Iceland in Europe

23 January, 1998
Iceland in Europe - Speech delivered at CEPS, Centre for European Policy Studies, Brussels:
H.E. Mr. Halldór Ásgrímsson, Minister for Foreign Affairs, Iceland,


Iceland is a European country

General De Gaulle has been quoted as saying that things that go without saying go even better when they are said. I would therefore first like to point out the obvious. My theme today is Iceland in Europe, not Iceland and Europe. It should not be necessary to remind this audience that Iceland is a European country but increasingly the term Europe is taken as a reference to the European Union. This is understandable but wrong. Iceland is as much a part of Europe as any Member State of the European Union, our culture, our history and our economy put us squarely in the European fold. On one of the first draft versions of the new Euro bills there was a map of Europe from which Iceland had disappeared. I am happy to say that in the latest version Iceland is back on the map.

But if our history is clearly European, what about our future?

All the European Member States both of NATO and the OECD either are Members of the European Union or have at one time or another applied to become one. All except Iceland. As the European Union expands and more and more countries apply to join I am often asked if an application from Iceland will be forthcoming. The short answer is no, we are not about to apply. But we still see our future in Europe, we plan to continue to play our role in European integration and strengthen our ties with our partners inside the European Union. Participation in European integration is not a question of all or nothing. There are different degrees of participation. One alternative is the European Economic Area.

Creation of the EEA

Maybe we should remind ourselves of the reasons that lay behind the creation of the European Economic Area. At the time we had on the one side the European Union with its ideals of an ever closer union among its states and a considerable transfer of sovereignty to common institutions. On the other side there were countries that in actual fact were extremely close to the EU countries, not only in economic terms but also in values and identity but still unable for various reasons to accept fully the whole EU package. At the time the European Union accepted that its own goals of peace, security and stability in Europe could best be achieved by accepting a compromise that allowed for limited participation in EU activities by countries outside rather than total exclusion. The fact that one after the other EFTA countries have decided that this was not enough and have opted for full membership, does not change the principle. European integration is not limited to the European Union.

Management of the EEA

The European Economic Area has given us access to the internal market and the possibility to cooperate with the European Union on a wide range of issues. Practically the whole of the acquis communautaire has been taken over and made a part of the national legislation of the EEA/EFTA States. In fact the EEA/EFTA countries have a better track record in implementing EU legislation than most EU Member States. Free movement of goods, capital, services and people is assured throughout the EEA. But co-operation is not limited to the four freedoms. There is a great deal of harmonisation in all areas that have a bearing on the competitive position of undertakings such as social policy, the environment, statistics, company law and consumer protection. In addition we participate fully in the framework programmes and actions in research and development, education, training, tourism, civil protection and the audio-visual sector.

We do not have the same influence on decision shaping as the Member States but we do have the possibility to present our views at an early stage and experience has shown that they are taken into account. The institutional machinery is complex and cumbersome but the EFTA Surveillance Authority has proved to be very effective in monitoring compliance and the EFTA Court has fulfilled its function of providing for dispute settlement.

The European Economic Area does not include participation in common policies such as the Common Fisheries Policy, the Common Agricultural Policy and the Common Trade Policy. This further limits our influence on the EU but gives us on the other hand more flexibility which is necessary as these are sensitive aspects in EFTA/EEA countries.

The Northern Dimension

The economic aspects are well covered in the institutions of the EEA. Alongside a political dialogue has been developed but it has been of a more informal nature. This could clearly be strengthened. A number of regional councils have been created over the past years in areas such as the Baltic, the Arctic region and the Barents Sea. These also provide fora for further contacts and co-operation between the EU and Iceland, sometimes in partnership with the United States and Russia. The North is in many respects a neglected area but it is indispensable for the security of Europe and I am not referring here to military matters but also to the environment. The European Union after the latest enlargement is now clearly a Northern power and will have to participate in efforts to make the Northern hemisphere safe by reducing environmental risks and addressing problems that have accumulated over the last years. We therefore particularly welcome the increased attention given to developing the Northern Dimension in European Union activities. Environmental challenges cannot be met with measures restricted to national or EU territory. International co-operation is required. It is not enough to look inwards. Even the biggest have to look for partners. It is a privilege to be a European, a special privilege to be an Icelander. But we have to share our future with others so we cannot always afford to see things only from the European (or the Icelandic) angle.

