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ABOUT EFTA THE EUROPEAN FREE TRADE ASSOCIATION
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.
The Association is responsible for the management of:
EFTA Convention, which forms the legal basis of the organisation and governs free trade relations between the EFTA
European Economic Area (EEA) Agreement, which enables three of the four EFTA Member States (Iceland, Liechtenstein
and Norway) to participate in the EU’s Internal Market.
The History The European Free Trade Association (EFTA) was founded on the premise of free trade as a means of
achieving growth and prosperity amongst its Member States as well as promoting closer economic cooperation between the Western European countries.
The origin of EFTA is well-anchored in the overall context of European integration. The seven founding members – Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom – began
exploring the idea of a free trade agreement amongst themselves in early 1959, in response to the formation of the European Economic Community (EEC) in 1958. The resulting EFTA Convention was agreed in
Stockholm in November 1959. It entered into force on 3 May 1960. The Stockholm Convention established a framework with certain guiding principles and a set of minimum
rules and procedures to be applied, with details focused on provisions for tariff reductions and the elimination of quantitative restrictions, as well as on rules of origin. Within this framework and in line with
a similar process taking place in the EEC, tariffs on industrial goods traded between the EFTA countries – with few exceptions – were abolished from 1967. Quantitative restrictions were removed in 1965.
In 1999, the EFTA Ministers decided to initiate an updating of the Stockholm Convention to reflect the increasing importance in the global economy of trade in services, foreign direct investment and intellectual
property rights. The agreement amending the EFTA Convention, the Vaduz Convention, was adopted in 2001. The revised Convention has strengthened the cohesion in economic relations among the EFTA Member States and provides an enhanced common platform for developing their relations with trade
partners around the world.
EFTA has seen several changes in membership. Finland became an associate member in 1961 and a full member in 1986. Iceland joined in 1970 and Liechtenstein in 1991. Denmark and the United Kingdom left EFTA to become members of the European Communities (EC) in 1973. Portugal joined the EC in 1986 as
did Austria, Sweden and Finland in 1995.
EFTA was founded by the Stockholm Convention in 1960 by seven countries: Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. Over the years (56) membership saw changes and
has reduced to four countries - Iceland, Liechtenstein, Norway and Switzerland. The immediate aim of the Association was to provide a framework for the liberalisation of trade in goods amongst its Member States as well as promoting closer economic cooperation between the Western European countries. Furthermore,
the EFTA countries wished to contribute to the expansion of trade globally.
EFTA was established as an economic counterbalance to the more politically driven European Economic Community (EEC). 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.
In the 1970s, the EFTA States concluded free trade agreements with the EC; in 1994 the EEA Agreement entered into force. Since the beginning of the 1990s, EFTA has actively pursued trade relations with third
countries in and beyond Europe. The first partners were the Central and Eastern European countries, followed by the countries in the Mediterranean area. In recent years, EFTA's network of free trade
agreements has reached across the Atlantic as well as into Asia.
Based on these overall goals, EFTA today maintains the management of the EFTA Convention (intra-EFTA trade), the EEA Agreement (EFTA-EU relations), and the EFTA Free Trade Agreements (third country relations). The EFTA Convention and EFTA free trade agreements are managed by the Geneva office, and
the EEA Agreement by the Brussels office.
THE EFTA COUNTRIES
The four EFTA States are competitive in several sectors vital to the global economy. Switzerland is a world leader in pharmaceuticals, biotechnology, machinery, banking and insurance. Liechtenstein, like Switzerland, is highly industrialized and specialized in capital-intensive and R&D driven technology products. The Icelandic economy benefits from renewable natural resources, not least rich fishing grounds,
and has increasingly diversified into other industries and services. Abundant natural resources also contribute significantly to Norway’s economic strength, including petroleum exploration and production, as
well as important service sectors such as maritime transport and energy related services.
The European Free Trade Association (EFTA) was established by this Convention, signed in Stockholm on
4 January 1960. The Convention contained basic rules regarding free trade in goods and related disciplines.
In 1990, EFTA established a third-country policy to mirror the European Union's external economic relations approach after the end of the Cold War. Since then, EFTA has established an extensive network of contractual free trade relations all over the world. The EFTA Member States also developed close trade
relations with the EU, as reflected in the EEA Agreement (1994) and the EU-Swiss Bilateral Agreements (1999). These developments prompted the EFTA States to modernise their Convention at the end of the
1990s to reflect an increased level of ambition in trade liberalisation.
The updated EFTA Convention, the Vaduz Convention, was signed on 21 June 2001 and entered into force on 1 June 2002, in parallel with the EU-Swiss Bilateral Agreements. It included several significant changes,
of which the most important was the integration of the principles and rules established between the EU and the EEA EFTA States in the EEA Agreement, and between the EU and Switzerland in the EU-Swiss Bilateral Agreements. Important new provisions included the free movement of persons, trade in services,
movement of capital and protection of intellectual property.
The Vaduz Convention covers all the important aspects of modern trade and considerably reinforced the ties between the EFTA countries. The revised Convention strengthened the cohesion in economic relations
between the EFTA Member States and provides for an enhanced common platform for developing their relations with trade partners around the world.
