The European Free Trade Association (EFTA) was founded on the premise of free trade as a means of achieving growth and prosperity amongst its Member States as well as promoting closer economic co-operation between the Western European countries. Furthermore, through their initiative the EFTA countries wished to contribute to the expansion of trade in the world at large.

The seven founding members of EFTA - Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom - were members of the Organisation for European Economic Co-operation (OEEC), which was established in 1947 to implement the Marshall Plan for the economic recovery of war-shattered Europe and to promote economic co-operation between member countries. The OEEC was very successful in terms of economic results, freeing trade and payments in Western Europe and fashioning effective new methods for the conduct of international economic relations.

By the nineteen-fifties strong currents in Western Europe were moving in the direction of a more rapid and more complete economic integration of its nation states. Some European governments were making plans to go beyond "co-operation" as exemplified in such inter-governmental organisations as the OEEC. They proposed to begin the process of close integration of their national economies and to create strong central institutions under a common authority to help bring this about.

The first successful move on this path had been the conclusion in April 1951 of the Treaty establishing the European Coal and Steel Community (ECSC), which created a common market for coal and steel within the territories of its six Member States: Belgium, France, the German Federal Republic, Italy, Luxembourg and the Netherlands. The next move was even more important. It came in 1955 and took the form of proposals for the formation of a European Economic Community (EEC). Its objective in the field of trade was to operate a customs union applying to all types of goods. A Community concerned with the non-military development of atomic energy was also to be established. It was on the basis of those proposals that negotiations were conducted which led to the treaties establishing the EEC and the European Atomic Energy Community (EURATOM). The two treaties were signed in Rome on 25 March 1957. The EEC came into being on 1 January 1958.

In 1956, while discussions concerning the establishment of the EEC were taking place, some other members of the OEEC presented the idea of a broad free trade area, covering the whole of Western Europe. This initiative led to the establishment of an inter-governmental Committee of Ministers to negotiate a free trade area agreement. A special Committee examined the complex issues involved and considerable progress was made in finding solutions to the numerous problems, solutions which were later to be applied in the negotiations of the EFTA Convention. Nevertheless, these negotiations were suspended at the end of 1958 mainly due to differences between France, which was devoted to the EEC, and Britain, which sought to form a looser alliance based on free trade.

The governments of other OEEC countries outside the EEC then began to explore the idea of a free trade arrangement between themselves with the aim of counterbalancing the EEC and finding a joint agreement with the Six. The first exploratory meeting between government officials took place in Oslo in February 1959. Other meetings followed, and in the first part of June 1959 officials from seven governments (the United Kingdom, Denmark, Norway, Sweden, Austria, Switzerland and Portugal) assembled at Saltsjöbaden, near Stockholm, to draw up a draft plan for a European free trade association. On the basis of this draft, Ministers agreed in principle towards the end of July to the creation of such an association among the seven countries. Officials assembled again at the beginning of September and completed the final text of the Convention establishing EFTA in the short period of eight weeks. The Convention was initialled at a Ministerial meeting in Stockholm on 20 November 1959 and signed on 4 January 1960. It entered into force after parliamentary approvals (a national referendum in the case of Switzerland) on 3 May 1960.

The Stockholm Convention

The authors of the Convention were essentially pragmatic in their approach. They did not try to legislate in detail and in advance for every contingency that might arise. Instead, they established a framework within which the necessary minimum set of rules was spelt out. For the rest, they contented themselves with the statement of certain guiding principles and the indication of procedures which could be applied in actual situations. However, the Convention went into detail in provisions for tariff reductions and the elimination of quantitative restrictions. The origin rules were also spelt out in detail.

As originally provided for in the Stockholm Convention, the abolition of tariffs and quantitative restrictions was to take ten years. This timetable was drawn up with the hope of achieving parallelism with the similar process taking place in the EEC. When the latter decided to accelerate this process, EFTA did likewise. As a result, tariffs on industrial goods traded between the EFTA countries' with few exceptions were abolished three years ahead of schedule, on 31 December 1966. The timetable for the abolition of quantitative restrictions on trade was also accelerated and was brought to completion by the middle of 1965.

The Association Agreement with Finland and the Accession of Iceland

When EFTA was founded in 1960, Finland expressed great interest in a relationship with the new Association because of the importance of her trade with the seven members. The result was an Agreement, signed in Helsinki on 27 March 1961, creating an association between the Member States of EFTA and the Republic of Finland.