Fisheries and the environment

Iceland is of course ready to shoulder its responsibility in this regard. Although not one of the bigger countries of Europe Iceland is in area more than 100 thousand square kilometers or three times the size of Belgium. At home we use to say that the sea is just as much our fatherland as the country itself. In addition to the surface land area the exclusive economic zone within our fishing limits is about 760 thousand square kilometers. In regional fisheries organisations such as NEAFC and NAFO we have of course co-operated with the European Union. With the Member States of these organisations we have reached agreement on the joint management of fisheries of certain stocks in international waters. These bodies are now being strengthened after the conclusion of negotiations on the UN Convention on Straddling and Highly Migratory Fish Stocks. Iceland and the European Union have also co-operated with Norway and others in the management of the Icelandic-Norwegian herring stock. In the United Nations framework we have sought the assistance of the European Union in our efforts to mobilise the international community to combat the accumulation of persistent organic pollutants in the northern seas.

Importance of EFTA

The European Economic Area was designed to accommodate seven EFTA countries. Now there are only three left as three have joined the European Union and one has rejected the EEA. I will not deny that this has caused problems but these problems have been overcome. EFTA may be much smaller than before but its external trade still represents 3.1% of world trade, a bigger share than China. EFTA's population is only 3% of that of the European Union but its exports are equivalent to 17.4 of those of the European Union. EFTA is the European Union's second largest trading partner, after the USA. EFTA first started out as an alternative to the European Union; it later served as a stepping stone or a halfway house for countries that later joined the European Union, such as the UK, Denmark, Portugal and recently Austria, Finland and Sweden

The EEA works for the European Union, for Iceland, Liechtenstein and Norway. It will continue to work as long as the political will is there on both sides to make it work. But we will have to be ready to adapt to changing circumstances; to allow the EEA to develop. What was by some considered to be an interim solution may turn out to be a long term one.

There have been encouraging developments so far. The EEA agreement is constantly evolving, new legislative acts are being added and over a hundred new decisions were taken last year. Many of these are modifications of existing acts but there have been new departures. Maritime cabotage that was not part of the original agreement has now been included and preparations are well underway to include veterinary border controls. This has a particular importance for Iceland given the relative weight of fisheries products in our exports.

Future of the EEA

The EEA will develop, both as the European Union changes its structures and also with enlargement. In article 128 of the European Economic Area Agreement it is stated that "Any European State becoming a member of the Community shall, and the Swiss Confederation or any European State becoming a member of EFTA may, apply to become a Party to this Agreement". The new Member States of the European Union will inevitably be a part of the EEA. Any enlargement of the EFTA pillar is more doubtful. Switzerland has always, formally at least, kept the option of EEA membership on the table just as it has not withdrawn its application for EU membership but has made no moves to follow up these options. The prospect of other European countries joining EFTA is very distant, to say the least. Any enlargement of the EEA will therefore happen through the enlargement of the European Union. Individual elements of the EEA Agreement may on the other hand prove to be a source of inspiration in the years ahead in the long adjustment process of EU new member states.

Association with all three EU pillars

Iceland is closely associated with all three pillars of the European Union. Most of the issues that fall under the first pillar are covered by the EEA Agreement. Matters of foreign policy and security in the second pillar are not only dealt with in the EEA-political dialogue but as a full member of NATO and associate of the Western European Union we maintain very close political ties with individual Member States of the European Union. In 1996 we concluded a co-operation agreement with the Schengen countries that we confidently expect to become the basis for our co-operation with the European Union on third pillar issues. In all three pillars we have the possibility to maintain and develop very close relations with the EU.

The CFP; the main obstacle to membership

Iceland is relatively satisfied with the EEA Agreement and there is little political or economic pressure for applying for membership. But membership has never been rejected by the people nor excluded as a matter of principle by the government. The issue has not polarised public opinion and divided it into two opposing camps as was the case in Norway. But then the case has never been put to the people and in my opinion there is no possibility to do so before we have settled the question of how we could stand outside the Common Fisheries Policy. Fisheries. As it is the European Union is bound to change considerably in the years ahead. Iceland will bide its time and follow developments closely.

