European Free Trade Association

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European Free Trade Association
Map of Europe with EFTA members highlighted in green.
Map of Europe with EFTA members highlighted in green.
Secretariat Geneva, Switzerland
Official working language English
Type Trade bloc
Member states
Leaders
 -  Secretary General Kristinn F. Árnason
 -  EFTA Council Chair Iceland
Establishment 3 May 1960
 -  EFTA Convention 4 January 1960 
Area
 -  Total 529,600 km2
204,518 sq mi
Population
 -  2012 estimate 13,389,956
 -  Density 100.6/km2
59.82/sq mi
GDP (PPP) 2011 IMF estimate
 -  Total $623.5 billion
 -  Per capita $44,828
GDP (nominal) 2011 IMF estimate
 -  Total $1138.8 billion
 -  Per capita $58,714
Currency
Iceland Króna kr ISK
Liechtenstein Franc Fr. CHF
Norway Krone kr NOK
Switzerland Franc Fr. CHF
Time zone WET / CET (UTC+0 / +1)
 -  Summer (DST) WEST / CEST (UTC+1 / +2)
Calling code See telephone numbers in Europe
Website
efta.int

The European Free Trade Association (EFTA) is a free trade organisation between four European countries that operates in parallel with – and is linked to – the European Union (EU). The EFTA was established on 3 May 1960 as a trade bloc-alternative for European states who were either unable or unwilling to join the then-European Economic Community (EEC) which has now become the EU. The Stockholm Convention, establishing the EFTA, was signed on 4 January 1960 in the Swedish capital by seven countries (known as the "outer seven").

Today's EFTA members are Iceland, Liechtenstein, Norway, and Switzerland, of which the latter two were founding members. The initial Stockholm Convention was superseded by the Vaduz Convention, which enabled greater liberalisation of trade among the member states.

EFTA states have jointly concluded free trade agreements with a number of other countries. The EFTA countries are part of the European Union's internal market; Iceland, Liechtenstein and Norway through the Agreement on a European Economic Area (EEA) and Switzerland through a set of bilateral agreements. This development prompted the EFTA states to modernise their Convention to ensure that it will continue to provide a successful framework for the expansion and liberalization of trade among themselves and with the rest of the world.

History[edit]

British reaction to the creation of the EEC was mixed and complex. Britain was also preoccupied with the Commonwealth, which, at the time of EFTA's formation, was in transition. Britain therefore brought together several countries, including some bordering the EEC, to form the European Free Trade Association soon after the establishment of the six-nation EEC (France, West Germany, Italy, Belgium, Luxembourg, and the Netherlands).

On 12 January 1960, the Treaty on European Free Trade Association was initialled in the Golden Hall of the Prince's Palace of Stockholm. This established the progressive elimination of customs duties on industrial products, but did not affect agricultural products or maritime trade.

The main difference between the early EEC and the EFTA was the absence of a common external customs tariff, and therefore each EFTA member was free to establish individual customs duties against, or individual free trade agreements with, non EFTA countries.

Despite this modest initiative, the financial results were excellent, as it stimulated an increase of foreign trade volume among its members from 3.5 to 8.2 billion US dollars between 1959 and 1967. This was rather less than the increase enjoyed by countries inside the EEC.

After the accession of Denmark and the UK to the EEC, EFTA began to falter. For this reason most countries eased or eliminated their trade tariffs in preparation to join the EEC, but experienced declining revenue which reduced the importance of EFTA. Four members remain: Switzerland, Norway, Liechtenstein and Iceland. Iceland applied for EU membership in 2009 due to the 2008–2011 Icelandic financial crisis.

Membership[edit]

History[edit]

  EFTA member states.
  Former members, now EU member states.

The founding members of EFTA were Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. During the 1960s these countries were often referred to as the Outer Seven, as opposed to the Inner Six of the then-European Economic Community (EEC).[1]

Finland became an associate member in 1961 (becoming a full member in 1986) and Iceland joined in 1970. The United Kingdom and Denmark joined the EEC in 1973, and hence ceased to be EFTA members. Portugal also left EFTA for the European Community in 1986. Liechtenstein joined EFTA in 1991 (previously its interests had been represented by Switzerland). Austria, Sweden and Finland joined the EU in 1995 and thus ceased to be EFTA members.

Twice, in 1973 and 1995, Norway has tried to join the EU (still the EEC in 1973) and by doing so, leave the EFTA. Both times, membership of the EU was rejected in national referendums, keeping Norway in the EFTA. Iceland currently is in negotiations as a candidate for EU membership. If they were to complete negotiations and all countries ratified the accession treaty, they would leave the EFTA and join the EU. As of June 2013 negotiations between Iceland and EU stopped by request of the Icelandic minister of foreign affairs.

