EFTA was historically one of the two dominant western Europeantrade blocs, but is now much smaller and closely associated with its historical competitor, theEuropean Union. It was established on 3 May 1960 to serve as an alternative trade bloc for those European states that were unable or unwilling to join the thenEuropean Economic Community (EEC), the main predecessor of the EU. The Stockholm Convention (1960), to establish the EFTA, was signed on 4 January 1960 in the Swedish capital by seven countries (known as the "Outer Seven":Austria,Denmark,Norway,Portugal,Sweden,Switzerland and theUnited Kingdom).[8] A revised Convention, theVaduz Convention, was signed on 21 June 2001 and entered into force on 1 June 2002.[9][10]
After 1995 only two founding members remained, namely Norway and Switzerland. The other five, Austria, Denmark, Portugal, Sweden and the United Kingdom, had joined the EU at some point in the intervening years. The initial Stockholm Convention was superseded by theVaduz Convention, which aimed to provide a successful framework for continuing the expansion andliberalisation of trade, both among the organisation's member states and with the rest of the world.
On 12 January 1960, the Convention establishing the European Free Trade Association was initiated in theGolden Hall of theStockholm City Hall.[11] This established the progressive elimination of customs duties on industrial products, but did not affect agricultural or fisheries products.
The main difference between the early EEC and the EFTA was that the latter did not operate common external customstariffs unlike the former: each EFTA member was free to establish its individual customs duties against, or its individual free trade agreements with, non-EFTA countries.
The founding members of the 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 theInner Six of the thenEuropean Economic Community (EEC).[12]
Finland became an associate member in 1961 and 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 theEuropean Community in 1986. Liechtenstein joined the 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.
In November 2012, after theCouncil of the European Union had called for an evaluation of theEU's relations with Andorra, Monaco, and San Marino, which they described as "fragmented",[19] theEuropean Commission published a report outlining the options for their further integration into the EU.[20] Unlike Liechtenstein, which is a member of the EEA via the EFTA and theSchengen 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:
A Sectoral Approach with separate agreements with each state covering an entire policy area.
A comprehensive, multilateral Framework Association Agreement (FAA) with the three states.
EEA membership, and
EU membership.
However, 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.[21]
As EEA membership is currently only open to EFTA or EU member states, 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, thenForeign 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 from those of larger countries such as Norway, and suggested that a simplified association would be better suited for them.[22]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 would be open to the possibility of EFTA membership for the microstates if they decided to submit an application, and that the country had not made a final decision on the matter.[23][24][25][26] 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 organisation. However, he suggested that the option of direct membership in the EEA for the microstates, outside of both the EFTA and the EU, should be considered.[25] On 18 November 2013, the EU Commission concluded that "the participation of the small-sized countries in the EEA is not judged to be a viable option at present due to the political and institutional reasons", and thatAssociation Agreements were a more feasible mechanism to integrate the microstates into the internal market.[27]
The Norwegian electorate had rejected treaties of accession to the EU in two referendums. At the time of the first referendum in 1972, their neighbour, Denmark joined. Since the second referendum in 1994, two otherNordic neighbours, Sweden and Finland, have joined the EU. Thelast two governments of Norway have not advanced the question, as they have both been coalition governments consisting of proponents and opponents of EU membership.
Since Switzerland rejected the EEA membership in areferendum in 1992, more referendums onEU membership have been initiated, the last time being in2001. These were all rejected. Switzerland has been in a customs union with fellow EFTA member state and neighbour Liechtenstein since 1924.
On 16 July 2009, the government of Iceland formally applied for EU membership,[28] but the negotiation process was suspended in mid-2013, and in 2015 the foreign ministers wrote to withdraw its application.
Denmark was a founding member of EFTA in 1960, but its membership ended in 1973, when it joined theEuropean Communities. Theautonomous territories of theKingdom of Denmark were covered by Denmark's EFTA membership:Greenland from 1961 and theFaroe Islands from 1968.[29] In mid-2005, representatives of theFaroe Islands raised the possibility of their territory re-joining the EFTA.[30] Because Article 56 of the EFTA Convention only allows sovereign states to become members of the EFTA,[10] the Faroes considered the possibility that the "Kingdom of Denmark in respect of the Faroes" could join the EFTA on their behalf. The Danish Government has stated that this mechanism would not allow the Faroes to become a member of the EEA because Denmark was already a party to the EEA Agreement.[31]
The Faroes already have an extensive bilateral free trade agreement with Iceland, known as theHoyvík Agreement.[32]
The United Kingdom was a co-founder of EFTA in 1960, but ceased to be a member upon joining the European Economic Community. The country held areferendum in 2016 on withdrawing from the EU (popularly referred to as "Brexit"), resulting in a 51.9% vote in favour of withdrawing. A 2013 research paper presented to theParliament of the United Kingdom proposed a number of alternatives to EU membership which would continue to allow it access to the EU'sinternal market, including continuing EEA membership as an EFTA member state, or theSwiss model of a number of bilateral treaties covering the provisions of the single market.[33]
In the first meeting since the Brexit vote, EFTA reacted by saying both that they were open to a UK return, and that Britain has many issues to work through. The president of SwitzerlandJohann Schneider-Ammann stated that its return would strengthen the association.[34] However, in August 2016 the Norwegian Government expressed reservations. Norway's European affairs minister,Elisabeth Vik Aspaker, told theAftenposten newspaper: "It's not certain that it would be a good idea to let a big country into this organization. It would shift the balance, which is not necessarily in Norway's interests."[35]
In late 2016, the Scottish First MinisterNicola Sturgeon said that her priority was to keep the whole of the UK in the European single market but that taking Scotland alone into the EEA was an option being "looked at".[36] However, other EFTA states have stated that only sovereign states are eligible for membership, so it could only join if it became independent from the UK,[37] unless the solution scouted for the Faroes in 2005 were to be adopted (see above).