The Finland-EFTA Agreement established a new free trade area on the basis that Finland was to have the same rights and obligations towards the EFTA Member States as these had among themselves. In practice, this was achieved by the simple expedient of making all the provisions of the EFTA Convention which concerned trade and economic aspects also applicable to the commercial relations between Finland and the seven EFTA countries.

Finland's tariffs applied in trade with the other EFTA countries were reduced to zero on 31 December 1967, i.e. one year after the same stage had been reached by the EFTA member countries. Finland became a full member of EFTA on 1 January 1986.

Although the other countries participating in the Nordic Council, Denmark, Finland, Norway and Sweden, took part in EFTA from the beginning of the sixties, Iceland did not join them in the Association until the end of the decade. Of some importance in this connection was the fact that the economy of Iceland depended almost exclusively on its fisheries exports, which could not benefit fully from the industrial free trade provisions of the EFTA Convention. In connection with Iceland's accession to EFTA, and to foster the industrial development of the country, the five Nordic countries established the Industrialization Fund for Iceland. Concerning industrial products, Iceland was granted tariff and quota-free entry to the markets of the other EFTA countries immediately upon accession.

The Accession of the United Kingdom and Denmark to the European Communities

The preamble to the Stockholm Convention reiterated the desire for a wider European solution to the question of economic integration. Accordingly, throughout the nineteen-sixties the EFTA countries continued their efforts, which had begun in the OEEC in 1956-58, to find an acceptable solution to the problem created by the division of Western Europe into two regional economic groups. A number of proposals was put forward to bridge the gap.

At a meeting of EFTA Ministers in London in June 1961 it was agreed to try the bilateral approach. On this basis, the EFTA member countries made applications for membership of, or association with, the Communities. The subsequent negotiations were brought to an end, without achieving their aim, in January 1963.

In the following years, various unsuccessful attempts were made to arrive at some arrangement between EFTA and the European Communities (EC, referring to the three European Communities), including renewed efforts by the British Government in 1966 and 1967 for membership.

In December 1969, a meeting of the Heads of Government of the six Community countries was held at The Hague. One decision made at this meeting was to open negotiations by 30 June 1970 on Community membership for the four countries which had applied for it: Denmark, Ireland, Norway and the United Kingdom. It was also decided to begin talks soon thereafter with the six EFTA countries which were not applicants for membership but which wished to arrive at suitable trading arrangements with the Community.

Britain and Denmark, along with Ireland, became members of the Community on 1 January 1973. However, Norway did not join. In a referendum held in Norway in September 1972 the majority of voters opted against Community membership. As a result, Norway negotiated the same type of Free Trade Agreement (FTA) with the Community as had in the meantime been concluded by the EFTA countries not seeking EC membership.

Free Trade Agreements Negotiated

The Community had decided at the Hague Summit in December 1969 that negotiations should also take place with the EFTA countries, on the understanding that:

1. the enlargement of the Communities should not involve the re-erection of tariff barriers in Europe;
2. the Agreements with the non-candidate countries should, if possible, enter into force at the same time as the candidate countries took up membership of the Communities.

Fourteen agreements were negotiated in all; seven of them were those of the EFTA countries with the EEC and seven with the ECSC. All the agreements were with the "enlarged" Communities, consisting of Belgium, Denmark, France, the German Federal Republic, Ireland, Italy, Luxembourg, the Netherlands and the United Kingdom. The negotiations culminated on 22 July 1972 with the signature in Brussels of Free Trade Agreements (FTAs) between the Communities and Austria, Iceland, Portugal, Sweden and Switzerland. Those with the EEC came into force in time for the first reciprocal tariff cuts to be made on 1 April 1973. The Norwegian FTAs were signed on 14 May 1973 and those of Finland in the autumn of 1973.

In general, the FTAs provided for a gradual reduction of import duties, arriving at zero duties for almost all industrial products on 1 July 1977. This timetable was respected by all concerned, with the result that by that date virtually all trade in industrial products between the sixteen countries was free of duty.

In the case of "sensitive" products the remaining duties were all removed by the end of 1983 (or, in the case of Finland, the end of 1984).

