What is EFTA and how is it different from the EU?
The European Free Trade Association (EFTA) is an intergovernmental organisation, established in 1960 by the EFTA Convention for the promotion of free trade and economic integration between its Member States (today Iceland, Liechtenstein, Norway and Switzerland), within Europe and globally.
EFTA does not envisage political integration. It does not issue legislation, nor does it establish a customs union.
EFTA’s first objective was to liberalise trade between its Member States. In 1972, each EFTA State negotiated bilateral free trade agreements (FTAs) with the EEC. Currently, the EFTA States have 29 FTAs in force or awaiting ratification covering 40 partner countries worldwide (outside Europe).
Since 1994, the EFTA Secretariat has assisted Iceland, Liechtenstein and Norway in the management of the EEA Agreement.
The EFTA Secretariat is not involved in the management of the bilateral agreements between Switzerland and the EU. Since 2001, the EFTA Convention has been updated on a continuous basis in order to align its content with the Swiss-EU bilateral agreements and the EEA Agreement. This includes, for example, provisions on the free movement of persons between all of the EFTA States.
Can the EFTA Member States also sign bilateral free trade agreements?
Yes, the EFTA States are not obliged by the EFTA Convention to conclude preferential trade agreements as a group. They maintain the full right to enter into bilateral third-country arrangements.
What is the European Economic Area – EEA?
The European Economic Area (EEA) was established by the EEA Agreement, which entered into force in 1994. Its objective is to extend the Internal Market of the EU to the three participating EFTA States creating a homogeneous European Economic Area, based on common rules and equal conditions of competition and providing for the adequate means of enforcement at the judicial level. The EEA Agreement guarantees equal rights and obligations within the Internal Market for individuals and economic operators in the EEA. Currently, the EEA comprises the 28 EU Member States and the three EEA EFTA States – Iceland, Liechtenstein and Norway.
What is covered by the EEA Agreement?
All relevant Internal Market legislation is integrated into the EEA Agreement so that it applies throughout the whole of the EEA. The core of these rules relates to the free movement of goods, capital, services and persons throughout the 31 EEA States. In addition, the EEA Agreement covers horizontal areas such as social policy, consumer protection, environment, company law, statistics, tourism and culture. In order to ensure equal conditions of competition throughout the EEA, the EEA Agreement mirrors the competition and state aid rules of the EU Treaties. It also provides for participation in EU programmes such as those for research and education.
What is not covered by the EEA Agreement?
The EEA Agreement does not cover EU common agriculture and fisheries policies, although it contains provisions on trade in agricultural and fish products. It does not entail a customs union, nor does it include a common trade policy, common foreign and security policy, justice and home affairs, harmonised taxation or the economic and monetary union.
Schengen is not a part of the EEA Agreement. However, all of the four EFTA States participate in Schengen and Dublin through bilateral agreements and they all apply the provisions of the relevant Acquis.
How do the EEA EFTA States contribute financially to the EU?
The financial contributions of the EEA EFTA States to the EU related to the EEA Agreement are twofold.
First, the EEA EFTA States contribute towards reducing economic and social disparities in the EEA through the EEA Grants. Currently the beneficiary states include Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia and Slovenia. In addition to the EEA Grants, Norway has funded a parallel scheme since 2004 – the Norway Grants. The funding period covering 2014-2021 has a total financial envelope of approximately EUR 400 million per year. These contributions are not managed by the EU, but by the EFTA Financial Mechanism Office in collaboration with the beneficiary countries.
Second, the EEA EFTA States contribute towards the EU programmes and agencies that they participate in on the basis of the EEA Agreement. These contributions are added to the EU budget, increasing the total financial envelopes of the programmes and agencies in question. For the current 2014-2020 EU multiannual budget period, the total EEA EFTA contribution to EU programmes and agencies is approximately EUR 460 million per year.
When the UK leaves the EU, will it also withdraw from the EEA?
All parties – the EEA EFTA States, the EU27 and the UK Government – agree that the EEA Agreement will not apply to the UK after its withdrawal from the EU. This follows from the two-pillar structure of the EEA Agreement and Article 126, which states that the EEA Agreement applies to the territory of the EU and the three EEA EFTA States.
What has EFTA done to prepare for Brexit?
- EFTA States
All the EFTA States have set up their own structures to prepare for Brexit, including the appointment of ‘Brexit coordinators’ at senior officials’ level and the establishment of inter-departmental working groups.
- EFTA at 4
The EFTA States consult among themselves regularly in the EFTA Council and at Ministerial level, as well as dedicated meetings of Brexit coordinators at senior officials’ level.
- EEA EFTA States
There are extensive contacts and dialogue among the EEA EFTA States on Brexit at all levels, both in the regular meetings of official bodies such as the Standing Committee, and more frequently in dedicated ad hoc settings.
On Brexit, what dialogue has EFTA had with?
- the EU
The EEA EFTA States have raised the issue of the implications of the UK’s withdrawal from the EU for the EEA Agreement in the EEA Joint Committee and in the EEA Council. There have also been extensive contacts between the EEA EFTA States and the EU institutions and Member States, both at ministerial level and at the level of senior officials and experts.
