There is life beyond the EU

After drifting around the galaxy, EFTA sounds like a more viable alternative for an independent Catalonia

In its intergalactic voyage powered by the Declaration of Independence, Catalonia drifts through the galaxy alone and isolated, without international recognition, kicked out of the European Union (EU). But beyond the alliance of European nations, tiny Catalonia finds new life. Specifically in a nebula that has recently been on everyone’s lips: EFTA, a club of European states that could be a viable alternative to spend eternity.

EFTA stands for European Free Trade Association and it is made up of Iceland, Norway, Switzerland and Liechtenstein. It is a bloc of states that are not in the EU but that have a strong connection to it. They do not want to be part of the EU, but they share its social and free-trade area. The UK, Portugal, Austria, Denmark and Sweden have all participated in the group. All the EFTA countries -except Switzerland- are also part of the European Economic Area (EEA).

The EEA is the agreement that allows member states of the EU and EFTA (except Switzerland) to participate in the EU’s internal market. That means that they benefit from the free movement of people, goods, services and capital. The EFTA states benefit as if they were part of the EU, and in exchange they adopt most EU law and do not receive European funding, but nor do they have to contribute, like EU members have to. What is true is that EFTA helps fund the single market.

According to economist at the Pompeu Fabra University and the European Institute at the London School of Economics and Political Science, Elisenda Lamana, “EFTA companies have their own agreements, which allow them to trade and carry out economic exchanges and make investments without any restrictions because EFTA is part of the EEA.” Therefore, the companies located in these countries “have access to the single market, not to all of it but to a large part,” while Swiss organisations have "bilateral agreements”.

Citizens “can also go there to look for work or to study, to retire or settle if a family member already works there,” says the expert, agreements that Switzerland also has.

Lamana: "EFTA is interested in having 7 million people in its market and a Mediterranean port”

The EFTA countries do not apply the EU’s foreign, agricultural, fishing or trade policies and are free to negotiate bilateral agreements with countries in the rest of the world.

So why does the EU allow EFTA to exist? Why can’t the EFTA states be part of the EU? The EFTA countries are not interested in being in the EU because they have “competitive advantages that they wouldn’t have if they were in the single market.” Lamana gives the example of Switzerland: “It is a tax haven. If it were to enter, it would not longer be one. Norway is a fishing power but if it were in the single market the EU would apply all the rules of its common fishing policy.”

However, Lamana warns that “Catalonia right now cannot offer any competitive advantage," but EFTA is interested in "including 7 and a half million people in its market and having a Mediterranean port.”

Yet, could the new state become a member? Absolutely. EFTA’s founding agreement says that to become part of the group all you need is to be a state and for the council to accept you. All that is needed is political will, while the Spanish State would not be able to prevent it and could not block the relationship between the EU and this club of states. In fact, the number three of the association of states, Georges Baur, said in 2013 that should the EU close its doors to an independent Catalonia, an alternative would be to become part of EFTA.

Small states and cooperation

Baur stated that an independent Catalonia would be "viable" if it were to safeguard its exterior markets and its current export conditions. Baur warned that being outside the EU would make things difficult in Catalonia, especially in the institutional sphere, if not so much in the area of trade, as the rigidity of some institutions become "diluted" by the economic interests of member states.

Baur: "The rest of the European countries are not interested in breaking off trade relations with the Catalans whatever the political situation"

The deputy secretary general of EFTA recognised that Catalonia is an “industrial bastion” inside Spain. That is why he thinks that the rest of the European countries, especially the French neighbours, are not interested in breaking off trade relations with the Catalans, whatever the political situation. "In my experience dealing with the EU and the member states, I have always seen the institutions as stricter, and that is diluted by the member states, which need a more realistic point of view." He thus thinks that the rest of the countries would probably decide “it makes no sense” to break economic ties with Catalonia.

So, maintaining the country’s exterior markets would be key to success, says Baur. Not only because of its commercial and industrial fabric, but also because of its financial sector, he says. For small states to survive -according to some definitions, those with under 10 million inhabitants- it is vital for them to have "access to the free market," points out Baur, who is from Liechtenstein, a country with a population of 36,000 people.

EFTA’s number three insists that countries like his have a great "feeling for cooperation", because they need to survive. Liechtenstein, for example, has no armed forces and, although it is not part of the EU, has signed up to a number of international treaties, such as Schengen.

Outside the Galaxy

But in the case of a new internationally recognised Catalan state being boycotted by everyone, what would happen on the level of trade? “When you are out of it, drifting through the galaxy, if you are internationally recognised, then they apply the Most Favoured Nation norms of the World Trade Organization. That means they apply trading conditions that are more favourable compared with the rest of the countries,” says Lamana. These norms have been reducing the tariffs between the countries that are part of it, which is just about all of them in the world. Therefore, “they cannot apply a tariff that is larger than that of any other country;” if Catalonia “wants to trade with Ethiopia and it applies a 5% tax on French products, then Catalan products will apply this tariff at the least,” explains the expert.

“Catalonia would be seriously affected, it could trade, yes, but even its neighbours would apply the tariffs,” she adds, warning that “it makes no sense at all, if it is a political issue.” Lamana also explains that what could be done is to try to "make one-off agreements with certain products, but these treaties are very costly because today it takes years to seal them, because the issue it is hard to deal with are legal, quality standards, etc.” And, right now, “Catalonia has no powerful diplomatic body to negotiate.”

“Catalonia could be a member of EFTA, but taking the step to recognise it means having a problem with Spain. And in the first few months it will also be quite a conflictive issue. These countries would have to reach agreement, there aren’t many of them,” she points out. Therefore, she says that “it is easier to get into EFTA than the EU.” And that would be “a big step that could help with many things. You get into the EEA and the single market, which should be the aim on the economic level, says Lamana.

Catalonia has to be recognised. If the EFTA countries were to do so, perhaps the rest of the countries would follow suit,” she concludes.

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