Current members[edit]

Flag Contracting party Accession Population Area (km²) Capital GDP in millions (PPP)[2] GDP per capita (PPP)[2]
Iceland Iceland 1 January 1970 320,000 103,000 Reykjavík 12,831[3] 39,223[3]
Liechtenstein Principality of Liechtenstein 1 January 1991 34,247 160.4 Vaduz 3,545[4] 98,432[4]
Norway Kingdom of Norway 3 May 1960 5,038,137 385,155 Oslo 265,911[5] 53,470[5]
Switzerland Swiss Confederation 3 May 1960 8,000,000 41,285 Bern 363,421[6] 45,417[6]

Membership history[edit]

Flag State Accession Left EFTA Notes
Austria Austria 1960 1995
Denmark Denmark 1960 1973
Finland Finland 1986 1995
Iceland Iceland 1970 EU candidate for membership in negotiations since 2010. Accession talks were frozen in 2013.
Liechtenstein Liechtenstein 1991
Norway Norway 1960 EU membership was rejected in referendums held in 1972 and again in 1994.
Portugal Portugal 1960 1986
Sweden Sweden 1960 1995
Switzerland Switzerland 1960 EU membership application was suspended after voters rejected the EEA agreement in 1992.
United Kingdom United Kingdom 1960 1973 Considering redefining their relationship with the EU, which may result in their withdrawal from the EU to rejoin the EFTA.[7]

Future[edit]

Members of the European Union (blue) and
EFTA (green).

The Norwegian electorate has rejected treaties of accession to the EU in two referendums. At the time of the first referendum (1972) their neighbour Denmark joined. The second time (1994) two other Nordic neighbours, Sweden and Finland, joined the EU. The last two governments of Norway have been unable and unwilling to advance the question, as they have both been coalition governments consisting of proponents and opponents.

Since Switzerland rejected the EEA in 1992, referendums on EU membership have been initiated, the last time in 2001. These were rejected.

Iceland may join the EU in the near future, following the global financial crisis of 2008, which has particularly affected the local economy. On 16 July 2009, the government formally applied for EU membership.[8]

Between 1994 and 2011, EFTA membership has been discussed regarding Andorra, San Marino, Monaco, Isle of Man, Morocco, Turkey, Israel and other ENP partners.[9]

In mid-2005, representatives of the Faroe Islands hinted at the possibility of their territory joining EFTA.[10] However, the chances of the Faroes' bid for membership are uncertain because, according to Article 56 of the EFTA Convention, only states may become members of the Association.[11] The Faroes already have an extensive bilateral free trade agreement with Iceland, known as the Hoyvík Agreement.

In November 2012, after the Council of the European Union had called for an evaluation of the EU's relations with the sovereign European microstates of Andorra, Monaco and San Marino, which they described as "fragmented",[12] the European Commission published a report outlining options for their further integration into the EU.[13] Unlike Liechtenstein, which is a member of the EEA via the EFTA and the Schengen Agreement, relations with these three states are based on a collection of agreements covering specific issues. The report examined four alternatives to the current situation: 1) a Sectoral Approach with separate agreements with each state covering an entire policy area, 2) a comprehensive, multilateral Framework Association Agreement (FAA) with the three states, 3) EEA membership, and 4) EU membership. The Commission argued that the sectoral approach did not address the major issues and was still needlessly complicated, while EU membership was dismissed in the near future because "the EU institutions are currently not adapted to the accession of such small-sized countries." The remaining options, EEA membership and a FAA with the states, were found to be viable and were recommended by the Commission. In response, the Council requested that negotiations with the three microstates on further integration continue, and that a report be prepared by the end of 2013 detailing the implications of the two viable alternatives and recommendations on how to proceed.[14]

As EEA membership is currently only open to EFTA or EU members, the consent of existing EFTA member states is required for the microstates to join the EEA without becoming members of the EU. In 2011, Jonas Gahr Støre, the then Foreign Minister of Norway which is an EFTA member state, said that EFTA/EEA membership for the microstates was not the appropriate mechanism for their integration into the internal market due to their different requirements than large countries such as Norway, and suggested that a simplified association would be better suited for them.[15] Espen Barth Eide, Støre's successor, responded to the Commission's report in late 2012 by questioning whether the microstates have sufficient administrative capabilities to meet the obligations of EEA membership. However, he stated that Norway was open to the possibility of EFTA membership for the microstates if they decide to submit an application, and that the country had not made a final decision on the matter.[16][17][18][19] Pascal Schafhauser, the Counsellor of the Liechtenstein Mission to the EU, said that Liechtenstein, another EFTA member state, was willing to discuss EEA membership for the microstates provided their joining did not impede the functioning of the organization. However, he suggested that the option direct membership in the EEA for the microstates, outside of both the EFTA and the EU, should be given consideration.[18]