The EFTA States now benefit from virtually the same privileged relationship among themselves as they do with the EU. The Convention effectively applies to the relations between Switzerland and the EEA EFTA
States, since the EEA Agreement applies to trade relations between Iceland, Liechtenstein and Norway. It is updated by the EFTA Council regularly to reflect developments under the EEA Agreement and the Swiss
Below you will find short summaries of the following areas covered by the EFTA Convention:
• Trade in goods • Services and investment
• Land and air transport • Intellectual property rights
• Government procurement • Movement of persons, social security and mutual recognition of diplomas
• Technical barriers to trade • Competition, public undertakings and monopolies, and state aid
Trade in goods To liberalise trade in goods among its Member States, has been the main objective of the Association as
from its establishment. The EFTA Conventions establishes a free trade area between the partners by:
- Providing for free trade in industrial goods, including fish and other marine products; - Improved market access for agricultural products;
- Including trade disciplines; and - Establishing rules on customs and origin matters.
The EFTA States have a highly developed and diversified industrial sector, and under the EFTA
Convention, the Member States grant total elimination of customs duties for all industrial products.
The fisheries sector is of major importance to both Iceland and Norway. Free trade in these products
constitutes an essential element of the Convention, and as in the WTO, these products are considered industrial goods.
In the Convention, EFTA distinguishes between basic agricultural products such as grain, milk and sugar,
and processed agricultural products such as bread, chocolate and soup. In principle, the EFTA States liberalize trade in processed products. Certain measures are maintained, however, to compensate for
higher costs of raw materials used by the EFTA food processing industry in the respective EFTA States. For basic agricultural products, the EFTA States grant each other preferential market access.
Services and investment
The EFTA Convention provides for the general liberalisation of trade in services and investment (including
establishment and movement of capitals) among EFTA States.
Specific rules govern the supply and consumption of services by natural persons, as well as liberalisation of the land, rail and air transport markets in the EFTA States.
For both cross-border trade and investment, EFTA States were allowed to lodge one-off national
reservations before the entry into force of the Convention. They agreed not to introduce any new limitation, to the gradual reduction and, ultimately, elimination of any reaming reservation. Existing reservations largely reflect the EFTA States’ commitments undertaken under the General Agreement on Trade in
Services (GATS) of the WTO.
Finally, the Convention stipulates that EFTA Member States undertake to extend to each other benefits that may accrue from any new agreement that they conclude with the European Union.
Land and air transport
Special rules govern liberalisation of trade in services and investment in the areas of land and air transport.
The EFTA Convention integrates elements of the “EU-acquis” well as of the relevant bilateral Switzerland-EU agreements.
In the field of land transport, the EFTA Convention provides for a gradual reciprocal opening of the markets
for the transportation of both persons and goods by road and rail between all the EFTA States.
Regarding air transport, the EFTA Convention lays down the terms on which EFTA airline companies will have access to each other’s market, including establishment in the territory of another Member State.
Other provisions concern the granting and surveillance of state aid, fares and rates, computer reservations systems, environmental regulations, licensing issues and slot allocation, ground handling, air carrier liability,
technical harmonisation and air safety.
Intellectual property rights
The revised EFTA Convention provides for high standards of protection of intellectual property rights.
The provisions afford adequate and effective protection of intellectual property rights, building on the principles of national treatment and most-favoured-nation (MFN) treatment as stipulated in the WTO Trade-
Related Aspects of Intellectual Property Rights (TRIPS) Agreement.
The Convention defines the areas of intellectual property to which it shall apply and specifically includes substantial provisions as regards patents, designs and geographical indications.
It specifies certain multilateral agreements in the field of intellectual property to which the EFTA States reaffirm their obligations.
It also provides for measures for the enforcement of intellectual property rights against infringement thereof, counterfeiting and piracy.
The EFTA Convention does not contain any obligations regarding government procurement. All four EFTA
States are members of the WTO plurilateral agreement on government procurement (GPA). Through this agreement, the EFTA States take on obligations both regarding the rules governing procurement, sectors
covered and thresholds. The commitments under the GPA are the most favourable conditions that the EFTA States offer to any partner, and therefore provide the EFTA States with non-discriminatory access to each other’s markets.
Movement of persons, social security and mutual recognition of diplomas
The Vaduz Convention introduced the free movement of persons by opening the labour markets of the EFTA States. It specifies the rights of entry, exit and residence and the right to work for the employed, the self-employed and service providers.
Special rules govern individuals living in border areas and working in Switzerland as well as public service
activities and the acquisition of real estate in Switzerland.
All lawful residents have the right to equal treatment with nationals in respect of access too, and in the pursuit of, an economic activity, and living, employment and working conditions.
The free movement of persons also covers social security issues by establishing a system of coordination
between the EFTA States. The objective is to apply common principles and rules so that differences in national legislation do not hinder the mobility of persons who move within the EFTA area. Additionally, the
mutual recognition of professional diplomas has been introduced under the EFTA Convention, which further facilitates the free movement of persons.
Technical barriers to trade
The EFTA Convention facilitates the free movement of goods between the EFTA States through mutual recognition of conformity assessments and notification of draft technical regulations.
