A common commercial policy involves several states coordinating some or all aspects of their trade policy.
55-590: It is sometimes agreed by treaty within a customs union . In the case of the European Union , a form of the EU's common commercial policy has been in place since 1957. A common commercial policy is also an aim of Mercosur . This economic policy related article is a stub . You can help Misplaced Pages by expanding it . This international trade related article is a stub . You can help Misplaced Pages by expanding it . Customs union A customs union
110-679: A coordinated trade policy. As a result, its member states have jointly concluded free trade agreements with the EU and a number of other countries. To participate in the EU's single market, Iceland, Liechtenstein, and Norway are parties to the Agreement on a European Economic Area (EEA), with compliances regulated by the EFTA Surveillance Authority and the EFTA Court . Switzerland has a set of multilateral agreements with
165-425: A customs union in the following way: (a) A customs union shall be understood to mean the substitution of a single customs territory for two or more customs territories, so that (i) duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated with respect to substantially all the trade between the constituent territories of
220-490: A customs union normally include increasing economic efficiency and establishing closer political and cultural ties between the member countries. It is the third stage of economic integration . Every economic union , customs and monetary union and economic and monetary union includes a customs union. The General Agreement on Tariffs and Trade , part of the World Trade Organization framework defines
275-470: A period of time, it should be completed within a reasonable period, which generally does not exceed 10 years. The exclusive protection measures of the Customs Union mainly include the following: Economic effects of customs unions can generally be grouped into static effects and dynamic effects . There are trade creation effects and trade diversion effects. The trade creation effect refers to
330-797: Is affiliated to the EFTA Secretariat in Brussels. EFTA also originated the Hallmarking Convention and the Pharmaceutical Inspection Convention , both of which are open to non-EFTA states. EFTA has 29 free trade agreements with non-EU countries as well as declarations on cooperation and joint workgroups to improve trade. Currently, the EFTA States have established preferential trade relations with 40 states and territories, in addition to
385-408: Is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff . Customs unions are established through trade pacts where the participant countries set up common external trade policy (in some cases they use different import quotas ). Common competition policy is also helpful to avoid competition deficiency . Purposes for establishing
440-404: Is greater than the transfer effect, the combined effect of joining the Customs Union on the member countries is net profit, which means an increase in the economic welfare level of the member countries; otherwise, it is a net loss and a decline in the economic welfare level. The trade creation effect is usually regarded as a positive effect. This is because the domestic production cost of country A
495-481: Is higher than the production cost of country A 's imports from country B. The Customs Union made Country A give up the domestic production of some commodities and change it to Country B to produce these commodities. From a worldwide perspective, this kind of production conversion improves the efficiency of resource allocation . The customs union will not only bring static effects to member states, but also bring some dynamic effects to them. Sometimes, this dynamic effect
550-462: Is more important than its static effect, which has an important impact on the economic growth of member countries. (UK-CD) Additionally, the autonomous and dependent territories such as some of the EU member state special territories are sometimes treated as separate customs territories from their mainland states or have varying arrangements of formal or de facto customs union, common market and currency union (or combinations thereof) with
605-803: Is not an EEA member, it does not participate in these institutions. The EFTA Surveillance Authority performs a role for EFTA members that is equivalent to that of the European Commission for the EU, as "guardian of the treaties" and the EFTA Court performs the European Court of Justice -equivalent role. The original plan for the EEA lacked the EFTA Court: the European Court of Justice was to exercise those roles. However, during
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#1732765403528660-845: The Aftenposten newspaper: "It's not certain that it would be a good idea to let a big country into this organization. It would shift the balance, which is not necessarily in Norway's interests." In late 2016, the Scottish First Minister said that her priority was to keep the whole of the UK in the European single market but that taking Scotland alone into the EEA was an option being "looked at". However, other EFTA states have stated that only sovereign states are eligible for membership, so it could only join if it became independent from
715-541: The Carnation Revolution and the consequential restoration of democracy and the decolonization of the country's overseas possessions. This followed a period of economic sanctions by most of the international community, which left Portugal economically underdeveloped compared to the rest of the western Europe . When Portugal left EFTA in 1985 in order to join the EEC, the remaining EFTA members decided to continue
770-718: The European Union (EU), and all four member states participate in the European single market and are part of the Schengen Area . They are not, however, party to the European Union Customs Union . EFTA was historically one of the two dominant western European trade blocs , but is now much smaller and closely associated with its historical competitor, the European Union . It was established on 3 May 1960 to serve as an alternative trade bloc for those European states that were unable or unwilling to join
