4 July 2001

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What Labour is not saying about close relations with the EU

By Kurt Sansone

If Malta embarks on the Labour Party’s ‘Switzerland in the Mediterranean’ option it may have to conform to the same EU legislation that Labour is criticising at present.

An investigation carried out by The Malta Business & Financial Times into the agreement reached between the European Union and three non-EU states, Norway, Iceland and Liechtenstein revealed that the co-operation included the free movement of workers, the removal of levies and the elimination of state aid.

Norway, Iceland and Liechtenstein are members of the European Economic Area (EEA) which is the closest relationship any country can have with the EU similar to what the Maltese Labour Party wants. Opposition leader Alfred Sant has for more then once trumpeted the arrangements reached by Norway and Iceland as role models for Malta’s relationship with the EU.

The arrangement that these three small countries have explicitly deals with the free movement of goods, persons, services and capital, referred to as the ‘four freedoms.’ This means that if Malta opts to have the closest possible relations with the EU instead of membership, it will still have to adhere to the ‘four freedoms’.

In the first instance, levies and protective taxes will definitely have to be removed. The EEA states that no country ‘shall impose, directly or indirectly, on the products of other Contracting Parties any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.’

This means that the Labour Party will have to remove levies that protect local industry, such as furniture manufacturers, and retain VAT to make good for the loss of revenue from levies.

The EEA agreement signed by Norway, Iceland and Liechtenstein makes specific reference to the free movement of workers. In Article 28 the EEA states that ‘Freedom of movement for workers shall be secured among EC Member States and EFTA States.’

Such an arrangement blows the top over the Labour Party’s scare mongering on the invasion of EU nationals once Malta joins the EU. If Labour opts for the closest relation possible with the EU, Malta will still have to grant the right to EU citizens to come and work and live in Malta.

Another torn in Labour’s side is the issue of state aid. The argument put forward by the MLP is that EU membership would spell the death of state aid to the Drydocks and Shipbuilding. However, the agreement reached by Norway, Iceland and Liechtenstein makes it clear that the same rules that apply for EU Member States, apply also for their situation. Article 61 of the EEA states that any state aid that distorts or threatens to distort competition is ‘incompatible with the functioning of the Agreement.’

To the Labour Party’s credit, Malta may get some reprieve in the agricultural and fisheries sector as it is considered to be a sensitive issue. It is worth noting that fishing is an important economic activity for both Iceland and Norway.

However, Article 19 of the EEA states that the countries involved have to continue working to achieve ‘progressive liberalisation of agricultural trade.’

The EEA also covers areas of social policy, consumer protection, the environment, company law and statistics. In most of the areas covered by the agreement Norway, Iceland and Liechtenstein have adopted the EU's rules lock stock and barrel.

It is evident that a similar arrangement for Malta would mean that most of the legislative and administrative changes being done at present would still have to be implemented. Malta’s participation in the EEA would mean that the EU Commission would consult Malta during the formulation of Community legislation. However, Malta would not have the right to participate in the decision-making process of the EU. At the end of the day the Islands may end up mopping up EU legislation without having a say in its drafting.

Last year the Joint Commission that oversees the implementation of the EEA agreement made 114 decisions on areas where the three participating countries had to implement changes to their respective national legislation.

Historically the EEA was agreed to in 1992 and implemented in 1994. Initially the agreement also covered Austria, Finland and Sweden, which have since become EU member states. Switzerland decided not to participate in the EEA and its relations with the EU are based on the free trade agreement reached with the European Community in the 1970s.

Switzerland’s arrangement still envisages a ‘no barrier to trade’ philosophy. Recently talks were underway to ensure the free movement of workers between EU member states and the alpine nation.

Alternative arrangements with the EU can be reached within the programme for Third Country Relations. Morocco, Tunisia and Israel have arrangements with the EU on the basis of this programme. Malta’s economic, social and political status, make it an over qualified candidate for such relations. Furthermore, the EU wants to see the third country relations developed into a closer relationship similar to the EEA, in the future.

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt