2. The EEA and EFTA

The European Economic Area (EEA) provides for the free movement of persons, goods, services and capital within the European Single Market. EEA membership is open to member states of either the European Union (EU) or the European Free Trade Association (EFTA). EFTA states which are party to the EEA Agreement participate in the EU's internal market without being members of the EU. They adopt most EU legislation concerning the single market but with exclusions, including laws regarding agriculture and fisheries.

There are 31 EEA states as of 2016: 28 EU member states, as well as three of the four member states of the EFTA (Iceland, Liechtenstein and Norway). One EFTA member, Switzerland, has not joined the EEA, but has a series of bilateral agreements with the EU which allow it also to participate in the internal market.

The UK was the major founding member of EFTA (in 1960). EFTA is a regional trade organisation and free trade area consisting of four European states: Iceland, Liechtenstein, Norway, and Switzerland. The organisation operates in parallel with the EU and all four member states participate in the EU's single market.

EFTA differs from the EU in that it is not a customs union and member states have full rights to enter into bilateral third-country trade arrangements. It does, however, have a co-ordinated trade policy. As a result, its member states have jointly concluded free trade agreements with a number of other countries. To participate in the EU's single market, Iceland, Liechtenstein and Norway are party to the Agreement on a European Economic Area (EEA), with compliance regulated by the EFTA Surveillance Authority and the EFTA Court. Switzerland instead has a set of bilateral agreements with the EU.

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