825-487: The European Union (EU). EFTA nationals and EU citizens are not only visa-exempt but are legally entitled to enter and reside in each other's countries. The Citizens' Rights Directive (also sometimes called the "Free Movement Directive") defines the right of free movement for citizens of the European Economic Area (EEA), which includes the three EFTA members Iceland , Norway and Liechtenstein plus
880-681: The Faroe Islands from 1968. In mid-2005, representatives of the Faroe Islands raised the possibility of their territory re-joining the EFTA. Because Article 56 of the EFTA Convention only allows sovereign states to become members of the EFTA, the Faroes considered the possibility that the "Kingdom of Denmark in respect of the Faroes" could join the EFTA on their behalf. The Danish Government has stated that this mechanism would not allow
935-649: The Isle of Man , Turkey , Israel , Morocco , and other European Neighbourhood Policy partners were discussed. In November 2012, after the Council of the European Union had called for an evaluation of the EU's relations with Andorra, Monaco, and San Marino , which they described as "fragmented", the European Commission published a report outlining the options for their further integration into
990-618: The " Outer Seven ", as opposed to the Inner Six of the then European Economic Community (EEC). Finland became an associate member in 1961 and a full member in 1986, and Iceland joined in 1970. The United Kingdom and Denmark joined the EEC in 1973 and hence ceased to be EFTA members. Portugal also left EFTA for the European Community in 1986. Liechtenstein joined the EFTA in 1991 (previously its interests had been represented by Switzerland). Austria, Sweden, and Finland joined
1045-675: The 2004 enlargement of the European Economic Area (EEA), which brought together the EU, Iceland, Liechtenstein and Norway in the Internal Market. In the period from 2004 to 2009, €1.3 billion of project funding was made available for project funding in the 15 beneficiary states in Central and Southern Europe. The EEA and Norway Grants are administered by the Financial Mechanism Office, which
1100-477: The 27 member states of the European Union . EFTA's interactive Free Trade Map gives an overview of the partners worldwide. Signed: Concluded: Negotiations: Negotiations currently on hold Declarations on cooperation The following agreements are no longer active: EFTA member states' citizens enjoy freedom of movement in each other's territories in accordance with the EFTA convention. EFTA & EEA nationals also enjoy freedom of movement in
1155-456: The EFTA countries (but for voting and working in sensitive fields, such as government / police / military, citizenship is often required, and non-citizens may not have the same rights to welfare and unemployment benefits as citizens). The Portugal Fund came into operation in February 1977 when Portugal was still a member of EFTA. It was to provide funding for the development of Portugal after
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#17327654035281210-591: The EU (popularly referred to as " Brexit "), resulting in a 51.9% vote in favour of withdrawing. A 2013 research paper presented to the Parliament of the United Kingdom proposed a number of alternatives to EU membership which would continue to allow it access to the EU's internal market , including continuing EEA membership as an EFTA member state, or the Swiss model of a number of bilateral treaties covering
1265-424: The EU . They adopt almost all EU legislation related to the single market, except laws on agriculture and fisheries. However, they also contribute to and influence the formation of new EEA relevant policies and legislation at an early stage as part of a formal decision-shaping process . One EFTA member, Switzerland, has not joined the EEA but has a series of bilateral agreements, including a free trade agreement , with
1320-674: The EU and its member states instead. On 12 January 1960, the Convention establishing the European Free Trade Association was initiated in the Golden Hall of the Stockholm City Hall . This established the progressive elimination of customs duties on industrial products, but did not affect agricultural or fisheries products. The main difference between the early EEC and the EFTA was that
1375-575: The EU in 1995 and thus ceased to be EFTA members. Twice, in 1972 and in 1994 , the Norwegian government had tried to join the EU (still the EEC, in 1973) and by doing so, leave the EFTA. However, both the times, the membership of the EU was rejected in national referendums, keeping Norway in the EFTA. Iceland applied for EU membership in 2009 due to the 2008–2011 Icelandic financial crisis , but has since dropped its bid. Between 1994 and 2011, EFTA memberships for Andorra , San Marino , Monaco ,
1430-552: The EU. The following table summarises the various components of EU laws applied in the EFTA countries and their sovereign territories. Some territories of EU member states also have a special status in regard to EU laws applied as is the case with some European microstates . A Joint Committee consisting of the EEA-EFTA States plus the European Commission (representing the EU) has the function of extending relevant EU law to
1485-545: The EU. Unlike Liechtenstein, which is a member of the EEA via the EFTA and the Schengen Agreement , relations with these three states are based on a collection of agreements covering specific issues. The report examined four alternatives to the current situation: However, the Commission argued that the sectoral approach did not address the major issues and was still needlessly complicated, while EU membership
