European Free Trade Association

European Free Trade Association (EFTA), trading bloc established in 1960 by Austria, Denmark, the United Kingdom, Norway, Portugal, Sweden, and Switzerland. The aim of EFTA is to work for the removal of trade barriers among its members and to promote closer economic cooperation between EFTA and the rest of Western Europe. In addition, EFTA acts as a platform that allows all of its members except Switzerland to participate with countries of the European Union (EU) in the European Economic Area (EEA), a free-trade bloc.

EFTA was established in response to the creation of the European Economic Community, or EEC (now the EU). Several Western European countries were concerned about the level of economic integration proposed by the EEC, which demanded that members relinquish some control over their economic policies. These concerns prompted the formation of EFTA, which is based purely on cooperation among governments.

EFTA membership expanded when Finland became an associate member in 1961 and a full member in 1986. Iceland and Liechtenstein joined the organization in 1970 and 1991, respectively. However, with the growing success of the European Union in the 1970s and 1980s, many members left EFTA to join the EU, and in late 1993 the only remaining EFTA countries were Norway, Liechtenstein, Iceland, and Switzerland. By 1994 the EFTA states were concerned that the success of the EU could affect their own economies negatively. The EFTA states negotiated with the European Union to establish a broader common market called the European Economic Area (EEA). The EEA comprises all the members of the European Union and EFTA, with the exception of Switzerland, which declined to join.

The operation of the free-trade area among the EFTA states is the responsibility of the EFTA Council, which meets twice yearly and is made up of representatives from each member nation. Among other things, the council manages relations among EFTA members, sets the organization’s budget, and handles relations with the European Union. Several standing committees, such as the Budget Committee and the Economic Committee, assist the council in its operations. EFTA is also served by a secretariat that deals with matters relating to the EEA, relations with countries outside Western Europe, and cooperation with European statistical agencies. The headquarters of the EFTA is in Geneva, Switzerland.