The FTAs with the EEC and the ECSC naturally also apply to trade with any new members of the Communities. This was the case when Greece and Spain, which had negotiated a free trade arrangement with EFTA in 1979, joined the EC in 1981 and 1986, respectively. However, both countries were allowed some transitional arrangements. When Portugal - an EFTA member since its foundation - joined the EC, the trade liberalisation achieved between Portugal and other EFTA countries remained intact, while transitional arrangements with Portugal as an EC member were negotiated.

The conclusion of the Free Trade Agreements with the Communities was celebrated, at the time, as a major progress towards the original goal of building the bridge between the two areas of economic integration in Western Europe and provided the basis for closer and more substantial co-operation between EFTA and the EC.

The Luxembourg Declaration

The relationship between the EC and the EFTA countries had functioned well during the 1970s in the sense that the obligations under the FTAs were gradually fulfilled. On the other hand, the possibilities to further develop the relationship had been somewhat restrained by the economic problems hitting Western Europe during these years as a consequence of the oil crises in 1973 and 1979. However, improving world economic conditions after 1982 paved the way for initiating the process of enhanced economic co-operation in Western Europe. At the same time European countries became increasingly aware of the need to re-establish their competitiveness in relation to the United States and Japan (a rising economic power at the time) as well as certain newly-industrialised countries. Although the bulk of tariff barriers had been eliminated, there was an ever increasing multitude of rules and requirements, mainly for the protection of the health, safety and economic interests of the consumers: These rules varied from country to country and thus often constituted much more of an impediment to trade than relatively modest tariff rates. It is against this background that the first multilateral meeting at Ministerial level between the EFTA countries and the EC in Luxembourg on 9 April 1984 should be viewed.

At the Luxembourg meeting, a programme for the development of the future European economic co-operation was laid down. This would follow up on the creation of the largest free trade system in the world. The aim on the EFTA side, from which the initiative rose, was to build on the FTAs, conscious of the projected evolution of the EC. The Luxembourg Declaration expressed the strong political will on both sides to create what was called a dynamic economic space in Western Europe.

The intensified co-operation between the EFTA countries and the EC aimed at removing in a pragmatic and sectoral way technical and other non-tariff barriers to trade and to extend co-operation to a number of non-trade areas, such as research and development, the telecommunications sector and new information technologies. As far as more concrete measures were concerned the co-operation focused on the following areas: harmonisation of standards, elimination of technical barriers, simplification of border facilities and rules of origin, elimination of unfair trade practices, abolition of State aid contrary to the FTAs and access to government procurement. In this regard the Communities efforts to strengthen their internal market were of particular relevance.

Between 1984 and 1989 the EFTA countries and the EC achieved agreements on many specific issues to ease or remove trade barriers. These specific projects had accumulated to well over twenty at the end of 1988 but they were insubstantial and not sufficient to ensure a coherent development of the co-operation. For that purpose a new approach was needed.

EEA: A New Momentum in EFTA-EC Relations

On 17 January 1989, in a speech before the European Parliament, Jacques Delors, the then President of the EC Commission, proposed "a new, more structured partnership, with common decision-making and administrative institutions" with the EFTA countries. The rationale behind Delors' ideas was to increase the efficiency of the co-operation between the EC and EFTA. He therefore raised the question whether the EFTA countries were prepared to strengthen their internal structures and to accept the same discipline as the Community Member States in the numerous fields of co-operation.

The Delors proposal was reviewed by the EFTA countries at a meeting of Heads of Government at Holmenkollen, outside Oslo, in March 1989. The EFTA countries declared themselves ready to initiate negotiations with the Community leading to "the fullest possible realization of free movement of goods, services, capital and persons, with the aim of creating a dynamic and homogeneous European Economic Space", as it was initially called. "To this end", they noted, "we are ready to explore various options and ways and means to strengthen the institutional links between the EFTA States and the EC."

After preparatory talks, negotiations on the European Economic Area, as it was renamed, began in June 1990. The first step was the joint identification of the relevant parts of the "acquis communautaire" (all existing EC law, treaties and judgements) which would be integrated into the EEA Agreement as the legal basis of the EEA. The negotiations in October 1990 focused on two key issues: the requests of the EFTA countries for a certain number of permanent derogations from the "acquis"; and substantive talks on the institutional arrangements for the EEA.

In December 1990, a joint Ministerial meeting led to progress in a number of key areas, even though it left open some crucial questions: agriculture, fisheries, participation of EFTA countries in EC committees, composition and competence of a joint judicial body (an EEA Court). The firm desire on both sides was to see the EEA Agreement enter into force on 1 January 1993, which meant that efforts had to be made to sign before the summer of 1991.

