European Free Trade Association (EFTA)

The European Free Trade Association (EFTA) is an intergovernmental organization comprising Iceland, Liechtenstein, Norway, and Switzerland. EFTA was established to promote free trade and economic integration for the benefit of its four Member States and their global trading partners. It was founded through the Stockholm Convention in 1960.

From the outset, EFTA's activities have centered around its relations with the EEC, which later became the European Community (EC) and the European Union (EU). Since the early 1990s, EFTA has actively sought to enhance trade relations with third countries both within and outside Europe.

The Association has three primary responsibilities:

• Maintaining and developing the EFTA Convention, which governs economic relations among the four EFTA States.
• Managing the Agreement on the European Economic Area (EEA Agreement), which integrates the Member States of the European Union with three EFTA States into a single market, often referred to as the “Internal Market.”
• Expanding EFTA’s global network of free trade agreements.

The EFTA Member States include:

• Iceland
• Liechtenstein
• Norway
• Switzerland

The four EFTA States are competitive in various sectors crucial to the global economy and rank among the highest worldwide in terms of competitiveness, wealth generation per capita, life expectancy, and quality of life. Switzerland excels in pharmaceuticals, biotechnology, machinery, banking, and insurance. Liechtenstein, similar to Switzerland, is highly industrialized and focuses on capital-intensive and R&D-driven technology products. Iceland's economy benefits from renewable natural resources, particularly rich fishing grounds, and has diversified into other industries and services. Norway's economic strength is bolstered by abundant natural resources, including oil and gas exploration and production, fisheries, and significant service sectors like maritime transport and energy-related services.

EFTA operates as an intergovernmental organization functioning as a free trading bloc. It is managed by the EFTA Secretariat, which has offices in Geneva (Switzerland) and Brussels (Belgium). Its activities are overseen by the EFTA Surveillance Authority (similar to the EU Commission) and the EFTA Court (comparable to the European Court of Justice). Since Switzerland is not a member of the EEA, it does not participate in the Surveillance Authority or the court.

The four EFTA States are open, developed economies with trade figures significantly exceeding expectations for a population of fewer than 14 million. EFTA ranks as the ninth largest trader globally in merchandise trade and the fifth largest in services trade. It is the third most significant trading partner in goods for the EU and the second most important in services.

The European Free Trade Area (EFTA) and the European Economic Area (EEA) are two distinct international trading and economic organizations that operate separately but closely with the European Union. EFTA consists of Norway, Liechtenstein, Iceland, and Switzerland, providing a framework for free trade among member states and facilitating Free Trade Agreements (FTAs) with other countries, particularly the EU’s 28 member states.

The EEA connects three of the EFTA nations (Norway, Liechtenstein, and Iceland) with the EU member states in a SINGLE market. While EFTA and the EEA promote free trade and cooperation among member states, they do so without most of the political obligations and financial responsibilities associated with EU membership.

The EU and EFTA are interconnected through the EEA. This agreement unites three EFTA nations (Norway, Liechtenstein, and Iceland) with the 28 EU member states in an internal market governed by the same fundamental rules. Membership in the EEA allows these states to engage in the EU’s single market without becoming EU members. However, this arrangement means they do not participate in negotiating single market regulations.