European Free Trade Association

  EFTA member states

  Former members, which left to join the EU

  Rest of EU member states

On 12 January 1960, the Convention establishing the European Free Trade Association was initiated in the Golden Hall of the Stockholm City Hall.[8] This established the progressive elimination of customs duties on industrial products, but did not affect agricultural or fisheries products.

The main difference between the early EEC and the EFTA was that the latter did not operate common external customs tariffs unlike the former: each EFTA member was free to establish its individual customs duties against, or its individual free trade agreements with, non-EFTA countries.

The founding members of the EFTA were: Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. During the 1960s, these countries were often referred to as the "Outer Seven", as opposed to the Inner Six of the then European Economic Community (EEC).[9]

Finland became an associate member in 1961 and a full member in 1986, and Iceland joined in 1970. The United Kingdom and Denmark joined the EEC in 1973 and hence ceased to be EFTA members. Portugal also left EFTA for the European Community in 1986. Liechtenstein joined the EFTA in 1991 (previously its interests had been represented by Switzerland). Austria, Sweden, and Finland joined the EU in 1995 and thus ceased to be EFTA members.

Twice, in 1972 and in 1994, the Norwegian government had tried to join the EU (still the EEC, in 1973) and by doing so, leave the EFTA. However, both the times, the membership of the EU was rejected in national referendums, keeping Norway in the EFTA. Iceland applied for EU membership in 2009 due to the 2008–2011 Icelandic financial crisis, but has since dropped its bid.[10]

Members of the European Union (blue) and
EFTA (green)

Between 1994 and 2011, EFTA memberships for Andorra, San Marino, Monaco, the Isle of Man, Turkey, Israel, Morocco, and other European Neighbourhood Policy partners were discussed.[16]

In November 2012, after the Council of the European Union had called for an evaluation of the EU's relations with Andorra, Monaco, and San Marino, which they described as "fragmented",[17] the European Commission published a report outlining the options for their further integration into the EU.[18] Unlike Liechtenstein, which is a member of the EEA via the EFTA and the Schengen Agreement, relations with these three states are based on a collection of agreements covering specific issues. The report examined four alternatives to the current situation:

1. A Sectoral Approach with separate agreements with each state covering an entire policy area.
2. A comprehensive, multilateral Framework Association Agreement (FAA) with the three states.
3. EEA membership, and
4. EU membership.

However, the Commission argued that the sectoral approach did not address the major issues and was still needlessly complicated, while EU membership was dismissed in the near future because "the EU institutions are currently not adapted to the accession of such small-sized countries". The remaining options, EEA membership and a FAA with the states, were found to be viable and were recommended by the commission. In response, the Council requested that negotiations with the three microstates on further integration continue, and that a report be prepared by the end of 2013 detailing the implications of the two viable alternatives and recommendations on how to proceed.[19]

As EEA membership is currently only open to EFTA or EU member states, the consent of existing EFTA member states is required for the microstates to join the EEA without becoming members of the EU. In 2011, Jonas Gahr Støre, then Foreign Minister of Norway which is an EFTA member state, said that EFTA/EEA membership for the microstates was not the appropriate mechanism for their integration into the internal market due to their different requirements from those of larger countries such as Norway, and suggested that a simplified association would be better suited for them.[20] Espen Barth Eide, Støre's successor, responded to the commission's report in late 2012 by questioning whether the microstates have sufficient administrative capabilities to meet the obligations of EEA membership. However, he stated that Norway would be open to the possibility of EFTA membership for the microstates if they decided to submit an application, and that the country had not made a final decision on the matter.[21][22][23][24] Pascal Schafhauser, the Counsellor of the Liechtenstein Mission to the EU, said that Liechtenstein, another EFTA member state, was willing to discuss EEA membership for the microstates provided their joining did not impede the functioning of the organization. However, he suggested that the option of direct membership in the EEA for the microstates, outside of both the EFTA and the EU, should be considered.[23] On 18 November 2013, the EU Commission concluded that "the participation of the small-sized countries in the EEA is not judged to be a viable option at present due to the political and institutional reasons", and that Association Agreements were a more feasible mechanism to integrate the microstates into the internal market.[25]

The Norwegian electorate had rejected treaties of accession to the EU in two referendums. At the time of the first referendum in 1972, their neighbour, Denmark joined. Since the second referendum in 1994, two other Nordic neighbours, Sweden and Finland, have joined the EU. The last two governments of Norway have not advanced the question, as they have both been coalition governments consisting of proponents and opponents of EU membership.

Since Switzerland rejected the EEA membership in a referendum in 1992, more referendums on EU membership have been initiated, the last time being in 2001. These were all rejected. Switzerland has been in a customs union with fellow EFTA member state and neighbour Liechtenstein since 1924.

On 16 July 2009, the government of Iceland formally applied for EU membership,[26] but the negotiation process was suspended in mid-2013, and in 2015 the foreign ministers wrote to withdraw its application.

