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UK rejoin the European Free Trade Association (EFTA) after Brexit?

With the Brexit clock ticking ever louder, the need to plan the UK’s future relationships with not only the EU but other trading partners too becomes more urgent. One option is to seek membership of the European Free Trade Association (EFTA), the grouping comprising Norway, Switzerland, Iceland and Liechtenstein.

This would provide some continuity in terms of preferential access to a not insignificant market for UK goods. EFTA accounts for 8.5% of UK exports. Membership should also, through EFTA’s free trade agreements with 38 countries, provide preferential access to a range of markets without the UK having to negotiate new bilateral agreements. Plus, securing EFTA membership would facilitate participation in the European Economic Area(EEA) if the UK wanted to pursue this post-Brexit. EFTA membership does not entail EEA membership, but only EU and EFTA member states can currently be contracting parties to the EEA Agreement.

This raises the question of what is the process for joining EFTA, an organisation of which the UK was in fact a founding member in 1960 and which it only left in 1972 to join the European Community.

Article 56 of the EFTA Convention sets out the formal requirements. It states:

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.

It later adds that:

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.

Joining EFTA is therefore a relatively straightforward process. It is essentially left to the EFTA Council – ministerial representatives of the four EFTA member states – to decide whether a state can join the EFTA Convention. Each member state has a vote in the council. Provided there is unanimity, the applicant can be admitted.

Terms and conditions

The main focus of the council decision is the terms and conditions of accession agreed with the applicant state. These cover the obligations contained in the EFTA Convention and its assorted annexes. The focus is on the liberalisation of trade between EFTA states, so includes provisions on the abolition of tariffs and quotas as well as on rules of origin and various customs matters.

Following revisions to the EFTA Convention in 2002, agreement would have to be reached on commitments regarding the liberalisation of investment and trade in services between member states as well as arrangements flowing from provisions on various issues including agriculture, intellectual property rights, movement of persons, air and land transport and social security. The council’s decision would also need to cover the contribution of the acceding state to EFTA’s annual budget. This is currently just over 22m Swiss francs (roughly £17m).

Plus, a new member state has to apply to join the various trade agreements that the EFTA states have concluded with third countries. These currently provide for free trade with most European states outside the EU, Canada, Mexico, the Philippines, Hong Kong, the Gulf Cooperation Council and the South African Customs Union. Negotiations on additional agreements with India, Indonesia and Malaysia among others are ongoing. Joining EFTA is not per se conditional on actually joining these trade agreements, but on applying to join them. Revisions to those agreements would be part of separate negotiations.

Compared to what is required of states wishing to join the EU, the requirements of EFTA membership are relatively modest. They are though significantly greater than when the UK was member in the 1960s and early 1970s.

Where EFTA also differs significantly from the EU is in terms of its experience of admitting new members. The EU has enlarged seven times to include 22 states beyond the original six that established the European Coal and Steel Community in 1952. EFTA, by contrast, has lost five of its original members (Denmark, the UK, Portugal, Austria and Sweden) plus one subsequent member (Finland), and gained only three. Its experience of processing membership applications is limited.

Moreover, of the three states admitted, Finland (in 1986) was already in an extremely close relationship with EFTA through its FINEFTA association agreement. Similarly, Liechtenstein (admitted in 1991) was closely linked through its customs union with Switzerland. Their accession was therefore relatively straightforward. Meanwhile, the accession of Iceland (in 1970) was almost 50 years ago when EFTA’s focus was essentially on free trade in industrial goods.

The accession process

If EFTA were to receive a membership application from the UK – which could only join once it had withdrawn from the EU – and the EFTA states agreed to proceed with the application, an accession process would need to be devised. Given the more limited scope of EFTA cooperation activities compared to those of the EU, negotiations on the terms of accession could be straightforward, assuming no intractable problems emerged and the consensus on admitting the UK held. What could complicate matters is the nature of any transitional arrangements regarding the UK’s departure from the EU and its customs union. Whether the UK’s withdrawal from the EEA is amicably negotiated could also have a bearing.

The process would not stop with agreement on the terms of accession and the EFTA Council’s green light. The council’s decision would also require domestic approval in each of the EFTA states. The EFTA Convention is silent on the actual approval requirements. With the accession of Finland, the EFTA states were required to give notice that they either accepted the decision “without reservation” or that “their affirmative vote ha[d] been approved in conformity with their constitutional requirements”.

The process by which each EFTA state can provide such notice is for each to determine. Precedent suggests and constitutional requirements provide for a parliamentary vote. No statutory requirement exists anywhere for a referendum, but opting to proceed with a referendum cannot necessarily be ruled out. As for the UK, it would be for the government to ratify. Parliament’s role would be one of scrutiny with the option to block ratification.

From application to accession could take less than a year depending on the timing of an application, the progress of negotiations and domestic parliamentary calendars. The outcome of an application cannot, however, be taken for granted.

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