The term EFTA most commonly refers to the European Free Trade Association, an intergovernmental organization and regional trade area. It was established in Stockholm in 1960 by the EFTA Convention to promote free trade and economic integration among its member states by eliminating customs duties on industrial products. The organization was created as an alternative to the then-European Economic Community (EEC).
EFTA currently comprises four member states: Iceland, Liechtenstein, Norway, and Switzerland. It functions as a platform for its members to negotiate free trade agreements with third countries globally. Unlike the European Union (EU), EFTA is not a customs union, allowing its members to set their own external tariffs. The 2001 renewal of the EFTA Convention integrated new provisions for trade in services, movement of capital, and intellectual property protection.
EFTA is closely connected to the European Economic Area (EEA), which was established in 1994. Three EFTA states (Iceland, Liechtenstein, and Norway) are party to the EEA Agreement, which extends the EU's Single Market, including the Four Freedoms (free movement of goods, capital, services, and persons), to them. Switzerland is an EFTA member but not an EEA member, instead managing its relationship with the EU through a series of bilateral agreements.
A significant recent development is the India-EFTA Trade and Economic Partnership Agreement (TEPA), signed on March 10, 2024, and set to enter into force on October 1, 2025. This agreement, India's first FTA with these four developed European nations, includes an unprecedented pledge of $100 billion in investment from EFTA states to India over 15 years.
Note: EFTA is also the acronym for the Electronic Fund Transfer Act, a 1978 US federal law that regulates electronic payments and protects consumers in the United States.