In 1992, the EU, its member states, and the EFTA member states signed the Agreement on theEuropean Economic Area inPorto, Portugal. However, the proposal that Switzerland ratify its participation was rejected by referendum. (Nevertheless, Switzerland has multiple bilateral treaties with the EU that allow it to participate in theEuropean Single Market, theSchengen Agreement and other programmes). Thus, 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 27member states of the European Union (EU). It was established on 1 January 1994 following an agreement with theEuropean Economic Community (which had become the European Community two months earlier).[39] It allows the EFTA-EEA states to participate in the EU's Internal Market without beingmembers 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.[citation needed] One EFTA member, Switzerland, has not joined the EEA but has a series of bilateral agreements, including afree 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 aspecial status in regard to EU laws applied as is the case with someEuropean microstates.
AJoint Committee consisting of the EEA-EFTA States plus the European Commission (representing the EU) has the function of extending relevantEU 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 theEFTA Surveillance Authority and theEFTA 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 a role for EFTA members that is equivalent to that of the European Commission for the EU, as "guardian of the treaties" and the EFTA Court performs theEuropean Court of Justice-equivalent role.
The original plan for the EEA lacked the EFTA Court: the European Court of Justice was to exercise those roles. However, during the negotiations for the EEA agreement, the European Court of Justice ruled by the Opinion 1/91 that it would be a violation of the treaties to give to the EU institutions these powers with respect to non-EU member states.[47] Therefore, the current arrangement was developed instead.
TheEEA and Norway Grants are the financial contributions of Iceland, Liechtenstein and Norway to reduce social and economic disparities in Europe. They were established in conjunction with the 2004 enlargement of the European Economic Area (EEA), which brought together the EU, Iceland, Liechtenstein and Norway in the Internal Market. In the period from 2004 to 2009, €1.3 billion of project funding was made available for project funding in the 15 beneficiary states in Central and Southern Europe. The EEA and Norway Grants are administered by the Financial Mechanism Office, which is affiliated to the EFTA Secretariat in Brussels.
Map of free trade agreements between EFTA and other countries:
EFTA
Free trade agreement
Ongoing free trade negotiation
European Economic Area
Declaration on cooperation or dialogue on closer trade relations
EFTA has 31 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 41 states and territories, in addition to the 27member states of the European Union.[48]
EFTA's interactive Free Trade Map gives an overview of the partners worldwide.[49]
EFTA member states' citizens enjoy freedom of movement in each other's territories in accordance with the EFTA convention.[100] EFTA & EEA nationals also enjoyfreedom of movement in theEuropean Union (EU). EFTA nationals and EU citizens are not only visa-exempt but are legally entitled to enter and reside in each other's countries. TheCitizens' Rights Directive[101] (also sometimes called the "Free Movement Directive") defines the right of free movement for citizens of theEuropean Economic Area (EEA),[102] which includes the three EFTA membersIceland,Norway andLiechtenstein plusthe member states of the EU.Switzerland, which is a member of EFTA but not of the EEA, is not bound by the Directive but rather has a separatemultilateral agreement on free movement with the EU and its member states.[103]
As a result, a citizen of an EFTA country can live and work in all the other EFTA countries and in all the EU countries, and a citizen of an EU country can live and work in all the EFTA countries (but for voting and working in sensitive fields, such as government / police / military, citizenship is often required, and non-citizens may not have the same rights to welfare and unemployment benefits as citizens).[104]
The Portugal Fund came into operation in February 1977 when Portugal was still a member of EFTA.[105] It was to provide funding for the development of Portugal after theCarnation Revolution and the consequential restoration of democracy and thedecolonisation of the country's overseas possessions. This followed a period of economic sanctions by most of the international community, which left Portugal economically underdeveloped compared to the rest of thewestern Europe. When Portugal left EFTA in 1985 in order to join the EEC, the remaining EFTA members decided to continue the Portugal Fund so that Portugal would continue to benefit from it. The Fund originally took the form of a low-interest loan from the EFTA member states to the value of US$100 million. Repayment was originally to commence in 1988, however, EFTA then decided to postpone the start of repayments until 1998. The Portugal Fund was dissolved in January 2002.[106]
^"The Faroes and the EU - possibilities and challenges in a future relationship"(PDF). The Ministry of Foreign Affairs in the Faroes. 2010. p. 53. Archived fromthe original(PDF) on 23 August 2011. Retrieved15 August 2013.Under its constitutional status the Faroes cannot become a contracting party to the EEA Agreement in its own right due to the fact that the Faroes are not a state.
