EEA emerges from the doldrums

Date: 01/08/1996

EVEN by the standards of the fast-moving world of international trade relations, the European Economic Area (EEA) achieves the unusual feat of being both very young and somewhat anachronistic.

Designed as a sort of waiting-room for member countries of the European Free Trade Association (EFTA) keen to participate in the Union's single market - but not in its other policies - the EEA, which came into force on 1 January 1994, was overtaken by history even before the first day of its existence.

Of the seven EFTA countries outside the EU, four - Austria, Finland, Norway and Sweden - were busy negotiating full Union membership.

Meanwhile, the fifth biggest EFTA player, Switzerland, had already rejected EEA membership in a popular vote which caused much dismay in government ranks.

To the horror of EEA planners, the outcome of the Swiss referendum in December 1992 left only Iceland as a certain candidate for full EEA membership. For, because of its de facto economic union with Switzerland, tiny Liechtenstein initially had to follow its dominant partner into EEA abstention. (Having renegotiated its customs union with Berne, the principality managed to join the EEA in 1995.) Then the Norwegians came to the rescue.

Despite their leaders' pleading, a majority of Norway's 4.3 millions citizens rejected Union membership in a 1994 referendum, guaranteeing that the EEA would retain at least one non-EU member state with a population bigger than that of a mid-sized provincial town.

Had Norway joined the rush for Union membership, leaving Iceland and Liechtenstein as the EEA's only members, the organisation would almost certainly have been dissolved and replaced with a network of bilateral relationships.

For one thing, the two countries would not have had enough resources to finance the running of bodies overseeing and assisting the EEA's work outside the EU.

For another, the world's biggest free-trade association - the Union - would hardly have been willing to send high-ranking officials to monthly meetings with representatives of two states with a combined population of less than 300,000.

As things stand, Switzerland's No to the EEA and Norway's refusal to join the Union have left the EFTA with an internal organisational structure of mind-boggling complexity.

Within the EU, all is fairly clear.

The areas of cooperation covered by the EEA agreement - essentially the single market shorn of issues such as agriculture and fisheries - are policed by the European Commission, with the brunt of the work falling on the Directorate-General for competition (DGIV).

As with internal Union matters, the Commission's decisions can be legally challenged before the European Court of Justice in Luxembourg.

But a look at the three supranational bodies responsible for the EEA's smooth running in Norway, Iceland and Liechtenstein reveals a picture where names alone spell confusion.

Oslo, Reykjavik and Vaduz jointly fund a Brussels-based independent surveillance authority, whose main task is to enforce the EEA rules, akin to Union law, on their national territory.

Confusingly, this body is known as the EFTA Surveillance Authority (ESA), although EFTA member Switzerland neither participates in its funding nor falls within its remit.

The ESA, in its turn, is supervised by the similarly misnamed EFTA Court of Justice, which is soon to move from Geneva to Luxembourg and is made up exclusively of Norwegian, Icelandic and Liechtenstein jurists.

The same is not true of the EFTA Secretariat, the only key EFTA institution fully co-funded and co-staffed by the government in Berne, which maintains offices in Brussels and Geneva.

The secretariat's Geneva operation focuses on negotiating trade deals with countries or trade associations outside EFTA, while its Brussels staff essentially assist Norway, Iceland and Liechtenstein in following and influencing the drafting of new EU laws, which in most cases will almost automatically become EEA legislation.

Exerting a crucial privilege little-known outside expert circles, the EFTA secretariat's non-Swiss officials attend or participate in the deliberations of dozens of Commission committees which serve as a first forum for the elaboration of new EU legislation.

Whereas the ESA is keen to stress its formal independence from EFTA governments, which, as its acting President Bernd Hammermann explains, is couched in terms broadly similar to those preserving the autonomy of the Commission, the secretariat explicitly serves the interests of its member states' governments.

However, the Swiss officials' work takes place “in a little bit of a grey area”, EFTA officials acknowledge.

They do not formally participate in EEA activities but, albeit as observers, they do attend meetings of the crucial EFTA standing committee where Iceland, Norway and Liechtenstein establish a common position before their monthly formal talks with their Union counterparts.

These talks, which focus on the extension of new EU legislation to the rest of the EEA, are usually held on the last Friday of the month within an institution called the EEA joint committee.

“Literally hundreds” of other committees deal with the gigantic task of adapting EU and EEA legislation to the swift technological and economic evolution of the European economy.

While this highly-complex two-pillar structure was initially designed for a much more balanced organisation than the EEA is now, with one side of the table representing 320 million citizens and the other a mere 4.5 million, it seems to serve the interests of all of its participants well enough to escape any pressing demands for change.

Flanked by Liechtenstein and Iceland, Norway - which towers above its two partners both economically and politically - can negotiate with the Union as the leading power of a supranational group of countries.

“Within the EEA, Norway can pursue its national interest in a much more effective way than if it were acting alone,” says one official.

And despite Norway's crushing weight, the EEA gives Liechtenstein and Iceland a degree of institutionalised attention from the EU that neither country could even dream of attracting on its own.

Meanwhile, Berne, which is desperately keen to avoid the potentially damaging economic and political implications of its voters' rejection of European integration, uses the EFTA secretariat as a vital outpost for the regular scrutiny of Union policies, gladly co-funding Brussels' activities which apparently benefit Norway, Liechtenstein and Iceland alone.

As officials explain, the Union sees the EEA as a useful tool which ensures the integration of Norway - a fairly important European economy - into the single market.

Despite initial misgivings about the EEA's lopsided twin-pillar structure, diplomats stress that it has so far functioned without any major problems.

The fairly smooth working of the new institutions in 1995, their first year of full operational existence, has been a key factor in dispelling doubts about the EEA's future.

One of the very few areas of serious disagreement so far has been maritime cabotage, with some of the Union's southern member states showing great reluctance to allow Norwegian competitors to ship goods from one EU harbour to the next.

But according to Commission experts, there is little doubt that, in this particular case, it is the Union which is in the wrong.

“We have been exerting strong pressure in our governments to fulfil their obligation under the EEA agreement,” says one official.

While trade experts keen to keep the EEA alive used to speculate about a possible extension of the agreement to Central and Eastern European countries, or to Mediterranean nations outside the EU, most EFTA officials today feel confident enough to predict that grand expansionary designs will be neither needed nor suitable to ensure the EEA's future.

“Both will survive in their present form for as long as neither Switzerland nor Norway take the step of fully joining the EU,” said one official.

And that question is unlikely to be put to either country's electorate again before the century is over.