General secretaries[edit]

State Name Year
 United Kingdom Frank Figgures 1960–1965
 United Kingdom John Coulson 1965–1972
 Sweden Bengt Rabaeus 1972–1975
  Switzerland Charles Müller 1976–1981
 Norway Per Kleppe 1981–1988
 Austria Georg Reisch 1988–1994
 Iceland Kjartan Jóhannsson 1994–2000
  Switzerland William Rossier 2000–2006
 Norway Kåre Bryn 2006-2012
 Iceland Kristinn F. Árnason 2012–present

Institutions[edit]

EFTA is governed by the EFTA Council and serviced by the EFTA Secretariat. In addition, in connection with the EEA Agreement of 1992, two other EFTA organisations were established, the EFTA Surveillance Authority and the EFTA Court.

EFTA Council[edit]

The EFTA Council is the highest governing body of EFTA. The Council usually meets eight times a year at the ambassadorial level (heads of permanent delegations to EFTA) and twice a year at Ministerial level. In the Council meetings, the delegations consult with one another, negotiate and decide on policy issues regarding EFTA. Each Member State is represented and has one vote, though decisions are usually reached through consensus. The Council discusses substantive matters, especially relating to the development of EFTA relations with third countries and the management of free trade agreements, and keeps under general review relations with the EU third-country policy and administration. It has a broad mandate to consider possible policies to promote the overall objectives of the Association and to facilitate the development of links with other states, unions of states or international organisations. The Council also manages relations between the EFTA States under the EFTA Convention. Questions relating to the EEA are dealt with by the Standing Committee in Brussels.

EFTA Secretariat[edit]

The day-to-day running of the Secretariat is headed by the Secretary-General, Kristinn F. Árnason, who is assisted by two Deputy Secretaries-General, one based in Geneva and the other in Brussels. The three posts are shared between the Member State. The division of the Secretariat reflects the division of EFTA’s activities. The Secretariat employs approximately 100 staff members, of whom a third are based in Geneva and two thirds in Brussels and Luxembourg.

The Headquarters in Geneva deals with the management and negotiation of free trade agreements with non-EU countries, and provide support to the EFTA Council. In Brussels, the Secretariat provides support for the management of the EEA Agreement and assists the Member States in the preparation of new legislation for integration into the EEA Agreement. The Secretariat also assists the Member States in the elaboration of input to EU decision making. The two duty stations work together closely to implement the Vaduz Convention’s stipulations on the intra-EFTA Free Trade Area. The EFTA Statistical Office in Luxembourg contributes to the development of a broad and integrated European Statistical System.

The EFTA Statistical Office in Luxembourg contributes to the development of a broad and integrated European Statistical System. The EFTA Statistical Office (ESO) is located in the premises of Eurostat, the Statistical Office of the European Union, in Luxembourg, and functions as a liaison office between Eurostat and the EFTA National Statistical Institutes. ESO's main objective is to promote the full inclusion of the EFTA States in the European Statistical System, thus providing harmonised and comparable statistics to support the general cooperation process between EFTA and the EU within and outside the EEA Agreement. The cooperation also entails technical cooperation programmes with third countries and training of European statisticians.

EEA-related institutions[edit]

A Joint Committee consisting of the EEA-EFTA States plus the European Commission (representing the EU) has the function of extending relevant EU law to the non EU members. An EEA Council meets twice yearly to govern the overall relationship between the EEA members.

Rather than setting up pan-EEA institutions, the activities of the EEA are regulated by the EFTA Surveillance Authority and the EFTA Court. The EFTA Surveillance Authority and the EFTA Court regulate the activities of the EFTA members in respect of their obligations in the European Economic Area (EEA). Since Switzerland is not an EEA member, it does not participate in these institutions.

The EFTA Surveillance Authority performs the European Commission's role as "guardian of the treaties" for the EFTA countries, while the EFTA Court performs the European Court of Justice's role for those countries.

The original plan for the EEA lacked the EFTA Court or the EFTA Surveillance Authority, the European Court of Justice and the European Commission were to exercise those roles. However, during the negotiations for the EEA agreement, the European Court of Justice informed the Council of the European Union by way of letter that they considered that giving the EU institutions powers with respect to non-EU member states would be a violation of the treaties, and therefore the current arrangement was developed instead.