The second half of 1990 witnessed a growing public debate in most EFTA countries on the advantages and disadvantages of EC membership, against the backdrop of the changes taking place in Europe.

At the same time as some EFTA countries were considering EC membership Liechtenstein became a full EFTA member on 1 September 1991. Hitherto, Liechtenstein had been covered by the Stockholm Convention through a particular Protocol under which the interests of Liechtenstein were represented through Switzerland.

Meetings on the EEA in 1991 were intense and frequent. The legal and institutional questions were largely resolved at a joint Ministerial meeting in May. The Ministers envisaged safeguard clauses, re-balancing measures, involvement in EC committees, an EFTA surveillance mechanism and an independent EEA Court.

The next joint Ministerial meeting, in June 1991, had to tackle the complicated question of fisheries. The EFTA countries' request for free trade in fish was countered by EC demands for some access to EFTA countries' fish resources. The meeting resulted in a delicate compromise, but when it came to translation into concrete terms, it emerged that the two sides had interpreted the compromise differently.

The joint Ministerial meeting in October 1991 saw the resolution of the last big questions concerning fish, the contribution of the EFTA States to the reduction of economic and social disparities in the EEA area (the Financial Mechanism) and road transit through the Alpine countries which, although being negotiated bilaterally, was made a condition of agreement by the EC side.

With these issues off the table the political conclusion of the EEA Agreement was achieved in the early hours of 22 October 1991 in Luxembourg. The idea had been to initial the Agreement in November. However, with an EC Court of Justice hearing scheduled, the initialing was delayed. On 14 December 1991, the Court delivered its opinion that the system of judicial supervision envisaged, the creation of an independent EEA Court, was incompatible with the Treaty of Rome and its own competencies.

In February 1992 a solution to this setback was found through the creation of a separate EFTA Court and the inclusion of additional provisions to the Agreement to further ensure legal homogeneity. The Agreement was signed in Oporto on 2 May. On the same day, the EFTA Ministers signed the agreements establishing the EFTA Surveillance Authority (ESA), the EFTA Court and the Standing Committee.

The process of parliamentary approval and formal ratification lasted for the rest of 1992, monitored closely by the EFTA side. But what prevented the Agreement from entering into force on 1 January 1993 was the result of the Swiss referendum on 6 December 1992 rejecting the Agreement, which meant that the Agreement had to be adjusted.

The consequent Adjusting Protocol, signed on 17 March 1993, had also to pass through a complete ratification procedure, with the result that the EEA finally entered into force on 1 January 1994. Liechtenstein, which had held observer status in the Joint Committee and participated in the work on the EFTA side had to sort out its relations with Switzerland concerning the customs union, in order to join the EEA and eventually became a full member on 1 May 1995. All references to Switzerland in the Agreement were deleted. However, Switzerland was granted observer status in EFTA's internal meetings.

Through the EEA negotiations the EFTA countries became more familiar with the European Union (EU, established by the Maastricht Treaty) system and membership came to be more favorably looked upon. Austria and Sweden applied for EU membership in 1989 and 1991, Finland in March 1992, Switzerland in May 1992 and Norway in March 1993.

As a result of the negative referendum on EEA membership, Switzerland decided to leave her application on the table, but not to pursue it with the EU for the time being, while membership was turned down in the Norwegian referendum in November 1994.

EEA Put to the Test

The beginning of 1995 saw a much reduced EFTA. Nevertheless, at the meeting of EEA Ministers in the EEA Council in December 1994, all the signatories to the Agreement had expressed their firm commitment to the Agreement. At the same time, the uncertainty which had dominated business in the EEA during 1994 was lifted. The remaining EEA EFTA States were able to concentrate their energies on making the EEA function well. Thus, in some ways, 1995 can be seen as the first year in which the EEA Agreement was really put to the test, free of the diversion of accession negotiations.

The engine of the EEA, the Joint Committee, became increasingly active and efficient over the years. This is partly reflected in the increased efficiency with which EU legislation has been incorporated into the various annexes of the Agreement to ensure homogeneity across the whole eighteen-country area. The number of decisions taken by the EEA Joint Committee rose from 44 in 1994, 75 in 1995, and to 168 in 2002. This development reflected to a large extent the streamlining of procedures in the light of experience.