As you have heard the main obstacle to Iceland becoming a member of the European Union is the Common Fisheries Policy. Iceland shares with the European Union the goals of sustainable development, the optimum utilisation of resources and increased stability in the markets. But in all modesty we believe that our own fisheries policy has been rather more successful in achieving these goals than the Common Fisheries Policy of the European Union. I recognise the fact that the task has been more difficult for the European Union for historical and other reasons but it has by no means been easy for us in Iceland to arrive where we are now. We have had to exercise considerable self-restraint. It can be said that we were doomed to succeed because without an efficient fisheries sector we would not be able to run a modern society. We have no problems with competing on the European markets as long as this is on equal terms. For us fisheries should be treated in the same way as any other industry with full and free competition. The European Union, as well as most of its Member States has on the other hand tended to see fisheries as a regional issue where problems are solved with subsidies and state intervention. Fisheries simply do not carry the same weight in policy discussions within the European Union as in Iceland. The European Union can afford to run fisheries more from the social angle than the economic one and this has hindered the sector's development. A more liberal approach would give better results. I suspect that this will also become apparent in the upcoming negotiations on agriculture with the aspiring Member Countries from Central and Eastern Europe.

Importance of fisheries

Iceland depends on fisheries more than any other European nation. More than two thirds of our merchandise exports are fisheries products. We are understandably not inclined to take any chances when our economic survival is at stake. We can be depended upon to take good care of our resources, they are our future. The fishing grounds around Iceland have supplied the European market for centuries. Icelandic stockfish was a popular commodity on the Brugge marketplace in the fourteenth century and Iceland remains today the number two supplier of fish products on the European Union market. At times this has been at considerable risk to Icelandic sailors. Although Iceland was officially neutral during World War II many Icelandic fishing boats, supplying the British market were shot down. In fact Iceland lost more lives per capita than the United States during that conflict. Over the centuries Iceland has been a reliable source of seafood for the continent and its importance in this respect is likely to increase rather than diminish. I believe that the fisheries policy we have ourselves developed is the most appropriate to yield optimum results and that this will in the end be to the European Union's advantage.

But even if the European Union adopted our own fisheries policy the Common Fisheries Policy would still be an obstacle to Iceland's membership. The fundamental difficulty would still remain that decisions on quota allocation and management of resources would be finally taken in Brussels. I don't think that the UK would accept that decisions on North Sea oil would be taken in Brussels or that the Finns would leave decisions on forestry management to the Commission. Fish is much more important for Iceland than oil for Britain or timber for Finland. Important decisions should not be taken too far away from the people who depend on their outcome. This has been proved many times in history. I believe this principle goes by the name of subsidiarity in European circles.

Iceland became independent early this century and we celebrated the fifty years anniversary of the Republic in 1994. During this time we have managed in Iceland to build up a prosperous, modern society. This is in large measure due to the fact that we have ourselves taken control of our destiny. We are ourselves responsible and have nobody to blame but ourselves if things go wrong. If this responsibility is either taken away or diminished it will without doubt damage our society and impair our possibilities to be an active and constructive partner in Europe as a whole.

It is not the first time that fisheries have proved to be an obstacle for Iceland in European integration. Disputes over fisheries limits were one of the factors that delayed Iceland's participation in European free trade co-operation in the sixties and seventies. At that time a solution was found that allowed us to proceed. The present modus vivendi with the European Union on fisheries issues should also make sure that further developments of our co-operation are not blocked.

Schengen

Within the Nordic countries there has been a passport union that has worked well for over forty years. In this area the Nordic countries were pioneers as this was established well ahead of Schengen. But this also meant that if Schengen were to be extended to the Nordic countries, all of them would have to join at the same time in order to avoid splitting up the Nordic passport union. As Iceland and Norway are not members of the European Union we could not become full members of Schengen but a solution was found and a co-operation agreement signed in 1996 with the Schengen countries that gives Iceland and Norway full participation in all Schengen meetings. This has worked very well and when the technical preparations have been completed for the inclusion of the Nordic countries into the Schengen information system, passport controls at borders will be abolished in the wider area of Schengen and the Nordic countries (probably in the year 2000).