1540-495: The EU. The last two governments of Norway have not advanced the question, as they have both been coalition governments consisting of proponents and opponents of EU membership. Since Switzerland rejected the EEA membership in a referendum in 1992 , more referendums on EU membership have been initiated, the last time being in 2001 . These were all rejected. Switzerland has been in a customs union with fellow EFTA member state and neighbour Liechtenstein since 1924. On 16 July 2009,
1595-617: The European Union (EU), including Croatia which the agreement is provisionally applied to, pending its ratification by all contracting parties. It was established on 1 January 1994 following an agreement with the European Economic Community (which had become the European Community two months earlier). It allows the EFTA-EEA states to participate in the EU's Internal Market without being members of
1650-614: The Faroes to become a member of the EEA because Denmark was already a party to the EEA Agreement. The Faroes already have an extensive bilateral free trade agreement with Iceland, known as the Hoyvík Agreement . The United Kingdom was a co-founder of EFTA in 1960, but ceased to be a member upon joining the European Economic Community. The country held a referendum in 2016 on withdrawing from
1705-473: The UK, unless the solution scouted for the Faroes in 2005 were to be adopted (see above). In early 2018, British MPs Antoinette Sandbach , Stephen Kinnock and Stephen Hammond called for the UK to rejoin EFTA. In 1992, the EU, its member states, and the EFTA member states signed the Agreement on the European Economic Area in Porto , Portugal. However, the proposal that Switzerland ratify its participation
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1760-548: The United Kingdom, had joined the EU at some point in the intervening years. The initial Stockholm Convention was superseded by the Vaduz Convention, which aimed to provide a successful framework for continuing the expansion and liberalization of trade , both among the organization's member states and with the rest of the world. While the EFTA is not a customs union and member states have full rights to enter into bilateral third-country trade arrangements, it does have
1815-477: The alliance convention included: abolishing internal tariffs, unifying external tariffs, raising import tax rates, and allocating tariff income to all states in the alliance in proportion. In addition, there is a customs union between France and Monaco, which was established in 1865. A customs union was established by Switzerland and Liechtenstein in 1924, by Belgium, the Netherlands, and Luxembourg in 1948, by
1870-406: The benefits generated by products from domestic production with higher production costs to the production of customs union countries with lower costs. The trade diversion effect refers to the loss incurred when a product is imported from a non-member country with lower production costs to a member country with a higher cost. This is the price of joining the customs union. When the trade creation effect
1925-718: The countries of the European Economic Community in 1958, and by the Economic Community of Central African States in 1964. At that time, the European Free Trade Association was different from the European Economic Community Customs Union . Free trade within the former was limited to industrial products, and no uniform tariffs were imposed on countries outside the Union. It was brought into action by
1980-440: The end of 2013 detailing the implications of the two viable alternatives and recommendations on how to proceed. As EEA membership is currently only open to EFTA or EU member states, the consent of existing EFTA member states is required for the microstates to join the EEA without becoming members of the EU. In 2011, Jonas Gahr Støre , then Foreign Minister of Norway which is an EFTA member state, said that EFTA/EEA membership for
2035-565: The government of Iceland formally applied for EU membership, but the negotiation process was suspended in mid-2013, and in 2015 the foreign ministers wrote to withdraw its application. Denmark was a founding member of EFTA in 1960, but its membership ended in 1973, when it joined the European Communities . The autonomous territories of the Kingdom of Denmark were covered by Denmark's EFTA membership: Greenland from 1961 and
2090-457: The initiative of Prussia and joined by most of the German states. Pre- modern conditions ( 30+ currencies, trade barriers etc.) were viewed as an obstacle as obstacles to o economic exchange and growth by the new commercial classes, who argued for the creation of a unified economic territory allowing the unhindered movement of goods, people and capital. The main feature of the Customs Union is that
2145-404: The latter did not operate common external customs tariffs unlike the former: each EFTA member was free to establish its individual customs duties against, or its individual free trade agreements with, non-EFTA countries. The founding members of the EFTA were: Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. During the 1960s, these countries were often referred to as
2200-572: The mainland and in regards to third countries through the trade pacts signed by the mainland state. The European Union is a customs union and therefore sets a common external tariff. European Free Trade Association in Europe (green & dark grey) The European Free Trade Association ( EFTA ) is a regional trade organization and free trade area consisting of four European states : Iceland , Liechtenstein , Norway and Switzerland . The organization operates in parallel with
2255-638: The mainland; it was followed by the establishment of the North German Customs Union in 1826. Two years later, two customs unions were established in the states of South Germany. In 1834, 18 states joined to form the German Customs Union with Prussia as the main leader. Thereafter, this alliance was further expanded to all German-speaking regions and became the All-German Customs Union. The contents of
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2310-413: The member countries have not only eliminated trade barriers and implemented free trade , but also established a common external tariff. In other words, in addition to agreeing to eliminate each other's trade barriers, members of the Customs Union also adopt common external tariff and trade policies. GATT stipulates that if the customs union is not established immediately, but is gradually completed over
