European Economic Area (EEA) Agreement: What it is, How it Works

What Is the European Economic Area (EEA) Agreement?

The European Economic Area (EEA) Agreement is an agreement made in 1992 that brought the European Union (EU) member countries and three of the European Free Trade Association (EFTA) states—Iceland, Liechtenstein, and Norway—into a single market. (The fourth EFTA state, Switzerland, chose not to join.)

The purpose of the agreement is to strengthen trade and economic relations among the countries by removing trade barriers and imposing equal conditions of competition and compliance with the same rules.

Understanding the European Economic Area (EEA) Agreement

The EEA agreement requires the inclusion of EU regulations covering the “four freedoms”—free movement of goods, services, persons, and capital—throughout the member states. It also covers cooperation in other areas, such as research and development, education, social policy, the environment, consumer protection, tourism, and culture, collectively known as “flanking and horizontal” policies. Commonly comparable national economic statistics are also covered by the EEA as an economic matter relevant to achieving the goals of the agreement.

The agreement does not require the inclusion of the EU’s common agriculture and fisheries policies (although the agreement contains provisions on various aspects of trade in agricultural and fisheries products), customs union, common trade policy, common foreign and security policy, justice, and home affairs, or the European Economic and Monetary Union (EMU).

The EEA vs. the EU

Although the two are closely related, the EEA and the EU are not the same. All EU members are automatically required to be EEA members, but not all EEA members are EU members. The EEA agreement is related to the single market and the laws relevant to it, while the EU is both an economic and political union. Over the years several EFTA members have transitioned to become EU members, including Austria, Finland, and Sweden.

Switzerland is a member of the EFTA, but not a member of the EEA, and instead has a series of similar bilateral agreements with the EU. In 2021, Switzerland rejected a comprehensive treaty with the EU—which would have replaced these numerous bilateral agreements—over misgivings regarding how the treaty would impact Swiss sovereignty and the country's ability to set its own immigration policies.

All regulations that EEA countries have to comply with are made by the EU, which effectively means that the EEA/EFTA countries do not have a say in forming the laws they are required to implement. The EEA countries also have to make financial contributions to the EU, though they are smaller than the contributions of EU members.

EEA Members

There are currently 30 member countries of the EEA. Three countries (Iceland, Liechtenstein, and Norway) are EEA members but not EU members. One member, the United Kingdom, left both the EU and the EEA during Brexit.

Brexit and the EEA

The UK is a former member of the EEA. In a 2016 referendum, Britons voted to exit the EU, and, since EEA membership is contingent upon membership in either the EU or the EFTA (of which Britain is not a member), this also means that exiting the EEA unless some other alternative could be negotiated. At the end of 2020, the ongoing transitions and negotiations around the UK's exit from the EU expired with no such deal having been reached, so the UK is no longer an EEA member.