The EEA Agreement extends the Union’s internal market rules to the three EEA EFTA States. This comprises the entire body of technical regulations determining the requirements products need to fulfil concerning safety, consumer protection, health and the environment, as well as the procedures for testing
conformity with such requirements. The Convention incorporates the rules established under the bilateral
agreement between Switzerland and the EU in this area, as well as the corresponding provisions of the EEA Agreement.
Competition, public undertakings and monopolies, and state aid
The EFTA States recognise that anti-competitive business practices of private or public undertakings have the potential to undermine the benefits of liberalisation. The Convention text provides for consultations and safeguard measures to deal with possible difficulties resulting from anti-competitive practices of another
The Convention also contains detailed rules on public undertakings and monopolies aiming to prevent government authorities, public enterprises or other public undertakings from undue protection of domestic
production or discriminatory measures against nationals of the other EFTA States that would undermine the benefits of liberalisation.
The EFTA States aim to ensure that subsidies granted by the authorities to private entities, which trade in goods, do not distort, or threaten to distort, competition among undertakings in the EFTA States. However,
the EFTA States abstain from applying countervailing duties among themselves.
LEGAL TEXTS EFTA CONVENTION
The objectives of the Association shall be
a) to promote a continued and balanced strengthening of trade and economic relations between the
Member States with fair conditions of competition, and the respect of equivalent rules, within the area of the Association;
b) the free trade in goods;
c) to progressively liberalise the free movement of persons; d) the progressive liberalisation of trade in services and of investment; e) to provide fair conditions of competition affecting trade between the Member States;
f) to open the public procurement markets of the Member States; g) to provide appropriate protection of intellectual property rights, in accordance with the highest
FEW APPENDI XES
FREE MOVEMENT OF GOO DS
a) Customs duties on imports and exports, and any charges having equivalent effect, is prohibited between the Member States.
b) No Member State can impose internal tax on products of other Member States in excess of those levied on domestic products, or for the purpose of giving indirect protection to other products.
c) With respect to the rights and obligations of the Member States concerning rules of origin and administrative cooperation between the customs authorities of the Member States, the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin apply. If a Member State withdraws from the Pan -Euro-Med Convention, the Member States shall immediately enter into negotiations on new rules of origin applicable to this Convention.
d) Quantitative restrictions on imports and exports, and all measures having equivalent effect are prohibited between the Member States. It precludes prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality; public policy or public security; the protection of health and life of humans, animals or plants and of the environment;
e) The above points do not apply to all agricultural goods. It distinguishes between basic agricultural
products such as grain, milk and sugar, and processed agricultural products such as bread, chocolate and soup. In principle, trade in processed products is liberalized. Certain measures are maintained,
however, to compensate for higher costs of raw materials used by their food processing industry in the respective the Member States. For basic agricultural products, the States grant each other
preferential market access. f) The provisions of this Convention shall apply in relation to fish and other marine products.
TECHNI CAL BARRI ERS TO TRADE
Without prejudice, Switzerland, Iceland, Liechtenstein and Norway grant mutual acceptance of reports, certificates, authorisations, conformity marks and manufacturer’s declarations of conformity.
STATE AI D
The rights and obligations of the Member States relating to State aid is based on GATT 1994 and the WTO Agreement on Subsidies and Countervailing Measures, which are incorporated and made part of the Convention. GATT 1994 states that any subsidies affecting exports to and imports from Members should be notified in writing. Members should recognise the deleterious impact of subsidies and avoid their general and specific use.
PUBLI C UNDERTAKI NGS AND MONOPOLI ES
Public undertakings refrain from applying measures the effect of which is to afford protection to domestic production by means of a duty or quantitative restriction or government aid, or trade discrimination on grounds of nationality.
RULES OF COMPETI TI ON
Member States recognise that the following practices are incompatible with this Convention: a) agreements between enterprises, decisions by associations of enterprises which result in the prevention,
restriction or distortion of competition; b) abuse by one or more undertakings of a dominant position in the territories of the Member States as a whole
or in a substantial part thereof.
PROTECTI ON OF I NTELLECTUAL PROPERTY
EUROPEAN ECONOMIC AREA AGREEMENT
THE Contra c ti ng pa r ti es TO THI S AGREEMENT ARE:
The European Community,
The Kingdom Of Belgium, The Republic Of Bulgaria
The Czech Republic, The Kingdom Of Denmark,
The Federal Republic Of
Germany, The Republic Of Estonia,
The Hellenic Republic, The Kingdom Of Spain,
The French Republic,
The Republic Of Croatia,
The Italian Republic,
The Republic Of Cyprus, The Republic Of Latvia,
The Republic Of Lithuania, The Grand Duchy Of
Hungary, The Republic Of Malta,
The Kingdom Of The
Netherlands, The Republic Of Austria,
The Republic Of Poland,
The Portuguese Republic,
The Republic Of Slovenia, The Slovak Republic,
The Republic Of Finland, The Kingdom Of Sweden,
The United Kingdom Of Great
Britain And Northern Ireland, Iceland,
The Principality Of
Liechtenstein, The Kingdom Of Norway,
What is the European Economic Area?
