European Union
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Free trade is a trade policy between two countries that allows traders to make transactions without governmental interference. There are several free trade agreements within Europe that have been set up in the last century.
History
The European Economic Community (EEC), was established in the late 1950s to promote economic integration across Belgium, France, Germany, Italy, Luxembourg and Holland; it later expanded to include six other countries.
When the European Union (EU) was created in 1993, the EEC was integrated into it and became the European Community (EC)--one of the EU’s three core pillars. It handled economic, social and environmental policies across the EU until the demise of the three pillar structure in 2009, with the adoption of the Lisbon Treaty.
The European Union
The European Union developed as a political and economic union of primarily European states. The EU aims to promote economic and social development; represent Europe internationally; develop Europe as a region of freedom, justice and security; introduce European citizenship; and maintain and build on established EU law.
Some members of the EU have changed their currency to the euro, and these countries constitute the Eurozone.
European Free Trade Association
Authorities created the European Free Trade Association (EFTA) in 1960 to bring about free trade in industrial and agricultural goods for member countries. They envisioned it as a parallel alternative to the EU. The seven founding members were Austria, Denmark, Portugal, Sweden, the United Kingdom, Switzerland and Norway. The first five eventually became members of the EU. The EFTA member countries as of 2010 are Iceland, Liechtenstein, Norway and Switzerland.
As well as maintaining trade relations with the EU as set out by the European Economic Area, the EFTA has free trade agreements with non-EU countries.
European Economic Area
The European Economic Area was established in 1994 in order to facilitate free trade between members of the EU and members of the EFTA. The conditions of the agreement were that Iceland, Liechtenstein and Norway were allowed to participate freely in the EU’s single market without traditional EU membership. They also were given the "four freedoms": freedom of goods, persons, services and capital. In return, the member countries had to adopt all EU laws concerning the single market, except those regarding agriculture and fisheries.
Central European Free Trade Agreement
The Central European Free Trade Agreement (CEFTA) between non-EU countries in central and southeastern Europe provides a framework for countries to later enter the EU. The criteria for joining are: a commitment to respect all World Trade Organization regulations; participation in any European Union association agreement; free trade agreements with CEFTA member states.
Membership in CEFTA ends once a country has entered the EU. The members of CEFTA as of 2010 are Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia, and Kosovo, with some of them expected to progress into the European Union. Previous members include Bulgaria and Romania, which became members of the EU as of 2007.
