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Efta

"EFTA" redirects here. For other uses, see EFTA (disambiguation).

The European Free Trade Association (EFTA, in French 'Association européenne de libre-échange' : AELE) 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 and 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 The initial Stockholm Convention was superseded by the Vaduz Convention, which enabled greater liberalisation of trade among the member states.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. Three of the EFTA countries are part of the European Union Internal Market through the Agreement on a European Economic Area (EEA), which took effect in 1994; the fourth, Switzerland, opted to conclude bilateral agreements with the EU. In 1999, Switzerland concluded a set of bilateral agreements with the European Union covering a wide range of areas, including movement of people, transport, and technical barriers to trade. 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

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 4 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 trade 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 2008–2012 Icelandic financial crisis.

Membership

History


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 in 1991 (previously its interests in EFTA 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

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

Membership history

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 pending a referendum.[7]
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.[8]

Future


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 by clear majorities.

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.[9]

EFTA membership has been discussed regarding Andorra, San Marino, Monaco, Isle of Man, Morocco, Turkey, Israel and other ENP partners.[10]

In mid-2005, representatives of the Faroe Islands hinted at the possibility of their territory joining EFTA.[11] 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.[12] 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",[13] the European Commission published a report outlining options for their further integration into the EU.[14] 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.[15]

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.[16] 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.[17][18][19][20] 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.[19]

General secretaries

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

Institutions

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.

EEA-related institutions

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 are administered by the Financial Mechanism Office, which is affiliated to the EFTA Secretariat in Brussels.

Locations

The EFTA Secretariat is headquartered in Geneva, Switzerland. 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

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.

International conventions

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

Relationship to the European Economic Area

Except for Switzerland, the EFTA members are also members of the European Economic Area (EEA).

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International relationships

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.[21]

Free trade agreements

Ongoing free trade negotiations

Declarations on cooperation or dialogue on closer trade relations

EFTA and the European Union

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[27] No, ISK
 Liechtenstein Partial Unclear No No Yes No No Yes[27] No, CHF
 Norway, except: Partial Unclear No No Yes No No Yes[27] No, NOK
Norway Svalbard Partial Unclear No No No[28] No[29] No No[27][30] No, NOK
Norway Bouvet Island Partial Unclear No No Yes[31] No No Yes[27] No, NOK
Norway Peter I Island Partial Unclear No No Yes[31] No No Yes[27][32] No, NOK
Norway Queen Maud Land Partial Unclear No No Yes[31] No No Yes[27][32] No, NOK
  Switzerland Partial Unclear No No Yes No No Yes[33] No, CHF

See also

References

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