When the decision was taken in Amsterdam to incorporate Schengen into the European Union it was confirmed that co-operation with Iceland and Norway should continue on the basis of the 1996 agreement. Talks have unfortunately not yet started but we hope that we can settle quickly any outstanding institutional questions. The political commitment is there on both sides to find a solution.

EU enlargement

The European Union now faces the historic challenge of enlargement. Iceland has through EFTA concluded free trade agreements with all of the applicant states in Eastern and Central Europe and talks are underway with Cyprus. As these countries join they will become a part of the European Economic Area and by consequence enter into an even closer co-operation with Iceland. We welcome this and through EFTA we have contributed to the efforts underway to prepare these countries for the transition to a free market society. The negotiations will inevitably be between the European Union and the applicant countries but the results will directly affect the European Economic Area. Ways will therefore have to be found that would allow us to follow these negotiations and present our point of view. To take an example, if one of the applicant countries negotiates a transition period for one of the four freedoms or another part of the acquis communautaire a similar arrangement will have to be confirmed for the EFTA/EEA countries. One idea that has been floated was to invite Iceland, Liechtenstein, Norway and Switzerland to the European conference. That could certainly be helpful and we may need some kind of a common forum for European integration issues. But the possible role of a European conference is still not clear and we may have to look for more concrete ideas on how we could be associated with the negotiations.

Although EFTA does not have a common trade policy we have usually tried to make sure that the difference between EU operators and EFTA operators on third country markets does not become too wide. We have therefore made free trade agreements with most of the countries that the European Union has negotiated with, including several countries in Central and Eastern Europe, Turkey, Israel, Tunisia and Morocco. Our external trade relations have to this extent been parallel with the European Union, although usually we have been one step behind. We are now exploring possibilities of establishing free trade relations with Canada. In that particular case one could even say that we are one step ahead. Maybe the European Union will follow in our footsteps.

Economic and Monetary Union

The Economic and Monetary Union is now moving into an operative phase. We do not have any contractual link with this aspect of European Union co-operation but it will clearly affect us. Having one currency will obviously make the internal market more efficient and give the European Union a stronger role on the international currency markets. All smaller currencies in the vicinity will be affected. We have in the past linked the Icelandic króna to a basket of international currencies, including the Deutsche mark, the Pound Sterling, the dollar and the Yen. This would have to be redefined once the Euro comes into existence. It so happens that three of the four countries that have decided to stay outside for the time being, Denmark, Sweden and the UK, are all very important trading partners of Iceland. But even without these three the Euro will be a benchmark for the Icelandic economy. In the private sector in Iceland there are voices that press for a stronger future link to the Euro to minimise the cost to business of currency fluctuations. Already the Maastricht criteria have contributed to stability in Europe, inside and outside the European Union. It so happens that for some years Iceland has fulfilled all the Maastricht criteria, except a very important one, that of being a Member State of the European Union.

Global warming and Kyoto

I mentioned before the overwhelming dependence of Iceland on fisheries. For the past decades we have been trying to diversify the economy e.g. by harnessing our natural and renewable energy resources and investing in energy intensive industries. It would clearly be better for the world environment if renewable energy resources for example fuelled a greater part of the aluminium industry. If an aluminium factory or a ferrosilicon smelter based on fossil fuels is closed down and a new one set up in Iceland using hydroelectric energy the net global effect is very positive. The paradox is that international efforts to counteract global warming could make this more difficult. In past decades, well before the debate on global warming began we had been making efforts to reduce the emission of greenhouse gases. To take an example domestic heating is now almost entirely from geothermal or hydroelectric sources. But this has also meant that by 1990, the year that has been taken as the point of departure for future reductions in the emission of greenhouse gases, we had already done most of what could be done. Further reductions will naturally be more difficult for us than for those who are just beginning. Any new aluminium plant or ferrosilicon smelter will add to Iceland's emissions although in global terms its construction will be beneficial to the environment. In Kyoto we gained recognition of the special situation of Iceland up to a point but more flexibility will be needed. Hopefully this can be addressed in the preparations for Buenos Aires.

In absolute terms the figures involved are not very high. Within the European bubble our problems could be solved quite quickly as the Member States of the European Union enjoy within it more flexibility than they are willing to grant to others. We have explored the idea of being taken on as a part of that bubble on the grounds that our economy is closely linked through the EEA with the European Union but this has not been well received. It would still seem to be in the interest of Europe as a whole to work together to exploit the renewable energy resources of Iceland because they are in fact not abundant elsewhere in Europe.