2365-460: The member states of the EU . Switzerland , which is a member of EFTA but not of the EEA, is not bound by the Directive but rather has a separate multilateral agreement on free movement with the EU and its member states. As a result, a citizen of an EFTA country can live and work in all the other EFTA countries and in all the EU countries, and a citizen of an EU country can live and work in all
2420-471: The microstates provided their joining did not impede the functioning of the organization. However, he suggested that the option of direct membership in the EEA for the microstates, outside of both the EFTA and the EU, should be considered. On 18 November 2013, the EU Commission concluded that "the participation of the small-sized countries in the EEA is not judged to be a viable option at present due to
2475-437: The microstates was not the appropriate mechanism for their integration into the internal market due to their different requirements from those of larger countries such as Norway, and suggested that a simplified association would be better suited for them. Espen Barth Eide , Støre's successor, responded to the commission's report in late 2012 by questioning whether the microstates have sufficient administrative capabilities to meet
2530-583: The negotiations for the EEA agreement, the European Court of Justice ruled by the Opinion 1/91 that it would be a violation of the treaties to give to the EU institutions these powers with respect to non-EU member states. Therefore, the current arrangement was developed instead. The EEA and Norway Grants are the financial contributions of Iceland, Liechtenstein and Norway to reduce social and economic disparities in Europe. They were established in conjunction with
2585-441: The non-EU members. An EEA Council meets twice yearly to govern the overall relationship between the EEA members. Rather than setting up pan-EEA institutions, the activities of the EEA are regulated by the EFTA Surveillance Authority and the EFTA Court . The EFTA Surveillance Authority and the EFTA Court regulate the activities of the EFTA members in respect of their obligations in the European Economic Area (EEA). Since Switzerland
2640-550: The obligations of EEA membership. However, he stated that Norway would be open to the possibility of EFTA membership for the microstates if they decided to submit an application, and that the country had not made a final decision on the matter. Pascal Schafhauser, the Counsellor of the Liechtenstein Mission to the EU, said that Liechtenstein, another EFTA member state, was willing to discuss EEA membership for
2695-432: The political and institutional reasons", and that Association Agreements were a more feasible mechanism to integrate the microstates into the internal market. The Norwegian electorate had rejected treaties of accession to the EU in two referendums. At the time of the first referendum in 1972, their neighbour, Denmark joined. Since the second referendum in 1994, two other Nordic neighbours , Sweden and Finland, have joined
2750-627: The provisions of the single market. In the first meeting since the Brexit vote, EFTA reacted by saying both that they were open to a UK return, and that Britain has many issues to work through. The president of Switzerland Johann Schneider-Ammann stated that its return would strengthen the association. However, in August 2016 the Norwegian Government expressed reservations. Norway's European affairs minister, Elisabeth Vik Aspaker , told
2805-698: The then European Economic Community (EEC), the main predecessor of the EU. The Stockholm Convention (1960), to establish the EFTA, was signed on 4 January 1960 in the Swedish capital by seven countries (known as the " Outer Seven ": Austria , Denmark , Norway , Portugal , Sweden , Switzerland and the United Kingdom ). A revised Convention, the Vaduz Convention, was signed on 21 June 2001 and entered into force on 1 June 2002. After 1995 only two founding members remained, namely Norway and Switzerland. The other five, Austria, Denmark, Portugal, Sweden and
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#17327654035282860-504: The union or at least with respect to substantially all the trade in products originating in such territories, and, (ii) subject to the provisions of paragraph 9, substantially the same duties and other regulations of commerce are applied by each of the members of the union to the trade of territories not included in the union; The German Customs Union, the Zollverein , which was established in 1834, and gradually developed and expanded,
2915-408: Was a customs union organization that appeared earlier and played a role in promoting German economic development and political unification at that time. Before the establishment of the unified German Empire in the 1870s, there were checkpoints between and within the German states, which hindered the development of industry and commerce. In 1818, Prussia took the lead in abolishing the customs duties in
2970-466: Was dismissed in the near future because "the EU institutions are currently not adapted to the accession of such small-sized countries". The remaining options, EEA membership and a FAA with the states, were found to be viable and were recommended by the commission. In response, the Council requested that negotiations with the three microstates on further integration continue, and that a report be prepared by
3025-492: Was rejected by referendum. (Nevertheless, Switzerland has multiple bilateral treaties with the EU that allow it to participate in the European Single Market , the Schengen Agreement and other programmes). Thus, except for Switzerland, the EFTA members are also members of the European Economic Area (EEA). The EEA comprises three member states of the European Free Trade Association (EFTA) and 27 member states of
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