This question comes up often, but the answer may surprise: for most of us, little to nothing would change in daily life. Freedom of movement is already secured. The changes relate primarily to the movement of goods and business trade.
Schengen and the EEA: freedom of movement is already in place
Iceland joined the Schengen area in 2001. Since then, we've been able to travel across most of Europe without showing a passport at the border. In addition, the EEA Agreement gives us the full right to live, study, and work anywhere in Europe. Although the Schengen framework is part of EU law, we have secured our participation through a special supplementary agreement. EU membership would therefore change nothing about these fundamental citizens' rights — they are already in place.
The customs union: where the change lies
Iceland currently stands outside the EU customs union. While most industrial goods flow freely under EEA rules, they still need to be customs-cleared to prove their origin. A certificate of origin must be presented to show that the goods were actually manufactured within the EEA and not imported from elsewhere. Agricultural and fisheries products also remain subject to customs controls. Icelandic businesses that import or export goods must deal with paperwork, delays, and costs that their competitors inside the EU avoid entirely.
Joining the customs union would remove these barriers. Goods would flow between Iceland and other EU countries exactly as they flow between Denmark and Germany today — no customs declarations, no rules-of-origin certificates, no border inspections on goods.
What would we give up?
Joining the customs union also means adopting the EU's common external tariff on imports from countries outside the Union. We would lose the ability to set our own tariff rates on third-country imports or negotiate our own free trade agreements — for example, the agreement with China that Iceland negotiated independently in 2013. Inside the customs union, trade policy with non-EU countries would be handled entirely by the Union as a whole.
On the other hand, a nation of 380,000 people would gain access to the enormous negotiating power of one of the world's largest trading blocs. The EU negotiates free trade agreements on behalf of all its member states with nearly 450 million consumers behind it. Whether this is a "net gain or loss" depends on one's perspective, but the EU's collective bargaining position certainly carries weight when negotiating with giants like the United States, China, or India.
In short: In everyday life, the change would be barely noticeable — we already travel and work freely across most of Europe. For business and cross-border trade, joining the customs union would be a revolution and an enormous simplification.
Sources and further reading:
- EU Regulation 2016/399 — Schengen Borders Code — the EU framework governing the movement of persons across internal borders and how the Schengen area operates.
- EU Customs Union — Unique in the World (European Commission) — factsheet on the EU customs union and its benefits.
- Icelandic Customs Act No. 88/2005 (Althingi) — Iceland's current customs legislation governing import/export procedures.
- Schengen membership of Iceland (Ministry for Foreign Affairs) — official information on Iceland's participation in the Schengen area.
- EFTA Free Trade Agreements (EFTA.int) — overview of EFTA states' free-trade agreements with third countries, including those negotiated by Iceland.
- Treaty on the Functioning of the European Union (TFEU), Art. 28–32 — the treaty provisions establishing the customs union and common external tariff.