The European Economic Area (EEA) brings together the EU Member States and three of the EFTA States (Iceland, Liechtenstein and Norway). It was established by the EEA Agreement, an international agreement
which enables these three EFTA States to participate fully in the Single Market. It covers the four freedoms, i.e. the free movement of goods, capital, services and persons, plus competition and state aid rules and
horizontal areas related to the four freedoms.
The objective of the EEA Agreement is to create a homogenous European Economic Area. All relevant EU legislation in the field of the Single Market is integrated into the EEA Agreement so that it applies
throughout the whole of the EEA, ensuring uniform application of laws relating to the Single Market.
2. Who are the Contracting Parties to the EEA Agreement?
The 28 EU Member States, together with the three EFTA States Iceland, Liechtenstein and Norway, make up the EEA Contracting Parties (the 31 EEA States). In everyday language the latter three go by the term
“EEA EFTA States” in order to clarify that the other EFTA State, Switzerland, is not party to the EEA Agreement. However, in the EEA Agreement and legal texts linked to it (e.g. in Joint Committee Decisions (JCDs)) the term “EFTA States” refers to the three States and is also understood to exclude Switzerland.
The EEA Agreement states that when a State becomes a member of the European Union, it shall also apply
to become party to the EEA Agreement (Article 128 EEA), thus leading to an enlargement of the EEA.
The advance of the EU enlargement process has had a considerable impact on the EEA. The Agreement provides that any state becoming a member of the EU shall apply to become a party to the EEA. The EFTA
States thus closely followed the negotiations on EU enlargement to Central and Eastern Europe, and the enlargement of the EEA took place simultaneously with EU enlargement in May 2004. Negotiations on EEA
enlargement to Romania and Bulgaria were concluded in July 2007.
3. When did the EEA Agreement enter into force?
The EEA Agreement was signed in Porto on 2 May 1992 and entered into force on 1 January 1994. Liechtenstein joined on 1 May 1995.
4. What is included in the EEA Agreement?
The EEA Agreement provides for the inclusion of EU legislation in all policy areas of the Single Market.
This covers the four freedoms, i.e. the free movement of goods, services, persons and capital, as well as competition and state aid rules, but also the following horizontal policies: consumer protection, company law, environment, social policy, statistics. In addition, the EEA Agreement provides for cooperation in
several flanking policies such as research and technological development, education, training and youth, employment, tourism, culture, civil protection, enterprise, entrepreneurship and small and medium-sized
enterprises. The EEA Agreement guarantees equal rights and obligations within the Single Market for citizens and economic operators in the EEA. Through Article 6 of the EEA Agreement, the case law of the Court of Justice of the European Union is also of relevance to the EEA Agreement, as the provisions of the
EEA Agreement shall be interpreted in conformity with the relevant rulings of the Court given prior to the date of signature (i.e. 2 May 1992).
5. What is not covered by the EEA Agreement?
The EEA Agreement does not cover the following EU policies: common agriculture and fisheries policies
(although the EEA Agreement contains provisions on trade in agricultural and fish products); customs union; common trade policy; common foreign and security policy; justice and home affairs (the EEA EFTA States are however part of the Schengen area); direct and indirect taxation; or economic and monetary union.
I NSTI TUTI ONAL ASPECTS / THE TWO -PI LLAR STRUCTURE
6. Who is responsible for the management of the EEA?
The administration and management of the EEA is shared between the EU and the EEA EFTA States in a two-pillar structure. Substantive decisions relating to the EEA Agreement and its operation are a joint
venture and are taken by joint EEA bodies established by the EEA Agreement and consisting of representatives both from the EU side and the EEA EFTA States.
The daily management of the EEA lies with the 30 individual states, which are responsible for implementing
new legislation and adhering to the rights and obligations laid down by the EEA Agreement. To ensure uniform implementation and application of the common rules in all EEA States, there is a system of monitoring and judicial control, under which the EU institutions are responsible for the EU Member States
and the EEA EFTA institutions are responsible for the EEA EFTA States.
In addition, the EFTA Secretariat in Brussels plays an important role in the coordination and management of the EEA.
7. What is the two-pillar structure?
The EEA EFTA States have not
transferred any legislative competences to the joint EEA bodies and they are
also unable, constitutionally, to accept decisions made by the EU institutions directly. To cater for this situation, the
EEA Agreement established EEA EFTA bodies to match those on the EU
side. The EEA EFTA institutions and EU institutions form the two pillars, whereas the joint EEA bodies are
The two-pillar structure covers firstly the decision-making procedure. In the
EEA EFTA pillar all decisions are taken by consensus, as opposed to the EU pillar where decisions related to
EEA legislation are normally taken by majority vote. Secondly, the structure
encompasses supervision and judicial control and, as parallels to the European Commission and the Court of Justice of the European Union, a surveillance authority and a court were established by the EEA Agreement to ensure the monitoring of
implementation and application of EEA law in the EEA EFTA States.
8. What are the EEA joint bodies, and what do they do?
The EEA Joint Committee (the European Commission, the three EEA EFTA States and an observer from the EFTA Surveillance Authority (ESA)) meets regularly and is responsible for the ongoing management of
the EEA Agreement and for decisions concerning the incorporation of EU legislation into the EEA Agreement. Its decisions are taken by consensus.
