European Free Trade Association

The European Free Trade Association (EFTA) was established on May 3, 1960 as an alternative for European states that were not allowed or did not wish to join the European Community (now the European Union).

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The EFTA Convention was signed on January 4, 1960 in Stockholm by seven states. Today only Iceland, Norway, Switzerland and Liechtenstein remain members of EFTA. The Stockholm Convention was subsequently replaced by the Vaduz Convention.

This Convention provides for the liberalisation of trade among the Member States. Three of the EFTA countries are part of the European Union Internal Market through the Agreement on an European Economic Area (EEA), which took effect in 1994. The fourth country, Switzerland, opted to conclude bilateral agreements with the EU. In addition, the EFTA states have jointly concluded free trade agreements with a number of countries worldwide.

Membership history

Its original membership was United Kingdom, Denmark, Norway, Sweden, Austria, Switzerland and Portugal.

Finland became an associate member in 1961 (it later became a full member in 1986), and Iceland joined in 1970. The United Kingdom and Denmark joined the European Community in 1973 (together with Ireland), 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). Finally, Austria, Sweden and Finland joined the European Union in 1995 and hence ceased to be EFTA members.

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, and instead had 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.

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 end of the dictatorship. When Portugal left EFTA in 1985, 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

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

Future of EFTA

Norwegians have rejected in referendums to join the EU on two occasions. At the time of the first referendum (1972) their neighbours the Danes joined. The second time (1994) two other Nordic neighbours, Sweden and Finland joined the EU. The two last governments of Norway have been unable and unwilling to advance the question, as they have both been coalition governments consisting of both proponents and opponents.

Iceland is not likely to join the EU in the near future due to political indifference towards the Union. Only one party supports starting entry-negotiations.

Since Switzerland rejected the EEA in 1992, referenda on EU-membership have been initiated, the last time in 2001. These have, however been rejected by clear majorities.

In mid-2005, representatives of the Faroe Islands have hinted at the possibility of their territory joining EFTA. However, the chances of the Faroes' bid for membership are uncertain because according to the EFTA Convention, only states may become members of the Association.

United Kingdom

The United Kingdom benefited from the lack of common tariffs for EFTA members, by importing goods from the Commonwealth of Nations and selling them on to other EFTA members. Due to the advancement of the EEC and the decision to focus on Europe, rather than the United States and Commonwealth, as trading partners, the United Kingdom chose to apply for EEC membership in 1961 (however, it did not become a member until 1973).

External links

Europe Trade blocs | International organizations | 1960 establishments

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