The EEA and Norway Grants[edit]

The EEA and Norway Grants are the financial contributions of Iceland, Liechtenstein and Norway to reduce social and economic disparities in Europe. In the period from 2004 to 2009, €1.3 billion of project funding is made available for project funding in the 15 beneficiary states in Central and Southern Europe.

The EEA and Norway Grants were established in conjunction with the 2004 enlargement of the European Economic Area (EEA), which brings together the EU, Iceland, Liechtenstein and Norway in the Internal Market. The EEA and Norway Grants are administered by the Financial Mechanism Office, which is affiliated to the EFTA Secretariat in Brussels.

Locations[edit]

The EFTA Secretariat is headquartered in Geneva, Switzerland, but also has duty stations in Brussels, Belgium and Luxembourg. The EFTA Surveillance Authority has its headquarters in Brussels, Belgium (the same location as the headquarters of the European Commission), while the EFTA Court has its headquarters in Luxembourg (the same location as the headquarters of the European Court of Justice).

Portugal Fund[edit]

The Portugal Fund was established in 1975 when Portugal was still a member of EFTA, to provide funding for the development and reconstruction of Portugal after the Carnation Revolution. When Portugal left EFTA in 1985 to join the EEC, the remaining EFTA members decided to nonetheless continue the Portugal Fund, so Portugal would continue to benefit from it. The Fund originally took the form of a low-interest loan from the EFTA member states to Portugal, to the value of 100 million US dollars. Repayment was originally to commence in 1988, but EFTA then decided to postpone the start of repayments until 1998. The Portugal Fund has now been dissolved by the Member States.

EFTA and the European Union[edit]

Except for Switzerland, the EFTA members are also members of the European Economic Area (EEA). The EEA comprises three member states of the European Free Trade Association (EFTA) and 27 member states of the European Union (EU), excluding Croatia which is provisionally applying the agreement pending its ratification by all EEA countries.[20][21] It was established on 1 January 1994 following an agreement with the European Community (which had become the EU two months earlier).[22] It allows the EFTA-EEA states to participate in the EU's Internal Market without being members of the EU. They adopt almost all EU legislation related to the single market, except laws on agriculture and fisheries. However they also contribute to and influence the formation of new EEA relevant policies and legislation at an early stage as part of a formal decision-shaping process.[23] In addition, independence and direct membership of international bodies in their own right means the countries are able to participate in and become signatories to various conventions, such as the Basel Convention of 1992, that are only adopted by the EU many years later (2007). One EFTA member, Switzerland, has not joined the EEA but has a series of bilateral agreements, including a free trade agreement, with the EU.

The following table summarises the various components of EU laws applied in the EFTA countries and their sovereign territories. Some territories of EU member states also have a special status in regard to EU laws applied as is the case with some European microstates.

EFTA member states
and sovereign territories
Application
of EU law
Enforceable in local courts? EURATOM? EU
Membership
?
Schengen area? EU VAT area? EU customs territory? EU single market? Eurozone?
 Iceland Partial Unclear No No Yes No No Yes[24] No, ISK
 Liechtenstein Partial Unclear No No Yes No No Yes[24] No, CHF
 Norway, except: Partial Unclear No No Yes No No Yes[24] No, NOK
Norway Svalbard Partial Unclear No No No[25] No[26] No No[24][27] No, NOK
  Switzerland Partial Unclear No No Yes No No Yes[28] No, CHF

Relationship to the European Economic Area[edit]

European Free Trade Association Agreement with EU to mint euros Schengen Area European Economic Area Central European Free Trade Agreement Council of Europe European Union Eurozone European Union Customs Union Customs Union of Belarus, Kazakhstan, and Russia Switzerland Iceland Liechtenstein Norway Kosovo (UNMIK) Albania Bosnia and Herzegovina Macedonia Montenegro Serbia Moldova GUAM Ukraine Azerbaijan Georgia Kazakhstan Belarus Russia Armenia Vatican City San Marino Monaco Andorra Turkey Croatia Bulgaria United Kingdom Romania Czech Republic Denmark Hungary Lithuania Poland Sweden Cyprus Ireland Austria Belgium Estonia Finland France Germany Greece Italy Luxembourg Latvia Malta Netherlands Portugal Slovakia Slovenia Spain
A clickable Euler diagram showing the relationships between various multinational European organisations and agreements.vde

International conventions[edit]

EFTA also originated the Hallmarking Convention and the Pharmaceutical Inspection Convention, both of which are open to non-EFTA states.

