Trade deal complexities pile up as we move to the margins away from the single market says Jim McLean
There two kinds of barriers to international trade states: tariff barriers (or customs duties on imports) and non-tariff barriers, which arise from differences between the laws of exporting and importing states over such things as safety or environmental standards. In a free trade area agreement, tariff barriers are abolished while, for non-tariff barriers, the parties promise to hold discussions and seek agreement on common standards.
A single-market agreement goes further than a free trade agreement. It provides for the free movement of goods, capital, services and people, the “four freedoms”. To secure these freedoms, it provides a framework for states to adopt similar laws so that differing national laws do not constitute a non-tariff barrier. It also gives a basis for legal challenges to a national law that could affect interstate trade more than necessary to meet otherwise justifiable goals of the state that enacts it. To ensure that treaty obligations and harmonising laws have a single binding legal interpretation, a supranational court is established. Its rulings become part of the law enforced by the national courts in all the single-market states.
When trade barriers come down, the costs of social protections for the workforce and other regulations can affect competitiveness. To avoid unfair competition between states with different extents of social protection, the law of, for example, employment protection might be harmonised in the national courts.
There is nothing to prevent any outside state from exporting goods or services to a single-market state, so long as the export complies with the law in the state of import. Where the exporting state a member of the single market, the mere fact of being legally compliant in the state of export creates a presumption of compliance with the laws of the importing state. Any exceptions claimed by the importing state can be challenged in court under single market rules and struck down if necessary.
The European Free Trade Area Convention (Efta) provides free trade but not a single market in Iceland, Norway, Liechtenstein and Switzerland. These – apart from the latter – combine with the EU to form the European Economic Area.
Whenever the EU adopts a new EU-single-market law, a copy goes to the Joint EU/Efta Committee, which usually decides to make the new EU law part of EEA law too. The EEA equivalent of the European Commission is called the “Efta Surveillance Authority” and its supranational body is called the “Efta Court”.
The EU and its member states do not come under the Efta Surveillance Authority or the Efta Court. As this court is committed to follow the interpretations made by Court of Justice of the EU as “homogenisation” the result is pan-EEA uniformity. Switzerland, outside the EEA, has its own set of agreements with the EU. These create a single market in industrial products that meet EU requirements adopted by Switzerland.
There are agreements on public procurement and the cross-border provision of certain services but there is no general agreement on cross-border services. There is also agreement on free movement of persons on the EU/EEA pattern. However a national referendum in 2014 gave Switzerland until February 2017 to introduce new curbs that would limit EU immigration. This limitation would break the existing free movement rights and obligations. The EU/Switzerland Agreements form a package. Breach of any part of the package could call all the rest of it into question.
• Jim McLean is a consultant at Balfour + Manson LLP