Denmark was a founding member of EFTA in 1960, but its membership ended in 1973, when it joined the European Communities. The autonomous territories of the Kingdom of Denmark were covered by Denmark's EFTA membership: Greenland from 1961 and the Faroe Islands from 1968.[27] In mid-2005, representatives of the Faroe Islands raised the possibility of their territory re-joining the EFTA.[28] Because Article 56 of the EFTA Convention only allows sovereign states to become members of the EFTA,[29] the Faroes considered the possibility that the "Kingdom of Denmark in respect of the Faroes" could join the EFTA on their behalf. The Danish Government has stated that this mechanism would not allow the Faroes to become a member of the EEA because Denmark was already a party to the EEA Agreement.[30]

The Faroes already have an extensive bilateral free trade agreement with Iceland, known as the Hoyvík Agreement.[31]

The United Kingdom was a co-founder of EFTA in 1960, but ceased to be a member upon joining the European Economic Community. The country held a referendum in 2016 on withdrawing from the EU (popularly referred to as "Brexit"), resulting in a 51.9% vote in favour of withdrawing. A 2013 research paper presented to the Parliament of the United Kingdom proposed a number of alternatives to EU membership which would continue to allow it access to the EU's internal market, including continuing EEA membership as an EFTA member state, or the Swiss model of a number of bilateral treaties covering the provisions of the single market.[32]

In the first meeting since the Brexit vote, EFTA reacted by saying both that they were open to a UK return, and that Britain has many issues to work through. The president of Switzerland Johann Schneider-Ammann stated that its return would strengthen the association.[33] However, in August 2016 the Norwegian Government expressed reservations. Norway's European affairs minister, Elisabeth Vik Aspaker, told the Aftenposten newspaper: "It's not certain that it would be a good idea to let a big country into this organization. It would shift the balance, which is not necessarily in Norway's interests."[34]

In late 2016, the Scottish First Minister said that her priority was to keep the whole of the UK in the European single market but that taking Scotland alone into the EEA was an option being "looked at".[35] However, other EFTA states have stated that only sovereign states are eligible for membership, so it could only join if it became independent from the UK,[36] unless the solution scouted for the Faroes in 2005 were to be adopted (see above).

In early 2018, British MPs Antoinette Sandbach, Stephen Kinnock and Stephen Hammond all called for the UK to rejoin EFTA.[37]

A Joint Committee consisting of the EEA-EFTA States plus the European Commission (representing the EU) has the function of extending relevant EU law to the non EU members. An EEA Council meets twice yearly to govern the overall relationship between the EEA members.

Rather than setting up pan-EEA institutions, the activities of the EEA are regulated by the EFTA Surveillance Authority and the EFTA Court. 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 a role for EFTA members that is equivalent to that of the European Commission for the EU, as "guardian of the treaties" and the EFTA Court performs the European Court of Justice-equivalent role.

The original plan for the EEA lacked the EFTA Court or the EFTA Surveillance Authority: 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 it considered that it would be a violation of the treaties to give to the EU institutions these powers with respect to non-EU member states. Therefore, the current arrangement was developed instead.

The EEA and Norway Grants are the financial contributions of Iceland, Liechtenstein and Norway to reduce social and economic disparities in Europe. They were established in conjunction with the 2004 enlargement of the European Economic Area (EEA), which brought together the EU, Iceland, Liechtenstein and Norway in the Internal Market. In the period from 2004 to 2009, €1.3 billion of project funding was made available for project funding in the 15 beneficiary states in Central and Southern Europe. The EEA and Norway Grants are administered by the Financial Mechanism Office, which is affiliated to the EFTA Secretariat in Brussels.

• Central America
   Guatemala (Signed 22 June 2015)[80]
•  India (Since January 2008)[81]
•  Kosovo (Since June 2022)[82][83]
•  Malaysia (Since November 2012)[84]
•  Mercosur (Concluded 23 August 2019)[85]
   Argentina
   Brazil
   Paraguay
   Uruguay
•  Moldova (Concluded 24 March 2023)[86][87]
•  Thailand (Restarted June 2022)[88][89]
•  Vietnam (Since July 2012)[90]

Negotiations currently on hold

•  Algeria[91]
•  Honduras (Central American States)[92]
•  Eurasian Economic Union[93]
   Belarus
   Kazakhstan
   Russia

Declarations on cooperation

•  Mauritius
•  Mongolia
•  Myanmar[94]
•  Pakistan[94]

The following agreements are no longer active:[95]

•  Bulgaria (1995–2007)
•  Croatia (2002–2013)
•  Czech Republic (1993–2004)
•  Czechoslovakia (1992–1993)
•  Estonia (1996–2004)
•  Hungary (1995–2004)
•  Latvia (1996–2004)
•  Lithuania (1996–2004)
•  Poland (1995–2004)
•  Romania (1995–2007)
•  Slovakia (1993–2004)
•  Slovenia (1995–2004)
• Spain (1980–1986)
•  Turkey (1995–2021)

EFTA member states' citizens enjoy freedom of movement in each other's territories in accordance with the EFTA convention.[96] EFTA & EEA nationals also enjoy freedom of movement in the European Union (EU). EFTA nationals and EU citizens are not only visa-exempt but are legally entitled to enter and reside in each other's countries. The Citizens' Rights Directive[97] (also sometimes called the "Free Movement Directive") defines the right of free movement for citizens of the European Economic Area (EEA),[98] which includes the three EFTA members Iceland, Norway and Liechtenstein plus the member states of the EU. Switzerland, which is a member of EFTA but not of the EEA, is not bound by the Directive but rather has a separate multilateral agreement on free movement with the EU and its member states.[99]

As a result, a citizen of an EFTA country can live and work in all the other EFTA countries and in all the EU countries, and a citizen of an EU country can live and work in all the EFTA countries (but for voting and working in sensitive fields, such as government / police / military, citizenship is often required, and non-citizens may not have the same rights to welfare and unemployment benefits as citizens).[100]