A brief history of EFTA

EFTA was founded in 1960 with 7 members: Austria, Denmark, Norway, Portugal, Sweden, Switzerland and United Kingdom. Finland became an associate member in 1961 (it later became a full member in 1986). Iceland joined in 1970. The United Kingdom and Denmark, along with Ireland quitted EFTA in 1973 as they participated in the European Community (EC)(now European Union). The participating countries of EFTA continued to drop because Portugal entered the EC in 1985. Liechtenstein joined EFTA in 1991. In 1995, Austria, Sweden and Finland joined the EC and hence ceased to be EFTA members. Today Iceland, Norway, Switzerland and Liechtenstein remain members of EFTA only.

In 1950s there was a strong current in Western Europe to enhance economic integration of its nation states. Some European governments proposed to form the European Economic Community (EEC), aimed at operating a customs union applying to all types of goods. The EEC was established on 1 January 1958.

Since the government of the United Kingdom intended to form a looser alliance based on free trade, it did not join the EEC. Instead, it sought to explore the idea of a free trade arrangement between other European countries outside the EEC with the aim of counterbalancing the EEC.

In June 1959, officials from seven governments (Austria, Denmark, Norway, Portugal, Sweden, Switzerland and United Kingdom) met at Saltsjöbaden, near Stockholm, to draw up a draft plan for EFTA. They met again at the beginning of September and completed the final text of the Convention establishing EFTA. The Stockholm Convention, the legal basis of the Association, was signed on 4 January 1960.

The EFTA Convention

The Convention guides the monitoring and management of relationships between the EFTA States. It effectively applies mainly to the relations between Switzerland on the one hand and the other EFTA States, since the Agreement on the European Economic Area (EEA) applies to all trade relations between Iceland, Liechtenstein and Norway.

The main idea of the Convention is the provisions for the arrangement for full free trade in industrial goods between the contracting parties. Such provisions include the abolition of tariffs and quantitative restrictions among EFTA members. It also contains provisions regarding the prohibition of State aid, certain measures in relation to public undertakings, restrictive business practices, establishment and dumped and subsidized imports.

In April 2001, the EFTA member states agreed on significant amendments to the EFTA Convention, in order to bring it up to a similar level of co-operation as is the cases between the EFTA States and the European Community, especially after the latter concluded seven bilateral agreements with Switzerland. The updated Convention was signed by EFTA Ministers at their meeting in Vaduz, Liechtenstein, on 21 June 2001 and entered into force on 1 June 2002. Hence, the updated Convention is called Vaduz Convention.

Objectives of EFTA

(a) to promote sustained economic growth, full employment, increased productivity and the rational use of resources within the member states, financial stability and continuous improvement in living standards,

(b) to promote free trade among members states,

(c) to avoid significant disparity between Member States in the conditions of supply of raw materials produced within the Area of the Association, and

(d) to seek a broader economic union with the Western European countries and therefore contribute to the expansion of trade to the world.

The activities of EFTA can be divided into three main areas. Firstly, the monitoring and management of relationships between the EFTA States on the basis of the EFTA Convention , which is the legal basis of the Association. Secondly, in line with the broad objectives of the Convention, EFTA has developed relations with a large number of non-EU countries (usually referred to as third country relations), managed from the Geneva headquarters.

Thirdly, three of the four member states (Iceland, Liechtenstein and Norway) have structured their relations with the European Union (EU) in the form of the Agreement on the European Economic Area (EEA), through which they participate in the EU Single Market. The servicing of the EFTA pillar of this extensive Agreement is undertaken by the office in Brussels. The Office of the Statistical Adviser in Luxembourg handles statistical co-operation on the basis of the EEA Agreement. A Secretary-General, who is assisted by a Deputy in Geneva and in Brussels, heads the Secretariat.

European Economic Area (EEA): A New Momentum in EFTA-EC Relations

On 17 January 1989, in a speech before the European Parliament, Jacques Delors, the then President of the EC Commission, suggested to increase the efficiency of the co-operation between the EC and EFTA. The EFTA countries also expressed interest to strengthen the institutional links between the EFTA States and the EC.

The EFTA States and the EC began negotiations on the EEA in June 1990. They agreed all existing EC law, treaties and judgements would be integrated into the EEA Agreement as the legal basis of the EEA. Other negotiations continued. The EEA Agreement was signed in Oporto on 2 May 1992. On the same day, the EFTA Ministers signed the agreements establishing the EFTA Surveillance Authority (ESA), the EFTA Court and the Standing Committee. All current members of EFTA except Switzerland are participating in the EEA. The EEA finally entered into force on 1 January 1994.

EFTA third country relations

EFTA has been actively expanding economic interaction with central and eastern Europe as well as the Mediterranean region in the past decade. Eighteen free trade agreements and eight declarations on cooperation have been reached so far. Several more agreements are currently under negotiation.

EFTA enhances the third country relations with the aim of increasing economic interests, supporting the process of European and interregional integration as well as liberalizing world trade.

The first free trade partner of EFTA is Turkey. The EFTA-Turkey Free Trade Agreement entered into force on 1 April 1992.

Structure of EFTA

EFTA has the following institutions: the Secretariat, the EFTA Council, the EFTA Surveillance Authority and the EFTA Court. The last two are EEA institutions and hence Switzerland does not participate in them.

The EFTA Council is the governing body of the Association, with responsibility for all non-EEA matters concerning relations between the EFTA States, matters concerning relations with third countries and supervision of the Industrial Development Fund for Portugal.

The task of EFTA Surveillance Authority is to ensure that EEA rules are properly implemented by the EFTA States. The Authority can investigate possible infringements either on its own initiative or on the basis of complaints. It is noted that since EEA comprises both EU and EFTA countries, supervision for the two parties is under different institutions: the EU Member States and the EFTA States are supervised by the European Commission and the EFTA Surveillance Authority respectively. In view of its surveillance function, the EFTA Surveillance Authority has been given powers corresponding to those of the European Commission.

The EFTA Surveillance Authority has its headquarters in Brussels, Belgium.

The Court is mainly competent to deal with infringement actions brought by the EFTA Surveillance Authority against an EFTA State with regard to the implementation, application or interpretation of an EEA rule, for the settlement of disputes between two or more EFTA States, for appeals concerning decisions taken by the EFTA Surveillance Authority and for giving advisory opinions to courts in EFTA States on the interpretation of EEA rules.

The headquarters of the EFTA Court is located in Luxembourg.