A dialogue has been established at ministerial level, with regular meetings of EEA EFTA Ministers and the EU’s Chief Negotiator, Mr Michel Barnier, in the context of the biannual EEA Council meetings. A close dialogue has been established between the EU’s Brexit negotiating team (Task Force 50) and the EEA EFTA States.
The three EEA EFTA States and the EU agree on the need to safeguard the EEA Agreement, and ensure the continuation of a well-functioning, homogenous Internal Market after Brexit. Switzerland also has regular exchanges with the EU and its Member States.
- the UK
All the EFTA states have engaged in bilateral dialogue with the UK with the aim to maintain close economic and trade relations with the UK after the country leaves the EU. Discussions with the UK on the implications of Brexit for EEA EFTA-UK relations were launched in the immediate aftermath of the Brexit referendum. Switzerland set up several dialogues with the UK (1) a so-called Continuity Dialogue which deals with horizontal issues and oversees progress in each area, and (2) Specific Dialogues in areas currently covered by the CH/EU agreements.
There has also been considerable interest from the UK for information about EFTA and the EEA. Following requests from the UK, representatives from the EFTA States and the Secretariat have met with members of various committees of the House of Commons and the House of Lords, as well as from Scotland, Wales and Northern Ireland.
The UK is a very important trading partner for all the EFTA States. All of them want to keep an open mind to all possible options to safeguard the close economic and cultural ties between the countries.
How is EFTA preparing for the EU-UK Withdrawal Agreement?
The EFTA States are preparing both for a scenario in which the EU and the UK conclude a Withdrawal Agreement in time, and a no deal scenario.
The EEA EFTA States and the UK are ready to finalise an agreement which will mirror the relevant parts of the EU-UK withdrawal agreement. The key issue concerns citizens’ rights, but the agreement also covers other separation issues – such as goods placed on the market, IPR, ongoing police and judicial cooperation, judicial procedures, data protection, and public procurement - and institutional provisions.
As far as Switzerland is concerned, works for a future treaty relationship between Switzerland and the UK are also currently underway in areas including trade, migration, air and land transport, financial services and data security. These works are already at an advanced stage.
What does the EFTA Convention say about new member states?
According to Article 56 of the EFTA Convention, “any State may accede to the Convention provided that the EFTA Council decides to approve its accession, on such terms and conditions as may be set out in that decision.”
The EFTA Council is the highest governing body of EFTA, where the four EFTA States – Iceland, Liechtenstein, Norway and Switzerland – meet at ambassadorial or ministerial level. Each Member State is represented and decisions are taken by consensus.
If the UK would apply to join EFTA, how would the EFTA States respond?
The UK government has clearly indicated that it does not intend to apply for membership of EFTA. However, if the UK would seek to re-join EFTA, EFTA Member States would carefully examine the application. A request for membership of EFTA would be considered by the EFTA Council, where decisions are taken by consensus. It is not timely to prejudge what the outcome would be as EFTA remains open to examining all options to safeguard the interests of its Member States.
If the UK would re-join EFTA, would it automatically become party to the EEA Agreement?
Not automatically, as each EFTA state decides on its own whether it applies to be party to the EEA Agreement or not. According to Article 128 of the EEA Agreement, “any European State becoming a member of the Community shall, and the Swiss Confederation or any European State becoming a member of EFTA may, apply to become a party to this Agreement. It shall address its application to the EEA Council.” The EEA Council takes political decisions leading to the amendment of the EEA Agreement, including the possible enlargement of the EEA. Decisions by the EEA Council are taken by consensus between all EU Member States on the one hand and the three EEA EFTA States - Iceland, Liechtenstein and Norway - on the other.
If the UK would re-join EFTA, would it also become party to EFTA’s worldwide free trade agreements?
Any State that becomes a member of EFTA has an obligation to apply to become a party to EFTA’s existing free trade agreements according to Article 56 of the EFTA Convention. The accession of a new Member State to our FTAs can only be negotiated with the consent of the other party or parties to the agreement. All of our FTAs include provisions that regulate the accession to the FTA in question, stipulating that terms and conditions have to be agreed upon by the acceding Party and all existing Parties to the FTA.
If the UK would re-join EFTA, how would it affect
Fisheries: The EFTA Convention guarantees free trade in fish and other maritime products between the Member States. A UK membership would therefore mean better market access in the UK for these products than the current EFTA States have today.
Agriculture: When it comes to agriculture, the EFTA Convention has specific commitments for market access in agriculture for each Member State. These would have to be negotiated for any new member state as part of the accession process.
Migration: The EFTA Convention guarantees the free movement of people between the Member States. This would also apply between the UK and the current EFTA States in the event of a UK membership in EFTA.
If the UK remains in a customs union with the EU, could it still join EFTA?
Art. 56.3 of the EFTA Convention states that a new EFTA member state ‘shall apply to become a party to the free trade agreements between the Member States on the one hand and third states, unions of states or international organisations on the other.’ As a member of a customs union, a country acceding to EFTA could not comply with this obligation. EFTA membership does not preclude from entering into a customs arrangement with the EU; existing EFTA countries govern their relation to the EU through different instruments.