Deal or no deal: How five non-member states handle EU relations

Like Switzerland, Iceland – whose leaders are pictured here with German Chancellor Angela Merkel – is not a member of the European Union and has no current plans for a future membership. Keystone / Str

With Brexit done, Switzerland is hoping it can restart negotiations on its framework agreement with the European Union. The experience of other non-member states offers some valuable lessons on how it can engage with Brussels, though no blueprint exists.  SWI swissinfo.ch looks at how five other non-member states have negotiated with the EU.

Switzerland is not the only country that balks at the idea of joining the European Union. Iceland worries about fishing rights, Norway about its oil industry, and small Liechtenstein cannot imagine joining the EU without Switzerland. The situation in the western Balkans is the opposite: North Macedonia has been trying to become an EU member for decades but has been constantly held back by its EU neighbours.

No country finds it easy to balance competing interests, as a string of referendums on the EU held in different European countries since 1973 makes clear. Voters and politicians have had to weigh the economic and cultural advantages of close cross-border cooperation against concerns about a loss of sovereignty and individuality.

After saying no to joining the European Economic Area in 1992, followed by its withdrawal in 2016 of an application for EU membership (also made in 1992), Switzerland has focused on a bilateral path. Over the years, numerous cooperation treaties between the EU and Switzerland have been negotiated. But now the EU wants to pursue this bilateral path only if institutional questions are clarified in a framework agreement.

The road taken by other European states which, like Switzerland, are not members of the EU offers plenty of valuable lessons. The key, according to the Icelandic foreign affairs minister, is “to stay focused on the ball, because no one apart from ourselves will look after our interests.”

Britain: Is sovereignty the path to ruin?

Britain managed to secure a trade pact with the EU in December 2020 that ensures exports and imports will not be subject to customs tariffs. But the deal doesn’t encompass services, which account for about 80% of the British economy.

All the same, the Brexit deal stirred some envy among the Swiss population. The foreign affairs committee of the Swiss Senate asked the authorities to shed light on the advantages and disadvantages of the Brexit deal and to compare it with those of the framework agreement between Switzerland and the EU. The Federal Department of Foreign Affairs reached the conclusion that an agreement similar to the Brexit deal would be a clear step backwards for Switzerland.

Following Brexit, Britain now has the loosest relationship with the EU of all the countries examined below.

The EU and the EEA

The European Economic Area (EEA) was created in 1994 with the goal of extending EU internal market rules to the countries of the European Free Trade Association (EFTA). Norway, Iceland and Liechtenstein belong to the EEA. Switzerland is a member of EFTA, but not of the EEA.

Source: European ParliamentExternal link

There was no other solution available to the British, and certainly not the Swiss solution which, just like membership in the European Economic Area, requires a commitment to freedom of movement.

“A key motive for Brexit in Britain was limiting immigration,” said Vernon Bogdanor, a British professor of politics who has just published a bookExternal link on the ambivalent relationship between Britain and the EU.

Matt Qvortrup of Conventry University said that Britain can now make migration policy independently of the EU, but Brexit won’t necessarily lead to lower levels of immigration. Demand for foreign labour remains unabated, said the professor of political science.

In contrast to the Swiss view, Qvortrup sees Britain as a loser in its negotiations with the EU. While the French can still export champagne and the Germans can sell their cars to Britain, services are not part of the deal, and these are important to the UK.

“According to economists’ calculations, that will cost Britain 3-4% of gross domestic product [GDP],” he said.

The Brexiteers’ argument is that the UK has won back its sovereignty. “But this raises the question of whether it is worth paying the price,” said Qvortrup.

Iceland: EU membership no longer on the agenda

Ten years ago, the island state became embroiled in the global financial crisis. Almost overnight, the banking system in this nation of 350,000 people collapsed and the Icelandic currency depreciated dramatically. As a result of the crisis, the Icelandic government of the time submitted an application for EU membership to Brussels and negotiated for three years on an accession agreement.

“It became clear that different interests in fishing industry issues made membership in the EU impossible,” said Icelandic economist Magnús Árni Skúlason. The accession request was officially withdrawn in 2013.

Magnús Árni Skúlason. Bruno Kaufmann

For Icelandic Foreign Affairs Minister Guðlaugur Þór Þórðarson, who is a member of the EU-sceptic Independence Party, the biggest advantage of not being an EU member is the freedom to determine trade policy independently.

