Free trade agreements between EFTA and third countries: An overview

The biggest trading partner of the European Free Trade Association (EFTA) is the EU, but third countries have made up an increasing share of EFTA's trade since it began exploring new markets through free trade agreements (FTAs) following the end of the Cold War. Since international trade accounts for a significant share of EFTA countries' national economies, boosting trade with new markets is a priority for the association. Trade between the EU and three of the four EFTA states (the EEA EFTA states) is subject to the European Economic Area (EEA) Agreement, meaning these countries adopt EU legislation relevant to the Single Market. As the EU accounts for almost 70% of EFTA's total trade, EU rules and regulations play a major role in its trade relations. This has tended to restrict EFTA members' trade policies towards third countries.

EFTA began to negotiate FTAs around the world in the 1990s. Today, EFTA's network of preferential trade relations consists of 25 FTAs covering 36 countries. Further negotiations and exploratory talks are ongoing with major emerging economies such as India, Indonesia, and Malaysia. Modernisation and extension of some existing (first generation) FTAs, to incorporate new areas such as trade in services and investment, is also under way.

Because EFTA is a free trade area not requiring the harmonisation of member countries' external trade policies, EFTA members are free to decide their own trade policies towards third countries. They have therefore signed bilateral FTAs with a number of third countries.

The Iceland-China FTA, China's first with a European country, is one noteworthy example. Norway has signed two bilateral FTAs (with the Faroe Islands and Greenland), while Switzerland, which has been in a customs union with Liechtenstein since 1923, has concluded bilateral FTAs with three countries – China, Japan, and the Faroe Islands.

For the most part, EFTA has been able to speak with one voice whilst allowing its individual members to decide their own bilateral policies.

Author: Konur Alp Kocak.

EFTA: Free Trade: Free Trade Agreements http://www.efta.int/free-trade/free-trade-agreements

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