As stated in chapter 1, the European Free Trade Association (EFTA) was set up in 1959 on the initiative of the United Kingdom, which favoured trade liberalisation through intergovernmental cooperation rather than through the multinational integration process aimed at by ECSC and EEC [see sections 1.1.2 and 1.2]. When the United Kingdom and Denmark switched allegiances from EFTA to the EEC in 1973, the scale of their commercial relations with the other EFTA countries made it necessary to abolish customs barriers between the two groups of countries. As a consequence, free trade agreements were signed in 1972 and 1973 between the European Economic Community and the EFTA countries. These agreements abolished customs duties and restrictions on trade in industrial products. Furthermore, the Community agreed to certain compromises on the Common Agricultural Policy, which were matched by reciprocal EFTA concessions in the agricultural field. EEC-EFTA free trade has operated in a satisfactory manner and has brought about sustained growth in trade between the two groups of countries. This trade, by the end of the 1980s, represented 25% of total Community trade and between 40% and 65% of that of the EFTA countries.
In 1989, Jacques Delors, then President of the European Commission, proposed and the European Council agreed to further strengthen the relations between the two European trade blocks. The negotiations were completed in October 1991 between the Community and EFTA as a body on the basic, legal and institutional aspects of such a global agreement. The Treaty on the European Economic Area (EEA) was signed in 1992 by the governments of twelve EU countries and six EFTA countries. However, as a result of the negative Swiss referendum on the EEA Treaty, on 6 December 1992, and the accession to the European Union since 1 January 1995 of the former EFTA members Austria, Sweden and Finland, the EEA Treaty associates to the EU only Norway, Iceland and Liechtenstein [Decisions 93/734 to 93/741, Agreement on EEA, Protocol and Annexes, OJ L 1, 03.01.1994, last amended by Decisions of the EEA Joint Committee, OJ L 8, 12.01.2017, see also section 5.2.2]. The new members of the EU have become contracting parties to the EEA Agreement.
The institutional framework of the EEA comprises: the EEA Council, which is made up of members of the Council of the EU and the Commission plus one member for each signatory EFTA government, and which provides political impetus for the implementation of the Agreement and lays down general guidelines; the EEA Joint Committee, comprising representatives of the contracting parties and responsible for the implementation of the Agreement; the EEA Joint Parliamentary Committee; and the EEA Consultative Committee, which provides a forum for representatives of the social partners. The EFTA countries, members of the EEA, participate in the decision-shaping process of the EU in the ambit of the Commission.
The aim of the EEA Agreement is to establish a dynamic and homogeneous integrated economic entity based on common rules and equal conditions of competition. The EFTA States, minus Switzerland, undertook to take on board existing Community legislation concerning the free movement of goods, persons, services and capital, subject to a few exceptions and transitional periods in certain sectors. Apart from the implementation of the "four freedoms" of the common market [see chapter 6], the EEA Agreement also provides for close relations between the EC/EU and the EFTA countries to be reinforced and extended in areas which have an impact on business activity [Regulation 2894/94], notably social policy, consumer protection, environment, statistics and company law, research and development, information, education, the audiovisual sector, SMEs and tourism. In fact, the EFTA countries (including Switzerland in some respects) participate practically in the common market without participating in the decision making process that governs it, adapting its legislation to their circumstances.
Thus, the EEA countries participate in European programmes such as EURES (employment) [see section 6.4.2] and the Competitiveness and Innovation Framework Programme [see sections 17.1.3 and 19.1.3]. Other agreements cover inland transport, air transport, free movement of persons, agriculture, public procurement [see section 6.3], mutual recognition of certificates of conformity [see section 6.2.3], and technological research and development [see section 18.2.6]. Special arrangements on agriculture, fisheries and transport are provided in bilateral agreements, which accompany the EEA Agreement. This contains provisions designed to iron out economic, social and regional disparities under the cohesion principle. Therefore, the EEA countries contribute to the financing of the EU Cohesion Fund. Norway and Iceland are associated in the implementation and development of the Schengen acquis [see section 9.2]. An EEA Financial Mechanism governs the EU-EEA financial mechanisms and cooperation programmes for the period 2009-2014 [Decisions 2010/674 and 2011/160].
Not being a party to the EEA agreement, Switzerland has, nevertheless, negotiated with the EU sectoral agreements on the free movement of persons, air transport, the transport of goods and passengers by rail and by road, scientific and technological cooperation [Agreement and Decision 2007/502], public procurement, trade in agricultural products, and mutual recognition and conformity assessment [Agreements of 2002]. Other sectoral agreements between the EC and Switzerland concern the Schengen acquis [Agreement and Decision 2008/903], the Dublin asylum Convention, a free trade agreement on services and an agreement in the audiovisual field. These agreements allow the Community acquis to enter Switzerland through the back door. The Swiss case is a good example of a pro-integration political leadership being overruled by a media-led negative public opinion [see sections 9.5 and 10.1].