The EEA Council (members of the Council of the European Union and members of the European
Commission, and Foreign Ministers of the EEA EFTA States) meets twice a year and provides political impetus for the development of the EEA Agreement and guidelines for the EEA Joint Committee.
The EEA Joint Parliamentary Committee (Members of the European Parliament and Members of the
national parliaments of the EEA EFTA States) contributes through dialogue and debate to a better understanding of the fields covered by the EEA Agreement.
The EEA Consultative Committee (the Economic and Social Committee of the EU and members of the EFTA Consultative Committee) is a forum for cooperation and consultation between the social partners in
the EEA EFTA States and those in the EU.
9. What are the institutional bodies on the EEA EFTA side, and what do they do?
The Standing Committee of the EFTA States (Ambassadors of Iceland, Liechtenstein and Norway, and observers from Switzerland and ESA) is a forum in which the EEA EFTA States consult each other and
arrive at a common position before meeting with the EU in the EEA Joint Committee. The Committee has five subcommittees which consist of representatives of the foreign ministries or the Prime Minister’s Office
of the EEA EFTA States. Under the subcommittees there are several working groups which consist of experts in different fields from the national administrations of the EEA EFTA States. They are responsible for processing all EU legislation to be incorporated into the EEA Agreement.
The EFTA Surveillance Authority (ESA), based in Brussels, ensures that the EEA EFTA States fulfil their obligations under the EEA Agreement. In addition to general surveillance of compliance, ESA has powers in
relation to competition, state aid and public procurement, reflecting the extended competences of the European Commission in these fields within the EU. The EEA Agreement foresees close cooperation
between ESA and the European Commission.
The EFTA Court, based in Luxembourg, deals with infringement actions brought against an EEA EFTA State with regard to the implementation, application or interpretation of EEA law, gives advisory opinions to courts in the EEA EFTA States on the interpretation of EEA rules, and is competent for the settlement of
disputes between two or more EEA EFTA States. It also hears appeals concerning decisions taken by ESA.
LEGI SLATI ON AND PROCEDURE
12. What is EEA legislation?
The EEA Agreement is based on the primary legislation of the EU (Treaty of Rome) at the time of the EEA
Agreement’s entry into force, and on secondary legislation (EEA-relevant regulations, directives, decisions and certain non-binding instruments). Hence, a large part of the EEA Agreement is identical to the relevant parts governing the four freedoms as laid down in the Treaty on the Functioning of the European Union. A
central feature of the EEA Agreement is its dynamic aspect; the common rules of the EEA Agreement are updated continuously with new EU legislation.
The legal texts of EEA Agreement consist of 129 articles, 22 annexes, 49 protocols and a final act. The
annexes list the EU acts applicable to the EEA, including adaptations. Some of the protocols include provisions on specific areas such as rules on the origin of goods, simplified customs procedures. Protocol 31
provides the basis for cooperation outside the four freedoms, and on that basis the EEA EFTA States contribute financially to and participate in various EU programmes. Finally, on the basis of Protocol 35, the EEA EFTA States have to introduce in their national legal order, if necessary, a statutory provision that EEA
rules prevail in the case of a conflict with other statutory provisions.
15. What is “decision shaping”?
The EEA Agreement does not grant the EEA EFTA States formal access to the decision-making process within the EU institutions. However, the EEA EFTA States can participate in shaping a decision at the early
stages of preparing a legislative proposal. The EEA Agreement provides for input from the EEA EFTA side at various stages of the preparation of EEA-relevant legislation:
- representatives of the EEA EFTA States have the right to participate in expert groups and committees of the European Commission. - Second, the EEA EFTA States have the right to submit EEA EFTA comments on upcoming legislation
While the EEA EFTA States use these opportunities to contribute to the legislative process, they can neither
sit nor vote in the European Parliament or the European Council.
The EEA EFTA States have access to the following types of Commission committees: expert groups (Article 99 EEA); comitology committees (Article 100 EEA); programme committees (Article 81 EEA); and other committees in specific areas (Article 101 EEA). In total, the EEA EFTA States have the right to
participate in several hundred committees.
One of the ways in which the EEA EFTA States participate in shaping EU legislation is by submitting comments on important policy issues. A typical EEA EFTA comment provides a brief commentary and
suggestions regarding Commission initiatives such as green papers or legislative proposals. The comments are endorsed by the Standing Committee and officially noted by the EEA Joint Committee after they have
been sent to the relevant services in the Commission, the European Parliament and/or the Council.
The EEA Agreement ensures participation by the three EEA EFTA States in a number of EU programmes and agencies. In addition, bilateral agreements with the EU ensure the participation by the individual EFTA States in several other EU agencies.
20. What are the EEA Grants?
The EEA Grants are related to the EEA Agreement and provide social and economic development funding
from the EEA EFTA States. This financial support aims at reducing economic and social disparities in the EEA and strengthening bilateral relations with the beneficiary states: Bulgaria, Cyprus, Czech Republic,
Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia and Spain. In addition to the EEA Grants, Norway has funded a parallel scheme since 2004 – the Norway Grants.
2015 CURRENT SCENARIO
As of 2015, the following agenda was being undertaken by EFTA.
