Meeting of the Iceland Chamber of Commerce and the European Commission Delegation to Norway and Iceland
Honoured guests,
I would like to express my gratitude to the Iceland Chamber of Commerce and the European Commission Delegation to Norway and Iceland for their initiative in organising this meeting.
The relations between Iceland and the European Union are very much in the public eye these days, and there is little doubt in anyone’s mind of the need for open and rational discussion of Iceland’s future with regard to its neighbours in Europe.
Through its membership of the European Economic Area, Iceland is a participant in the co-operation between the Member States of the European Union. Nevertheless, there are important aspects of the co-operation that fall largely outside the scope of the Agreement, such as agriculture, fisheries, foreign affairs, economic matters and monetary matters. Like the other EFTA states that form a part of the European Economic Area (Norway and Liechtenstein), Iceland is not a member of the European Customs Union. Unfortunately, there has been far too little discussion of this last issue, and that gives us special reason to welcome this meeting here today.
The EU trade policy
The European Union is a steadfast proponent of free trade in the world. One of the principal aims of the founding states of the European Economic Community, apart from securing peace in the region, was to promote trade among the European countries.
The EU trade policy is based on a number of factors. The Treaty of Rome states that the trade policy is based on the principle of “an open market economy with free competition.” The trade policy is also reflected in a common internal market and the four freedoms. Furthermore, the joint customs union with respect to third countries also forms a basis for the Union’s trade policy.
The European Union is the world’s largest trade bloc, accounting for a 20% share of the world trade in goods, followed by the United States with 16% and Japan with 9%. The sheer size of the European Union gives it a dominant negotiating position and secures for undertakings within the Union generally better terms in trading with third countries.
The objective of the European Union has been to ensure that undertakings in the Member States are able to operate on a fair basis within and outside the Union. The EU Trade Policy covers, among other things, goods, services, intellectual property rights and investments, and the Union has, through its size and strength, promoted increased world trade.
Increased world trade is generally for the benefit of both enterprises and consumers, as it results in an increased variety of goods and competition between importers and domestic manufacturers. It also lead to lower prices of goods and improved quality of life.
The European Union’s trade policy is closely related to its development policy. Thus, the EU has granted to most developing countries tariff-free importation to some extent, or granted special access to its markets. In addition, the Union has gone still further as regards the 49 poorest countries in the world, as on the basis of an initiative begun in 2001, goods from these countries, other than weapons, are tariff-free in the European Union.
Iceland’s position within the EEA
Formally, the EEA Agreement does not restrict Iceland’s freedom to enter into international trade agreements. The preamble to the EEA Agreement stipulates that the Agreement does not restrict the decision-making autonomy nor the treaty-making power of the Contracting Parties, subject to the provisions of the Agreement and the limitations set by public international law.
The conclusion of the judgment of the EFTA Court in the MagLite case in 1997 confirms that the EEA Agreement does not entail a common commercial policy with respect to third countries and does not establish a customs union. The Court also pronounced a judgment to the effect that the EFTA states had not relinquished its powers of concluding treaties and agreements with third countries to any supranational organisations, so that they were free to conclude trade agreements with third countries.
The reality, however, is that many provisions of the EEA Agreement have the effect that there are in fact limits on the material scope available to the Contracting Parties of the EEA to enter into agreements with third countries. This is due to the fact that any discrepancy between the policy of the EFTA States, on the one hand, and the European Union, on the other hand, could have a negative impact on the trading environment of undertakings in the EFTA States.
Accordingly, the three EFTA States in the European Economic Area have made an effort to follow in the wake of the European Union in their trade agreements with other countries. However, EFTA’s new free-trade agreement with Canada is an exception. In concluding free trade agreements, Iceland usually benefits from being in the company of the other EFTA States, although the current free trade negotiations with China can be mentioned as an example of the contrary.
Future policy for Iceland
The policy of the Icelandic government is to promote free trade in the world to the extent possible. The objective must be to remove as many trade barriers as possible and thereby simplify the lives of consumers and enterprises, increase competition, reduce the prices of goods and increase variety of choice. These objectives can be achieved, among other things, by facilitating imports and exports of goods and by supporting the cross-border expansion of enterprises by all available means.
It is clear that Iceland’s interests are in good harmony with basic EU policy in this regard. Closer co-operation involving participation in the European customs union would provide Icelandic undertakings with still better access to markets around the world.
In some cases, Iceland has better market access than the EU Member States, and therefore there is no easy answer to the question of whether membership of the European Union would have positive consequences for Icelandic export companies. In the long term, the answer will largely depend on the extent to which account would be taken of Icelandic interests in the European trade policy in the event of Iceland joining the Union.
I truly hope that this meeting today will bring us somewhat closer to answering these questions. At any rate, the debate is in its proper course and the outlook is for a flourishing discourse here in Iceland on the subject of Europe.