As to the substance of the EEA, an important development for the EFTA States was the incorporation of a large body of EU law on veterinary matters. This meant that health checks on the borders were removed for fish from Iceland and Norway and for all animal products for Norway, while scientific co-operation on human and animal health matters related to this trade was increased.

The period from 1995 saw several important developments in the further realisation of the EU Single Market, in which the EEA EFTA States were able to participate. The most profound of these was perhaps the deregulation of services, particularly telecommunications, but also financial services.

The EEA EFTA countries also took over the new wave of social legislation emanating from the EU. This included such laws as the working time directive and the directive on young people at work, both of which seek to protect the interests of people in the work place.

Another important aspect of the EEA is the participation in EU programmes related to co-operation on research and development, education, the media and many other areas. This co-operation also developed dramatically from 1995 onwards. In 1995, the EEA EFTA States participated in 11 programmes; at the end of 2002 the number of programmes had risen to 34.

The experience of the operation of the EEA Agreement confirms that the EEA Agreement is functioning well and to the satisfaction of the EEA states.

The EEA EFTA States have successfully adopted more than forty years’ worth of Acquis Communautaire. With the exception of the actions related to economic and taxation policies, all relevant Community legislation in the field of the Internal Market has been integrated into the Agreement. Implementation rates in the EEA EFTA States for this legislation are comparable to those of the EU member states. The EEA EFTA States follow closely new legislative initiatives in the European Commission’s Strategy for Europe’s Internal Market.

In line with the information and consultation procedures with the EU under the Agreement, the EEA EFTA States provide regular input into the shaping of Community legislation.

The EEA Agreement is expected to remain the firm basis for relations between the EEA EFTA States and the EU. The EFTA member Switzerland retains an open invitation enabling it to apply to become a member of the EEA at any time in the future should the Swiss people wish to do so.

EEA enlargement

Enlargement of the EU is of direct relevance to the EEA. Article 128 of the EEA Agreement provides that any state becoming a member of the EU shall apply to become a party to the EEA. Therefore, the EFTA States followed closely the screening process carried out by the Commission and the subsequent opening of negotiations with ten accession countries from Central and Eastern Europe.

Following the successful conclusion of the EU accession negotiations on 13 December 2002 at the Copenhagen European Council, the ten accession countries submitted their letters of application for EEA membership, according to Article 128 (EEA), to the President of the EEA Council in the course of December 2002. The EEA enlargement negotiations started in January 2003. After lengthy discussions between the EFTA and the EU side, including the ten acceding countries, the negotiations were concluded in June 2003. The aim is to ensure a simultaneous enlargement of the EU and the EEA from 1 May 2004. On the basis of the EU Accession Treaty, the legal text of the EEA Enlargement Instrument has been prepared, including EEA-relevant technical adaptations and transitional arrangements.

EU and EEA enlargement and removal of barriers will lead to increased trade and investment, partnership and employment. An enlarged EEA will offer a great opportunity to EEA EFTA citizens, businesses, and organisations, who will have access to a larger Internal Market and will enjoy valuable contacts and relations in the new Member States.

 

The Lisbon Strategy

At the EU Lisbon Summit in March 2000 the EU embarked on a strategy to make Europe the most competitive knowledge based economy in the world by 2010 - the so-called Lisbon Strategy. The summit called for a new method of “open coordination” to promote sustainable economic growth with more and better jobs and greater social cohesion.  Circumnavigating traditional forms of EU policy formulation, this approach calls for setting targets and benchmarking progress, primarily through the EU Council.  The Council now meets every spring to follow progress and determine new targets for the Lisbon strategy.  At the Stockholm European Council in March 2001 sustainable development policy was added as another important area for coordination through the Lisbon process.

At its meeting in September 2000, the EEA Council agreed to explore how the EEA EFTA States could be involved in the follow-up activities to the Lisbon Summit. Many elements of the Lisbon Strategy affect the EEA Agreement, and it is therefore a high priority for EEA EFTA countries to participate in relevant parts of the process. In October 2000 the Standing Committee of the EFTA States established an Ad hoc Group on the follow-up to the Lisbon Summit. This group has coordinated EEA EFTA comments to the Stockholm (2001), the Barcelona(2002) and the Brussels (2003) Summits. In January 2002 the group established an action plan identifying areas for follow-up on Lisbon Strategy initiatives of common interest to the EEA EFTA States.