The four countries forming the European Free Trade Association (EFTA) – Iceland, Liechtenstein, Norw ay and Sw itzerland – have created
a global trading netw ork that extends to over 60 countries in Europe and across the globe and accounts for s ome 75% of the merchandise
trade of the EFTA States. By far the most comprehensive agreement is the Agreement on the European Economic Area.
In 2015, agreement w as reached betw een the EEA EFTA States and the EU on renew ed financial contributions to reduce social and
economic disparities and to promote cooperation in Europe for the period 2014-2021.
EFTA has 25 Free Trade Agreements (FTAs) in force w ith 35 countries and customs territories. In 2015, EFTA Ministers signed a protocol
on the accession of Guatemala to the FTA betw een the EFTA States and Central American States. A Joint Declaration on Cooperation
w as signed w ith Ecuador, setting the stage for the launch of free trade negotiations in 2016. In addition, free trade negotia tions w ere
launched w ith Georgia and the Philippine.
The EFTA Council met tw ice at Ministerial level in 2015 – on June 22 in Schaan, Liechtenstein, and on November 23 in Geneva,
By the end of the year, EFTA’s netw ork of preferential trade relations extended to 63 par tners outside the EU through the follow ing means
a) Operational Free Trade Agreements
In 2015, 25 Free Trade Agreements w ere operational w ith 35 partner countries and customs territories: Albania,
Bosnia and Herzegovina, Canada, the Central American States of Costa Rica, Hong Kong China, Israel, Jordan, Serbia, Singapore,
Tunisia, Turkey, Ukraine to name a few .
b) Free Trade Negotiations
EFTA w as party to negotiations w ith six partners in 2015: Georgia, India, Indonesia, Malaysia, the Philippines and Vietnam.
c) Joint Declarations on Cooperation and Other Processes
Eight Joint Declarations on Cooperation (JDCs) w ere operational w ith eleven partner countries in 2015, tw o of w hich (Georgia and the
Philippines) became negotiating partners during the year. These w ere Ecuador, Georgia, Mauritius, Mercosur (Argentina, Brazil, Paraguay
and Uruguay), Mongolia, Myanmar, Pakistan and the Philippines.
The EEA Joint Committee incorporated 43 legal acts in the veterinary area into the EEA Agreement.
Discussions continued on the Regulations on genetically modif ied food and feed, and on the traceability and labelling of genetically
modif ied organisms. These have not yet been incorporated into the EEA Agreement. Preparations continued for the incorporation of the
legal framew ork on organic production. In 2015, 67 legal acts relating to foodstuffs w ere incorporated into the EEA Agreement.
A total of ten acts concerning medicinal products and medical devices w ere incorporated into the EEA Agreement, including a regulation on
clinical trials. With regard to the Paediatrics Regulation, all EEA EFTA States agreed to the EU’s proposal to give the EFTA
Surveillance Authority the competence to impose f ines.
The process of adopting a unitary patent for Europe continued in the EU, w ith eight Member States ratifying the Agreement on a Unif ied
Patent Court. The package w ill enter into force in the EU once 13 Member States have ratif ied the agreement, including France, Germany
and the United Kingdom. The EEA EFTA States are follow ing the issue closely.
Regulations on establishing a European Research Infrastructure Consortium (ERIC) w ere incorporated into the EEA Agreement, giv ing the
EEA EFTA States the same status as EU Member States in ERIC consortiums.
Several acts in the f ield of environment w ere incorporated into the EEA Agreement in 2015, notably the Directive on the protection of the
environment through criminal law , the Fuel Quality Directive, and the Industrial Emissions Directive and related acts. Each o f these acts
had been the subject of extensive discussions prior to their incorporation. Experts discussed the Regulation on Ship Recycling and the
Regulation on Fluorinated Greenhouse Gases in view of their possible incorporation into the EEA Agreement.
The EEA EFTA net payment in 2015 amounted to EUR 425.7 mill ion. In the 2009-2014 period (projects may be implemented until 2016/17), the Grants amount to EUR 1.8 billion. The EEA Grants (EUR 993.5
million) are available in all countries. Of those, Norw ay provides 95.7%, Iceland 3.2% and Liechtenstein 1.1%. The Norw ay Grants (EUR
804.6 million) are f inanced by Norw ay alone. A total allocation of EUR 2.8 billion has been agreed for the seven-year funding period 2014-
I NDI CES
Switzerland Norway Iceland Liechtenstien
World Competitiveness Scoreboard (61
2014 02 10 25 Not included
2015 04 07 25 Not included
Global Competitiveness Index
2014 01 11 30 Not included
2015 01 11 29 Not included
The World Competitiveness Scoreboard 2015 from Institute of Management Development measures how well economies manage their resources and competencies to facil itate long term value creation.
The Global Competitiveness Index 2015-2016 from World Economic Forum measures the set of institutions, policies and factors that set the sustainable current and medium term level of economic prosperity.
Some of the top EFTA listed companies in 2015 are Novartis, Nestle, Roche, UBS, ABB, Telenor, Schindler and Credit Suisse
EFTA’S FREE TRADE NETWORK AS ON APRIL 2010
EFTA’s trade strategy vis -à-vis third countries has progressively evolved, moving beyond the European continent to comprise
today one of the world’s largest networks of free trade relations. The first free trade agreement negotiated by the EFTA States
as a group was with Spain. This entered into force in 1980 and came to an end in 1985 upon Spain’s accession to the EC.
