|European Parliament Fact Sheets|
6.3.2. The European Economic Area (EEA)
Article 310 (238) EC (Association Agreements).
The purpose of the EEA has been to create a Single Market covering not only the European Community itself, but also the countries of the European Free Trade Area (EFTA). The total market so created is one of some 380 million people.
The EEA Agreement was signed in May 1992 between the then 12 European Community Member States and the then 6 Member States of EFTA: Austria, Finland, Iceland, Norway, Switzerland and Sweden. Following an adverse referendum in December 1992, however, Switzerland failed to ratify the agreement. It therefore came into effect at the beginning of 1994 covering 17 countries.
Since then, three of the original EFTA countries - Austria, Finland and Sweden - have become full Members of the European Union; and in May 1995 Liechtenstein acceded to the EEA. The Agreement now therefore applies to the 15 EU Member States and 3 EFTA countries - though not to Switzerland, which nevertheless remains a member of EFTA.
This complex situation is the result of several changes in the relationships between EFTA and European Community countries over the years. When two EFTA states, the UK and Denmark, joined the EC in 1973, individual industrial free trade agreements were negotiated with each of the remaining five EFTA states. Cooperation was expanded by the "Luxembourg Declaration" of 1984. Finally the impending creation of the EC Single Market led to formal EEA negotiations in 1990.
2. The "four freedoms"
The core of the EEA Agreement lies in the "four freedoms" of the Single Market: the free movement of goods, services, capital and persons. It also covers certain policies "flanking" the Single Market: for example competition and social policy, consumer and environmental protection, education, and research and development. Cooperation between the European Community and the EFTA/EEA States outside the "four freedoms" is covered by Protocol 31 of the EEA Agreement. Currently, legislative steps have been taken to facilitate the full participation of the EEA states in the Community programmes concerning cultural cooperation.
Unlike the European Community Single Market, however, the EEA in principle excludes agricultural and fishery products; does not cover indirect taxation (VAT and excise duties); and has no common external economic policy (Common External Tariff, anti-dumping measures, etc.). As a result, the EEA does not constitute a fully "frontier-free" market, nor a true customs union.
Nevertheless, over 80% of EC Single Market legislation (some 1,500 Regulations, Directives and Decisions) applies within the whole EEA area, as will most future Single Market legislation. Moreover, practical considerations have meant that agreements have also been needed in fields formally outside the EEA, notably agricultural and fisheries products.
a. Free movement of goods
The abolition of customs duties on industrial goods within what is now the EEA area dates from 1972. The EEA Agreement itself extended this free movement to quantitative restrictions and measures with equivalent effect. Since the Agreement came into effect, solutions are also being found to problems such as:
- Rules of origin. The EEA is now to be treated as a single block with an "EEA origin" mark. Currently, the Council considers Commission proposals which aim at amending the existing rules of origin in a way to take into account economic and political requirements in the EEA area. Common procedures for dealing with goods originating outside the EEA are being agreed.
- Technical Barriers to Trade. Legislation on technical regulations, standards, testing and certification is being aligned (including those covering dangerous substances, foodstuffs and wine), not only within the EEA but also in relation to third countries.
- Veterinary controls. Progress is being made in aligning procedures for veterinary controls at frontiers.
b. Free movement of services
Freedom of establishment for both businesses and professionals applies throughout the EEA.
- Financial services. Freedom to carry out banking, insurance, investment and other financial services is being established within the EEA, as within the EU, on the basis of a "single licence" and "home country control".
- Telecommunications. The opening up of telecommunications is proceeding in parallel in the EU and EEA. In May 1998 the EEA Joint Committee drafted a decision which aims at the integration of Community legislation in the EEA Agreement, especially concerning the application of the principles of Open Network Provision - ONP - and a coordinated authorisation approach in the field of satellite personal-communication services.
- Audio-visual and information. EU legislation on such matters as data protection and television advertising are being incorporated into the EEA. The latest developments are a report issued by the European Parliament on 28 June 1998 which deals with Audio-Visual Services and a draft decision of the EEA Joint Committee which aims at amending Annex XXI to the EEA Agreement by adding legislation in the field of statistics which has already been adopted in the EU.