The EFTA States attach high political importance to the priority areas for action and confirm their commitment to work actively with the EU in achieving the goals set out at the Lisbon Summit. They welcome the new open method of coordination and are ready to contribute to the development of Europe by sharing best practices with the EU Member States.

The Vaduz Convention

The Stockholm Convention was updated and signed by EFTA Ministers at their meeting in Vaduz, Liechtenstein, on 21 June 2001. The new Vaduz Convention entered into force on 1 June 2002, in parallel wit the EU-Swiss bilateral agreements.

While the main objective of the Stockholm Convention was to provide a framework for the liberalisation of trade in goods amongst its Member States, and thus contained only basic rules with regard to free trade, the Vaduz Convention goes much further and reflects the important developments that have taken place over the last four decades with regard to EFTA-EU, and EFTA-third country relations. First, the European Economic Area (EEA) was concluded in the early 1990s, which established a single market for all forms of trade, including trade in services and the free movement of persons between and among the EFTA States, excluding Switzerland, and the European Union. Second, since the early 1990s the EFTA States have expanded trade relations with partners in Central and Eastern Europe, the Mediterranean region, and more recently, extended its network to countries in other parts of the world.

At the end of the 1990s EFTA therefore found itself in a situation where its relations with the EU and third countries went much further than the internal relations among its member states. It was therefore time, in 2001, to update the original EFTA Convention to regain the balance between the inter-EFTA relations and the EFTA States’ relations with the EU and with third countries

The Vaduz Convention includes several significant changes. The most important is the integration into the Convention of the principles and rules established between EFTA EEA members and the content of the bilateral agreements between Switzerland and the European Union. This means that all EFTA members now will benefit from virtually the same privileged relationship. The ties between the EFTA countries will be considerably reinforced since the Vaduz Convention covers all the important aspects of modern trade such as the free movement of goods and persons, public procurement, intellectual property rights, land and air transport, and services and investment.

Relations with non-EU Countries

Traditionally EFTA refers to non-EU countries as third countries. The origins of EFTA's third country relations reach as far back as 1967 when the EFTA States as a group established cooperation with the former Yugoslavia by means of a joint working group. In 1983, the relationship became more formal under the so-called (first) Bergen Declaration and the creation of a Joint EFTA-Yugoslavia Committee, which held annual meetings until the disintegration of that country.

The first free trade agreement negotiated by the EFTA States as a group was that with Spain. Concluded in 1979 with a view to completing the European free trade system and ensuring that EFTA exporters would be on the same footing as exporters from the EC countries in their dealings with Spain, the EFTA-Spain Agreement entered into force on 1 May 1980 and expired on 31 December 1985 upon Spain's accession to the EC. Trade relations between Spain and the EFTA States were thereafter covered by the bilateral free trade agreements in force between the individual EFTA Member States and the EC.

The Bergen Declaration and the EFTA-Spain Agreement, together with the free trade agreements that had been negotiated between individual EFTA Member States and the EC - and to some extent the Stockholm Convention - formed the model for the declarations and free trade agreements concluded by EFTA since 1989.

EFTA's policy towards non-EU countries has, however, become increasingly important in the 1990s. At the end of the Cold War in 1989 the EC initiated the so-called Europe agreements with the transition economies of Central and Eastern Europe. These Agreements aimed at free trade in industrial goods, thereby posing a threat of discrimination in these markets to businesses based in the EFTA States. The EFTA countries therefore needed to react in order to ensure the economic interests of their economic operators. At the same time they wanted to contribute to the reconstruction of the former "command economies" and to support their transition towards a market based economy and democracy. This policy was initially established in Gothenburg in 1990 where EFTA Ministers decided to build their own network of free trade agreements with third-country partners in parallel with the EC. In a first phase in the early years of the 1990s the EFTA States concluded free trade agreements with Poland, Romania, Bulgaria, Hungary, the Czech and Slovak Republics, and initiated a technical assistance programme. In addition, EFTA countries provided bilaterally financial assistance to these partner countries.

Parallel to these developments, but mainly in reaction to the risk of discrimination faced by the EFTA economic operators vis-ŕ-vis their main competitors from the EC or the United States, the EFTA States also entered into negotiations with Israel and Turkey in order to establish a free trade area. The agreement with Turkey was signed in 1991 and with Israel in 1992.