Shortcomings of the EEA

But this is only one example of many. Although the EEA agreement has made a tremendous difference and has given us a certain role in European integration it is of course not equivalent to EU membership. In a number of areas we still feel the discrimination. Icelandic students in the UK have to pay higher school fees than students from EU countries. There tends to be a certain delay before we can enter individual programme actions that we are entitled to. Our possibilities to follow developments and influence the debate once a directive or regulation has reached the Council level are strictly limited and the EEA agreement is still not well known. Economic operators too often still have to go through a long process of explanation before they receive the equal treatment they are entitled to. The list could go on and on.

Obviously the EEA can never be the same or provide the same results as EU membership. But in many instances as I have stated before it would be in the EU's own interest to take a more open line, rather than try to exaggerate the differences between being in and out. Often the automatic reaction seems to be to say no to equal treatment or further co-operation simply because we are not a member of the club instead of accepting that in certain cases it would be in the interest of the European Union itself to have us on board.

Common Foreign and Security Policy

I said before that European integration cannot be reduced to the European Union alone. But the European Union is and will remain at the centre; it has a leading role. With that leading role there comes a certain responsibility. Noblesse oblige. It will not shoulder this responsibility if it does not have a coherent foreign policy. It has often been said that the European Union is an economic giant but a political dwarf. Efforts have been made to strengthen the second pillar and define a foreign policy dimension. But the Common Foreign and Security Policy in Europe still has a long way to go. On a recent visit to Iceland, David Steel, former leader of the Liberal Party in the UK, went as far as saying that in fact it did not exist.

Be that as it may a stronger European foreign policy identity would be a positive development seen from the Icelandic point of view. We would hope to maintain existing contacts and even make our co-operation in this area more extensive. But we see this as complementing not as competing with or replacing the very fruitful co-operation we have had within NATO. In fact NATO is more important than ever as none of us wants to undermine in any way our transatlantic co-operation.

Reluctant Europeans?

In a newspaper article some years back Icelanders were called the reluctant Europeans. As you have heard today I do not agree with that description. Being reluctant to join the European Union, important as it is, is not the same as being reluctant to participate in the development of Europe. We have not applied for membership for reasons that I have outlined but in the areas of European co-operation where we can participate we have been very active. We are in favour of closer co-operation in trade and economics, in foreign policy and security, in justice and home affairs. We support your efforts for further integration, also in the areas where we are excluded. Our ambition is simply to maintain a good working relationship that ensures that we do not drift apart. There has always been a strong Nordic dimension in our approach to external relations. Now that three out of five Nordic countries have joined the European Union we will have to find ways of continuing our co-operation in a different framework. I am confident that Nordic co-operation will not disappear but it will have to adapt. As in all co-operation it is very much up to ourselves but we will also rely on the understanding of good friends in the different countries of Europe.

Other European organisations

Being European is not only a geographic term. It has value connotations. It has come to include a commitment to democratic values and human rights. This has always been a clear element in the work of the Council of Europe and this commitment has increasingly been spelt out in successive intergovernmental conferences of the European Union. Although active members from the beginning Iceland set up a fully-fledged permanent delegation in Strasbourg for the Council of Europe only last year and we are now preparing for the presidency of that organisation. The OSCE is another body where we are stepping up the level of our participation and we plan to set up soon a permanent representation in Vienna with the OSCE, (Organisation for Security and Co-operation in Europe). As mentioned before we are founding members of NATO and the OECD. Far from being reluctant Europeans we are committed to European integration. Wherever we can we are ready to strengthen our co-operation both with the European Union itself and its Member States. Our disagreement over the Common Fisheries Policy has hindered us from seeking membership. This should, however, not be used as an excuse for excluding us from developing our participation in European integration. Iceland is a European country in culture and heritage and will remain so.

Continental drift

The geological theory of continental drift is now universally accepted. It so happens that Iceland is on top the Mid-Atlantic ridge and thus a living example of continental drift. But this does not mean that Iceland is drifting away from Europe. To the contrary, it is growing, in Europe's direction. It is also growing to the west, towards the American continent but that only goes to show that you can have the best of both worlds.