International relationships[edit]

EFTA has several free trade agreements with non-EU countries as well as declarations on cooperation and joint workgroups to improve trade. Currently, the EFTA States have established preferential trade relations with 24 states and territories, in addition to the 28 member states of the European Union.[29]

Free trade agreements[edit]

Ongoing free trade negotiations[edit]

Declarations on cooperation or dialogue on closer trade relations[edit]

See also[edit]

References[edit]

  1. ^ "Finland: Now, the Seven and a Half". TIME. 7 April 1961. Retrieved 18 July 2009. 
  2. ^ a b in international dollars (rounded)
  3. ^ a b "Iceland". International Monetary Fund. Retrieved 17 April 2013. 
  4. ^ a b Liechtenstein, Infobox
  5. ^ a b "Norway". International Monetary Fund. Retrieved 20 April 2012. 
  6. ^ a b "Switzerland". International Monetary Fund. Retrieved 2013-04-17. 
  7. ^ http://www.publicserviceeurope.com/article/2978/cameron-speech-may-have-disastrous-outcome-for-uk
  8. ^ "Iceland moves towards joining EU". BBC News. 16 July 2009. Retrieved 18 July 2009. 
  9. ^ Official Norwegian Reports NOU 2012: 2, Outside and Inside, Norway’s agreements with the European Union
  10. ^ Spongenberg, Helena (8 October 2007). "Faroe Islands seek closer EU relations". EUobserver. Retrieved 18 July 2009. 
  11. ^ "Convention Establishing the European Free Trade Association" (PDF). 21 June 2001. Retrieved 18 July 2009. 
  12. ^ "Council conclusions on EU relations with EFTA countries". Council of the European Union. 2012-12-14. Retrieved 2013-04-01. 
  13. ^ "Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee of the Regions - EU Relations with the Principality of Andorra, the Principality of Monaco and the Republic of San Marino - Options for Closer Integration with the EU". 2012. 
  14. ^ "Council conclusions on EU relations with the Principality of Andorra, the Republic of San Marino and the Principality of Monaco". Council of the European Union. 2012-12-20. Retrieved 2013-04-01. 
  15. ^ "Norge sier nei til nye mikrostater i EØS". 2011-05-19. Retrieved 2013-04-06. 
  16. ^ "Innlegg på møte i Stortingets europautvalg". Ministry of Foreign Affairs of Norway. 2013-01-28. Retrieved 2013-04-01. 
  17. ^ "Eide: Bedre blir det ikke". 2012-12-21. Retrieved 2013-04-01. 
  18. ^ a b Aalberg Undheim, Eva (2012-12-08). "Regjeringa open for diskutere EØS-medlemskap for mikrostatar" (in Norwegian). Retrieved 2013-04-06. 
  19. ^ "La Norvegia chiude le porte a San Marino". La Tribuna Sammarinese. 2013-01-03. p. 7. Retrieved 2013-04-06. 
  20. ^ EEA Agreement - EFTA. Efta.int (1994-01-01). Retrieved on 2013-09-07.
  21. ^ "Croatia joins the EEA". European Free Trade Association. 2014-04-12. Retrieved 2014-04-11. 
  22. ^ Main text of the Agreement PDF (199 KB)
  23. ^ http://www.efta.int/~/media/Files/Publications/Bulletins/eeadecisionshaping-bulletin.pdf
  24. ^ a b c d European Economic Area
  25. ^ Norway and Iceland Schengen association agreement Article 14
  26. ^ Because of the Svalbard treaty it is even outside of the Norway taxation area.
  27. ^ Agreement on the European Economic Area - Protocol 40 on Svalbard and Declaration for activation of Protocol40 exclusion.
  28. ^ Through multiple sectoral agreements
  29. ^ Official EFTA site
  30. ^ a b Free Trade Agreements | 50 years of promoting free trade and economic integration - EFTA. Efta.int. Retrieved on 2014-03-12.
  31. ^ Pending notifications by Iceland and Norway
  32. ^ Notification pending
  33. ^ "Western Sahara excluded from EFTA-Morocco free trade agreement". SPS. 12 May 2010. Retrieved 13 May 2010. 
  34. ^ Parliament ratifies agreement on free trade between Ukraine, European Free Trade Association, Kyiv Post (7 December 2011)
  35. ^ a b EFTA Joint Declarations on Cooperation | 50 years of promoting free trade and economic integration - EFTA. Efta.int. Retrieved on 2014-03-12.
  36. ^ "President Aquino and Swiss President Widmer-Schlumpf agree to expand economic relations at ASEM9". Philippine Information Agency. 6 November 2012. Retrieved 25 March 2013.