What EFTA is and how it works

Seven, and then these

The convention establishing the association was signed at Stockholm on 4 January 1960 and entered into force on 3 May 1960. Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom signed it, and the object was a tariff-free market in industrial goods among the western European states that had stayed outside the European Economic Community set up at Rome three years before. Finland associated itself with the group in 1961 and became a full member in 1986. Iceland acceded on 1 March 1970. Liechtenstein acceded on 1 September 1991, having been covered until then by Switzerland, with which it has formed a customs union since the treaty of 29 March 1923.

Then the roster ran the other way. Denmark and the United Kingdom left on joining the European Communities in 1973, Portugal left in 1986, and Austria, Finland and Sweden left on joining the European Union in 1995. Every departure was an accession somewhere else, which is the fact that shapes the membership on this page: it is what stayed out, and it has not moved since 1995.

A free trade area, not a customs union

The distinction the convention rests on is technical and its consequences are visible. A free trade area takes the tariffs off trade between its members and sets no common tariff against anybody else, so each member keeps its own customs schedule and runs its own commercial policy, and goods moving inside the area have to satisfy rules of origin before they qualify for the free rate. A customs union would replace those schedules with a single one, and this association has never had one.

The founding text was replaced in full by a convention signed at Vaduz on 21 June 2001, in force from 1 June 2002, which carried the arrangement past goods into services, the movement of capital, the protection of intellectual property and the free movement of persons between the members. Basic agricultural products sit largely outside it even so: trade in them is handled in bilateral agreements between individual members rather than by the convention itself.

Joining costs a decision rather than a set of criteria. Article 56 lets any state accede provided the Council approves the accession, on whatever terms and conditions that decision sets out, and the instrument of accession is then lodged with the depositary. Leaving costs twelve months of notice in writing under Article 57. There is no convergence test to pass and no probation to serve.

Two routes to the single market

What the association does not do is hand its members the European Union's internal market. Two separate instruments do that, and they divide the membership.

The Agreement on the European Economic Area was signed at Porto on 2 May 1992 and entered into force on 1 January 1994, taking Union single market legislation into a common body of rules for Iceland and Norway. Liechtenstein voted for it on 13 December 1992 but had to rework its customs union with Switzerland first; a second vote on 9 April 1995 confirmed the decision, and the agreement took effect for Liechtenstein on 1 May 1995. It stops short of the Union's common agricultural and fisheries policies, its customs union, its common commercial policy, its foreign and security policy and its monetary union.

Switzerland signed the same agreement and never ratified it. The referendum of 6 December 1992 went against ratification by 50.3%, with sixteen cantons against and seven in favour, and the application for Union membership lodged that May was left dormant until it was formally withdrawn on 27 July 2016. What Switzerland has instead is a stack of sectoral treaties: a first package signed on 21 June 1999 and in force from 1 June 2002, the same day as the Vaduz Convention, and a second signed on 26 October 2004.

The split runs through the institutions as well. The EFTA Surveillance Authority in Brussels and the EFTA Court, seated at Luxembourg since September 1996, supervise the three members inside the European Economic Area and hold no jurisdiction over Switzerland. The secretariat sits at Geneva, with an office in Brussels for the Area work and a statistical office in Luxembourg.

Free movement of persons reaches one member in an adapted form. A decision of the EEA Joint Committee taken on 17 December 1999 lets Liechtenstein cap residence by nationals of the other states in the Area, at a floor of 56 permits a year for people in work and roughly 20 for people who are not, with short-term permits on top of that.

The agreements with everyone else

Because there is no common external tariff, nothing obliges the members to negotiate as a bloc, and they do it both ways. The association negotiates free trade agreements jointly with partners outside Europe, and members also sign on their own account: Iceland concluded an agreement with China on 15 April 2013 and Switzerland concluded one on 6 July 2013, both of them in force from 1 July 2014.

Where the edges are argued

The association and the European Economic Area are treated as one thing often enough that the difference is worth stating twice. Membership here carries trade among the members and the joint agreement network, and nothing beyond that. Membership of the Area carries the single market, and the two rosters match on neither side: one member of this group is outside the Area, and the Area also holds the member states of the Union.

Whether the group is a destination or a waiting room is the older argument, and each member has answered it on its own. Norway rejected the Communities on 25 September 1972 and the Union on 27 and 28 November 1994. Iceland applied on 16 July 2009 after its banks failed, suspended the talks in 2013, told the Council on 12 March 2015 that it should not be regarded as a candidate, and voted on 29 August 2026 against resuming them, the published count giving 52.8% against on a turnout of 82.5%. Switzerland withdrew its own application in 2016. Proposals to bring the United Kingdom back into the association it helped found have circulated since it left the Union on 31 January 2020, and admitting anybody would take a Council decision of the kind Article 56 describes. The catalogue records the arguments and settles none of them.