1. The European Free Trade Association

The European Free Trade Association (EFTA) is the intergovernmental organisation of Iceland, Liechtenstein, Norway and Switzerland. It was set up in 1960 by its then seven Member States for the promotion of free trade and economic integration between its members.

The main tasks of the Association are threefold:

• Maintaining and developing the EFTA Convention, which regulates economic relations between the four EFTA States;
• Managing the Agreement on the European Economic Area (EEA Agreement), which brings together the Member States of the European Union and three of the EFTA States – Iceland, Liechtenstein and Norway – in a single market, also referred to as the “Internal Market”.
• Developing EFTA’s worldwide network of free trade agreements.

Mission

The European Free Trade Association (EFTA) is an intergovernmental organisation set up for the promotion of free trade and economic integration to the benefit of its four Member States – Iceland, Liechtenstein, Norway and Switzerland – and the benefit of their trading partners around the globe. 

Member States

The four EFTA States are all open, competitive economies committed to the progressive liberalization of trade in the multinational arena as well as in free trade agreements. 

History

EFTA was founded by the Stockholm Convention in 1960. Relations with the EEC, later the European Community (EC) and the European Union (EU), have been at the core of EFTA activities from the beginning. Since the beginning of the 1990s, EFTA has actively pursued trade relations with third countries in and beyond Europe. Read more about EFTA through the years.

Key Figures

The four EFTA States are open, developed economies with trade figures that are substantially higher than might be expected from a total of less than 14 million people. EFTA is the ninth largest trader in the world in merchandise trade and the fifth largest in trade in services. EFTA is the third most important trading partner in goods for the EU and the second most important when it comes to services. 

Annual Budget

EFTA’s budget is prepared in two currencies: Swiss francs (CHF) and euros (EUR). The total budget for 2016 was equivalent to CHF 21 677 000 and the EFTA Secretariat has fewer than 90 employees. Three of the four EFTA States contribute to cohesion in the European Union through a separate arrangement, the EEA and Norway Grants. The EFTA’s budget is prepared according to the framework budgeting principle used by the Member States’ public administrations. This approach aims to increase awareness of budgetary spending at all levels. 

2. European Economic Area (EEA) / Relations with the EU

The European Economic Area (EEA) unites the EU Member States and the three EEA EFTA States (Iceland, Liechtenstein, and Norway) into an Internal Market governed by the same basic rules. These rules aim to enable goods, services, capital, and persons to move freely about the EEA in an open and competitive environment, a concept referred to as the four freedoms. 

3. EEA Agreement

The Agreement on the European Economic Area, which entered into force on 1 January 1994, brings together the EU Member States and the three EEA EFTA States — Iceland, Liechtenstein and Norway — in a single market, referred to as the “Internal Market”.

The EEA Agreement guarantees equal rights and obligations within the Internal Market for individuals and economic operators in the EEA. It provides for the inclusion of EU legislation covering the four freedoms — the free movement of goods, services, persons and capital — throughout the 31 EEA States. In addition, the Agreement covers cooperation in other important areas such as research and development, education, social policy, the environment, consumer protection, tourism and culture, collectively known as “flanking and horizontal” policies. The Agreement guarantees equal rights and obligations within the Internal Market for citizens and economic operators in the EEA.

The EEA Agreement also states that when a country becomes a member of the European Union, it shall also apply to become party to the EEA Agreement (Article 128), thus leading to an enlargement of the EEA.

4. What the EEA is Not:

The EEA Agreement does not cover the following EU policies:

• Common Agriculture and Fisheries Policies (although the Agreement contains provisions on various aspects of trade in agricultural and fish products);
• Customs Union;
• Common Trade Policy;
• Common Foreign and Security Policy;
• Justice and Home Affairs (even though the EFTA countries are part of the Schengen area); or
• Monetary Union (EMU).

 

Switzerland is not part of the EEA Agreement, but has a set of bilateral agreements with the EU. You can read more about these agreements on the European Commission website, and on the Swiss Federal Administration website. 

 

5. Global trade relations

The EFTA States jointly negotiate Free Trade Agreements (FTAs) with partners outside the European Union in order to strengthen their competitive position and increase market access for their products. As a result, economic operators in the EFTA countries enjoy access to one of the world’s largest networks of preferential trade relations, which continues to expand thanks to an ambitious agenda of negotiations. Today, EFTA has 27 FTAs covering 38 countries and territories outside the EU.