In 1990, in response to initiatives by the EC to conclude agreements aiming a t free trade in industrial goods with the transition
countries of Central and Eastern Europe, EFTA Ministers decided to build EFTA’s own network of free trade agreements in
parallel to the EC. In a first phase, the EFTA States entered into agreements with Poland, Romania, Bulgaria, Hungary, and the
Czech and Slovak Republics. Negotiations were also launched with Israel and Turkey.
In 1995, EFTA Ministers turned their attention to free trade relations beyond the confines of Europe, to maintain a policy of
parallelism and coherence with those of the EU, taking into account the “Barcelona process” launched by the EU in 1995.
Declarations on Cooperation with Egypt, Tunisia, Morocco, the Palestinian Authority, Jordan and Lebanon were in place by 1997 ,
all of which have since developed into free trade agreements.
Extension of EFTA’s network in Central and Eastern Europe continued simultaneously with Slovenia and the three Baltic States,
Latvia, Lithuania and Estonia, followed by Macedonia and Croatia. As a result of the enlargement of the EU in 2004 and 2007,
the free trade agreements in place with the EU accession countries were replaced by the relevant arrangements between the
EFTA States and the EU.
A third phase in EFTA’s third-country relations began when the EFTA States opened negotiations with Canada in 1998. Since
then, EFTA has extended its network to encompass countries in Latin America, Asia and Africa. EFTA has also expanded the
scope of its agreements to cover trade in services, investment and/or publ ic procurement, as in the case of the agreements with
Chile, Colombia, the Gulf Cooperation Council, Mexico, the Republic of Korea, and Singapore. Furthermore, several of EFTA’s
free trade agreements provide for technical assistance related to the promotion of trade and investment.
Till 2010, EFTA has signed 20 free trade agreements with 29 countries, in chronological order: Turkey, Israel, Morocco,
Palestinian Authority, Macedonia, Mexico, Jordan, Croatia, Singapore, Chile, Lebanon, Tunisia, Republic of Korea, SACU
(Botswana, Lesotho, Namibia, South Africa, Swaziland), Egypt, Canada, Colombia, the Gulf Cooperation Council (Bahrain, Kuwait,
Oman, Qatar, Saudi Arabia, United Arab Emirates), Albania and Serbia while an FTA with Peru was finalised and negotiations
were ongoing with 5 partners (Algeria, Hong Kong China, India, Thailand and Ukraine). Exploratory talks were being conducted
with several other countries, notably Russia, Indonesia, Malaysia and Vietnam.
Combining the contractual frameworks with the EU and the free trade agreements with third countries, approximately 80% of
EFTA’s total merchandise trade is today covered by preferential arrangements, with the EU accounting for more than 70%. All
the EFTA States are members of the WTO and attach the highest priority to a well -functioning global trade system. In EFTA’s
view the multilateral and bilateral approaches are mutually supportive.
Together they ranked eighth in world merchandise trade and fifth in world commer cial services trade in 2014.
Region Free trade agreements (FTA) FTA negotiations Joint declaration on cooperation/ Dialogue on trade relation
Europe European Union, Albania, Bosnia and Herzegovina, Macedonia, Montenegro, Serbia, Turkey and Ukraine
Georgia and Russia/ Belarus/ Kazakhstan
East/ North Africa
Egypt, Gulf Cooperation Council (GCC;
comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates), Israel, Jordan, Lebanon, Morocco, Palestinian Authority and Tunisia
Southern African Customs Union (SACU;
comprising Botswana, Lesotho, Namibia, South Africa and Swaziland)
East African Community (EAC;
comprising Burundi, Kenya, Rwanda, Tanzania and Uganda) and Mauritius
Americas Canada, Central American States (Costa Rica, Guatemala and Panama), Chile, Colombia, Mexico and Peru
Honduras Ecuador, Mercosur and United States (trade policy dialogue)
Hong Kong China, Republic of Korea,
Philippines and Singapore
India, Indonesia, Malaysia,
Thailand and Vietnam
Mongolia, Myanmar and Pakistan
THE EEA: STRENGTHS, WEAKNESSES AND CHALLENGES
As per 2012 data available to us, we take the case of Iceland to highlight the strengths and challenges of EEA.
I CELAND’S POSI TI ON I N THE EEA
The European Economic Area (EEA) has facil itated the active Europeanisation of Iceland. The EEA Agreement brings three of the
Member States of the European Free Trade Association (EFTA) – Iceland, Liechtenstein and Norway (collectively EEA EFTA) –into
the European Single Market, with those countries agreeing to adopt the regulatory framework of the European Union (EU). It
does not, however, provide access for the EEA EFTA Member States to the EU’s institutions and decision-making processes. It
also does not cover the Common Agricultural Policy and regional cohesion policies and, perhaps most importantly for Iceland, it
does not include the Common Fisheries Policy. EEA EFTA does not participate in the EU’s trade policy, monetary policy, tax
regimes, foreign affairs or many of the EU’s internal matters, including judiciary affairs that fall outside the Schengen and Dublin
DEMOCRATI C CHALLENGES
Despite the equality of the EU and EEA EFTA in the EEA Agreement, EU is the leading partner. As a result, the automatic
implementation of EU legislation is rarely discussed in the Icelandic parliament. According to many legal scholars, this
harmonised legal framework is in violation of the Icelandic constitution. When Iceland does try to deviate from the EU rules, the
EFTA Surveillance Authority (ESA) intervenes. More than a dozen times, the Authority has taken direct action or issued formal
infringement procedures against Iceland before the EFTA Court for being in violation of EU law. The number of cases against
Iceland increased substantially after the 2008 economic crash.
