The European Free Trade Association (EFTA) and the European Economic Area (EEA)

The European Free Trade Association (EFTA) is a free trade area between its members, without any further political objectives. In contrast to the European Union (EU), EFTA is not a customs union. This means that the individual EFTA States are free to set their own customs tariffs and arrange other foreign trade measures vis-à-vis non-EFTA States.

EFTA was founded by the Stockholm Convention in 1960 in order to facilitate trade between the Member States by eliminating the customs duties levied on industrial products. A 2001 agreement on the renewal of the EFTA Convention integrated, among other things, new provisions for trade in services, movement of capital, and the protection of intellectual property.

Since the 1990s, the EFTA Member States have been using the organization as a platform to negotiate free trade agreements with third countries outside of the EU. In 2013, EFTA boasted a network of 25 such agreements with 35 partners, with other agreements continuously in the negotiations pipeline.

Iceland, Liechtenstein and Norway are members of the European Economic Area (EEA). An EFTA Surveillance Authority and an EFTA Court were set up in order to implement these countries’ obligations under the EEA Agreement. A 1994 agreement united the Member States of the EU and the three countries of the EEA in a single market, referred to as the “internal market” or EU single market.

So as to enable the EFTA Member States to participate in the EU internal market, the EFTA States and the EU States negotiated the European Economic Area (EEA) Agreement. The EEA Agreement is regularly revised in order to bring it in line with developments in the relevant EU law (the “acquis communautaire”). With the exception of Switzerland, all EFTA States have ratified the EEA Agreement.

The contracting States to the EEA Agreement are the EU Member States as well as the so-called EEA States of Norway, Iceland, and Liechtenstein. The former EFTA Member States of Finland, Austria, and Sweden became EU members shortly after the negotiation of the EEA Agreement.

Switzerland rejected accession to the EEA Agreement in a popular referendum held in 1992. Since then, it has negotiated numerous bilateral sectoral agreements with the EU. As an EFTA Member State, Switzerland enjoys observer status in the EFTA pillar of the EEA. This enables Switzerland to closely monitor and follow developments both in the EEA and in EU law.

State Secretariat for Economic Affairs SECO

efta@seco.admin.ch