- Transport. Agreements are being reached on such matters as the dimensions of road vehicles, the transport of dangerous goods, marine cabotage and safety at sea.
- Energy. The Gas Directive of 11 May 1998 aims at the gradual opening of the market. Norway showed some concern about the issue of third party access to underwater pipelines and about the fate of long-term take-or-pay supply contracts.
c. Free movement of capital
Exchange controls and other obstacles to the free movement of capital were prohibited by the EEA Agreement, subject to certain derogations for Iceland and Norway in the field of fisheries investment. Certain restrictions also apply to ownership: for example of fishing vessels (Norway) and real estate (Liechtenstein).
d. Free movement of persons
Under the EEA Treaty, citizens of any one of the 18 Member States have the right to seek and take up employment in any of the others. EU legislation on social security is in the course of being integrated into the EEA, and official information on the rights of citizens moving between countries now covers the whole of the EEA area. Liechtenstein still retains a special position invoking safeguard measures to restrict EEA nationals' right to take up residence in the country.
In conjunction with freedom of establishment, measures on the equivalence and mutual recognition of qualifications likewise apply throughout the EEA.
Recently, negotiations have taken place to extend the free movement of persons within the context of the Schengen Convention. A formula has been found which will enable Norway and Iceland - which belong to the Nordic Passport Union, but not to the European Union - to join existing the ten Schengen countries as associated members. This measure is necessary after the decision of Denmark, Finland and Sweden to become full members of the Schengen agreement. Negotiation directives adopted by the Council at the end of August 1998 aim at the effective association of Iceland and Norway to the agreements which prevail between the Schengen countries. A reconsideration of the relationship between the two groups of countries has become necessary in light of the stipulations of the Amsterdam treaty which provides for the incorporation of the Schengen acquis into the framework of the treaties. The EU Council and the European Commission have different opinions on which juridical base to use for the association. The Council believes article 9 of the Schengen agreement to be the correct base, while the Commission argues for article 228 of the EC treaty.
Concerning the special situation of Liechtenstein, the Commission has contested the conformity of measures taken by the country in order to restrict the taking up of residence with the EEA agreement.
3. Competition policy
Most European Community competition policy rules apply throughout the EEA area. For example:
- Breaches of the Treaty. Businesses and others can invoke the competition rules before national courts throughout the EEA.
- Public procurement. Nationally discriminatory public procurement is prohibited.
- State Aids. Community rules on State Aids which might distort competition - subsidies, soft loans, tax concessions, etc. - apply throughout the EEA. The Commission and the EFTA authorities ensure conformity within the countries respectively covered.
- Anti-dumping. Anti-dumping procedures cannot in principle be invoked within the EEA (although there have been problems with certain non-industrial products like Norwegian salmon). Policies vis-à-vis third countries are being aligned.
The day-to-day operations of the EEA are the responsibility of the EEA Joint Committee, which consists of officials from the EC and EFTA countries. The detailed work of aligning legislation is carried out in five sub-committees:
- Free movement of goods.
Ultimate responsibility lies with the EEA Council, which consists of ministers from each of the participating countries, plus the EC Commission. Decisions are made by consensus, and the EU and EFTA are separately responsible for implementation in accordance with their own procedures.
Practical supervision of implementation is provided by the EC Commission on the one hand, and the EFTA Surveillance Authority on the other. Judicial supervision is provided by the EC Court of Justice and the EFTA Court of Justice.
ROLE OF THE EUROPEAN PARLIAMENT
Article 310 of the Treaty (under which the EEA Agreement was negotiated) requires the assent of the European Parliament: that is, a positive vote by more than half Parliament's membership was necessary for the agreement to proceed. Following very close monitoring of the negotiations, Parliament gave this assent in October 1992.
Following the entry into force of the Agreement, democratic supervision is provided by a Joint Parliamentary Committee, which consists of Members of the European Parliament and MPs from the EFTA countries. This Committee has the power to issue reports and to pass formal resolutions on EEA matters.