A second phase was opened in 1995, twelve years after the first meeting in Bergen, when EFTA Ministers, for the first time, looked beyond the immediate confines of Europe and opened the geographical scope of EFTA's third country relations. A declaration adopted at their spring meeting in Bergen confirmed the aim of the EFTA States to respond in a dynamic manner to the growing need for political, social and economic stability in Europe as well as in adjacent regions. This (second) Bergen Declaration confirmed the policy of parallelism and coherence with the policies of the European Union (EU). This Declaration was also a reaction to the Barcelona process and an assertion of the intention of the EFTA States to make an independent contribution to this process, similar to their policy towards the central and east European countries. In the same year, the EFTA States signed Declarations on Co-operation with Egypt, Tunisia and Morocco. The PLO followed in 1996 and Lebanon in 1997. Morocco and the PLO on behalf of the Palestinian Authority were the first among them to begin negotiations on a free trade agreement. These were concluded in 1997 and 1998 respectively and both agreements entered into force last year. Meanwhile, negotiations have also been opened with Cyprus, Jordan, Egypt and Tunisia.

During the second phase, the extension of the network in Central and Eastern Europe continued: in 1995, Slovenia and the three Baltic States, Latvia, Lithuania and Estonia, were added to the list of EFTA's free trade partner countries. Relations with the Southwest Balkans date back to the first phase of EFTA's Third-Country policy; a Declaration on Co-operation with Albania had been signed in 1992. However, the conflict in the former Yugoslavia was a serious impediment to a deepening of relations with countries there. Negotiations on a free trade agreement with Macedonia were opened in 1999. The EFTA Ministers have stressed their determination to make a substantial contribution to reconstruction in the region, considering the EU's stabilisation and association policy for South-Eastern Europe.

One important element common to all these negotiations and agreements concerns the rules of origin. In this respect, the EFTA States succeeded in offering to their economic operators a level playing field throughout Europe with their competitors based in EU countries, from Iceland and Norway in the North to Greece and Italy in the South, from Portugal in the West, to Bulgaria and Poland in the East. This was not automatic, but the result of lengthy negotiations. The end result is a Europe-wide network of free trade agreements with harmonised rules of origin allowing for preferential trade within a 30-country area that now also includes Turkey.

A third phase in their third country policy finally began when the EFTA States opened negotiations with Canada. Since then, they have increasingly focused on forging ties with countries beyond Europe. Declarations on Co-operation have been concluded with MERCOSUR (Argentine, Brazil, Paraguay and Uruguay) and the Gulf Co-operation Council (GCC) and free trade agreements with Macedonia, Jordan and Croatia. A new chapter was opened in EFTA's third country relations with the conclusion of a free trade agreement with Mexico in 2000. This agreement covers new areas of trade, very much in the spirit of the new EFTA Convention (Vaduz Convention).

In June 2002, the Free Trade Agreement between the EFTA States and Singapore was signed in Egilsstađir (Iceland). One year later, in June 2003, the EFTA States and Chile signed a Free Trade Agreement in Kristiansand (Norway). With the Chile Agreement, the EFTA States will have concluded Free Trade Agreements with 20 States and Territories, representing a population of 340 million.

The increasingly global character of EFTA’s activities will be further strengthened in 2003, when EFTA continues negotiations on free trade agreements with Lebanon, South Africa, Tunisia, Canada, and Egypt.

Future challenges

As might be expected, the major preoccupations of the EU inevitably become preoccupations of the EEA EFTA States.

This was particularly true of the revision of the EU Treaties, which started with Maastricht and moved on to Amsterdam and Nice. The EEA EFTA States have carried out a number of detailed analyses of these developments and identified possible areas in which, in years to come, divergence between the EEA Agreement and the EU Treaty might become a cause for concern and require legal adaptations to the EEA Agreement.

EFTA has also monitored closely the developments of the Convention on the Future of Europe, which will be followed by the Intergovernmental Conference (IGC) in October 2003. The suggestions of the Convention to replace the Treaties with a Constitution and to restructure the European Union Institutions will have an impact on the EEA Agreement and might require adjustments.

EEA enlargement will offer both great opportunities and challenges to the EFTA member states. Businesses will have access to a much larger market and to new consumers in the EEA Internal Market from 1 May 2004. However, at the same time it is obvious that the imbalance between a “small” EFTA of 4 states and a “larger” EU of 25 states will increase, and it is therefore essential that the EFTA states continue to play an active and efficient role both in the decision-shaping and decision-making process of EU legislation.