“In our case, almost 90% of our entire international trade is customs-free, while in the EU’s case, it’s just 27%.”

Iceland has belonged to the European Economic Area since 1994 and that, Þórðarson says, has served it well. “If I had to choose between leaving the EEA and EU membership, I wouldn’t know how to answer,” said the minister.

Liechtenstein: Never fully sovereign

With a territory of 160 square kilometres and fewer than 40,000 inhabitants, Liechtenstein is one of the smallest countries in the world. The country is closely linked to Switzerland: since the 1920s, the principality has been part of the Swiss customs and economic area and uses Swiss francs as its currency.

At the same time, the microstate has also had good relations with the EU. Since the 1990s, Liechtenstein has been part of the EEA. Joining the EU is not, however, up for debate in Liechtenstein.

“Most politicians see no sense in EU membership given the size of the country,” said Christian Frommelt,External link a director and researcher in politics at the Liechtenstein Institute. “This is particularly true of any accession that would take place without Switzerland.”

Given the close links between the two, it is unrealistic to envisage Liechtenstein joining the EU without Switzerland, he said.

Thanks to its EEA membership, Liechtenstein is more integrated in the EU than Switzerland. The EEA covers more areas of policy than the planned framework agreement – it regulates among other things financial services and the energy market. With the help of a special clause, Liechtenstein managed to retain discretionary powers to control immigration.

As a small state, Liechtenstein has accepted that it cannot be fully sovereign.

“Despite Liechtenstein’s fast adoption of EU law and dwindling scope to control some areas of regulation, I see EEA membership as a strengthening of Liechtenstein’s sovereignty,” said Frommelt. “Through its EEA membership, Liechtenstein has, for example, managed to reduce its reliance on Switzerland.”

Norway: Learning to live with a “democracy deficit”

As the biggest oil exporter in Europe, Norway is one of the richest countries in the world.

Economically and culturally, the kingdom of Norway – independent from Sweden since 1905 – has shared close ties with Europe and twice tried to join the EU as a full member: in 1972 and 1994. Both times, a majority of the 5 million Norwegians rejected membership for fear of losing their independence.

Kate Hansen Bundt. Norwegian Atlantic Committee

Like Iceland and Liechtenstein, Norway chose to join the EEA in the 1990s as a third option. This path of integration has, on the whole, proven worthwhile, according to the Norwegian expert on Europe, Kate Hansen Bundt: “A large majority of Norwegians and most political parties support the EEA today, even if it does commit us to taking on new EU regulations without having a say in them.”

According to Hansen Bundt, the EEA is, for these reasons, “a sub-optimal integration solution with a large democracy deficit.” Her country has, however, learnt to live with that, she said – there is no popular majority for EU membership or for leaving the EEA.

That is unlikely to change in parliamentary elections this year, she added.

“In both possible coalitions – the current centre-right government and the red-green opposition camp – proponents of full membership and advocates for leaving the EEA are about equal.”

There is currently no alternative to staying in the EEA, which was once marketed by the former prime minister Gro Harlem Brundtland as an “emergency solution.”

North Macedonia: Neighbours blocking EU membership

This landlocked country in south-eastern Europe first set out on the path of EU integration at the time of the collapse of the former Yugoslavia. In 2005, the country of just 2 million inhabitants submitted its official application for membership in the Union.  It was accepted as a full member of the NATO military alliance in 2020.

But its formal negotiations on an accession agreement with Brussels remain at a standstill, even though its decades of integration have brought North Macedonia politically and economically much closer to the EU than other applicants in the region, such as Albania, Serbia and Kosovo.

Simonida Kacarska. zvg

“Our main problem is difficulties with neighbouring states that already belong to the EU,” said Simonida Kacarska, who leads the Europe Institute in Skopje, the capital of North Macedonia. “First we had to wait because of a dispute lasting years with Greece over our name, and now Bulgaria is blocking the beginning of accession negotiations because of a historical question relating to our language.”

However, Kacarska warns against giving up the option of EU accession because of these enduring difficulties.

“In comparison with other non-members in northern Europe, we are economically and politically still much weaker, so a majority of people in this country see EU membership as a valid perspective for the future.”