, would be for the United Kingdom to attempt to negotiate a bilateral agreement with the European Union outside the EEA altogether. Given past experience, it could not be guaranteed that such an agreement could be successfully concluded within the two-year period of negotiations, foreseen under Article 50 of the EU Treaty (as modified by the Treaty of Lisbon), for a Member State, which has formally announced its intention to leave the European Union. This two-year period may be extended should both parties agree. However, failure to obtain such an agreement would leave the United Kingdom in the same trading position as those members of the WTO, which have not negotiated free trade agreements with the EU or are not developing countries, which already benefit from the EU’s Generalised System of Preferences (GSP), by which their products enter the EU’s Single Market either at zero tariff or at a reduced tariff.
— Richard Gupwell, June 2016.