The European Free Trade Association (EFTA) is a regional trade organisation and free trade area. It is an intergovernmental organization currently comprising four European states: Iceland, Liechtenstein, Norway, and Switzerland.
EFTA was established on May 3, 1960, following the signing of the Stockholm Convention on January 4, 1960. It was created by the "Outer Seven" founding members—Austria, Denmark, Norway, Portugal, Sweden, Switzerland, and the United Kingdom—as an alternative to the more politically integrated European Economic Community (EEC), the predecessor of the EU. The core problem it solved was allowing member states to remove trade barriers for industrial goods among themselves while retaining the right to set their own commercial policies, including customs duties, with non-member countries.
The primary mechanism of EFTA is the elimination of tariffs and quantitative restrictions on trade in industrial goods and fish products between its member states. Unlike the European Union, EFTA is not a customs union. The original EFTA Convention was completely revised and an updated version was signed in Vaduz, Liechtenstein, on June 21, 2001, which integrated new provisions for trade in services, movement of capital, and protection of intellectual property.
EFTA is closely connected to the European Union (EU) through the European Economic Area (EEA) Agreement, which came into effect on January 1, 1994. This agreement allows three EFTA states (Iceland, Liechtenstein, and Norway) to participate in the EU’s single market, with compliance regulated by the EFTA Surveillance Authority and the EFTA Court. Switzerland is not an EEA member but maintains a set of bilateral agreements with the EU. A significant recent development is the landmark Trade and Economic Partnership Agreement (TEPA) signed with India in March 2024, which is set to come into effect on October 1, 2025.