ECONOMI C CHALLENGES
In economic terms, the EEA Agreement has altered the composition of the Icelandic economy, for example by opening up the
international financial markets to Icelandic businesses. Few segments of economy e.g. vegetable and flower producers, that lost
out after the country entered the EEA.
The new access to the EU financial market created a major weak spot for Iceland that became evident during the 2008 financial
crisis. After privatisation and extensive deregulation, the Icelandic banks grew rapidly on the European markets and well beyond
Iceland’s capability to bail them out when the crisis hit. Three major banks and virtually the whole Icelandic financial sector were
devastated. The depositors’ guarantee fund set up on the basis of an EU directive never had enough funding to cover a systemic
collapse and no help came from the European institutions that Iceland was not part of. This “neither in nor out” arrangement,
with one foot in the European Single Market, with all the obligations that entails, and the other foot outside the EU institutions,
and therefore without access to back-up from, for example, the European Central Bank, proved to be flawed when faced with a
crisis of this magnitude.
OPERATI ONAL CHALLENGES
EEA does not respond to the operational and institutional changes of the EU. Since the 1992 Maastricht Treaty, various political
shifts and institutional turns have taken place within the EU, meaning the political and legal environment in which the EEA
operates has changed dramatically. Four new treaties and the Eastern Europe enlargement have, for example, marked a
transformation of the EU that has led to the increased influence of the European Parliament and the European Council at the
expense of the European Commission. Within the EEA, the Commission is the voice of the EFTA Member States and should
speak on their behalf in the EU’s institutions. The diminished capacity and influence of the Commission has further narrowed the
influence that EEA EFTA has on the European legislative process. With only Iceland, Liechtenstein and Norway representing
EFTA, while the EU has grown to 27 Member States with a total of around 500 mill ion inhabitants, the influence of the EEA EFTA
Member States within the EEA has diminished significantly.
A good example of this is when Iceland was treated as a third State outside the internal trade framework when the EU invoked
tariffs on steel in a trade dispute with the United States. The Eastern Europe enlargement almost resulted in the collapse of the
EEA Agreement when the EU threatened to halt simultaneous enlargement of the EEA until Iceland, Liechtenstein and Norway
agreed to increase their contribution to the EFTA development fund. The process showed how vulnerable Iceland is against the
COOPERATI NG WI TH NORWAY
Iceland is a small country of approx. 3 lakh inhabitants and has small administration. It compensates for its lack of resources by
relying on close cooperation with and help from the services of neighbouring countries, especially Norway mainly because under
the EEA Agreement, the EEA EFTA Member States are meant to harmonise their position and speak with one voice. However,
there is tension between them. It has been claimed that Norway seems to forget its agreement with two smaller counterparts
and tends to operate alone on issues concerning all three. There have also been claims that when Iceland refused to accede to
EU, the Norwegian Government has agreed to them. As a result, the Icelandic Government feels that Norway is keen to give into
the demands of the EU, rather than sticking firmly to the principles of the EEA Agreement and the EFTA Convention.
Since Iceland depends on EFTA Secretariat while Norway is in a position to handle EEA related matters directly, Icelandic officials
claim that their Norwegian counterparts systematically bypass the EFTA Secretariat on many EEA relevant issues, thereby
avoiding coordination with Iceland.
As a direct result of these operational difficulties and diminished capacity to influence EEA legislation, the Icelandic Government
started pressing for a revision of the EEA Agreement.
the EEA has both proved instrumental in both the boom and the bust of the Icelandic economy. The realisation of the systemic
flaw that caused Iceland’s financial trouble in 2008 but denied it access to EU support is perhaps the main reason for Iceland’s
EU application in 2009. Even in that phase where the application could be accepted/rejected, the alternative to rejection was
review of the EEA Agreement. Revisiting this agreement was also risky for Iceland due to the agreement on exchange of fishing
quotas. The EU transferred its Icelandic region fishing quota mainly to Spanish fishermen, who have had difficulti es meeting it,
while Icelandic fishermen have had no trouble catching all they are allowed. If the Agreement is renegotiated, it is l ikely that the
EU would also want to revisit arrangements that it finds unsatisfactory, potentially to the detriment of Iceland.
EFTA-EU TRADE STATS
Data from GTI, Global Trade Atlas (update Feb 2015).
Merchandise trade data from Liechtenstein are included in data for Switzerland.
HS refers to Harmonized Commodity Description and Coding System nomenclature of Wor ld Customs Organization.
EFTA-INDIA TRADE STATS
Data of Feb 2015