From Wider Negotiations to a Seven-State Plan
The European Free Trade Association (EFTA) emerged from differing paths in postwar Western European economic cooperation. The six European Economic Community states chose a deeper common-market arrangement, while Britain and others sought a free-trade area linking more countries within the Organisation for European Economic Co-operation. When negotiations for the wider area failed in late 1958, several countries that had remained in close contact began seeking a separate arrangement.
On July 20–21, 1959, ministers from Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom met at Saltsjöbaden near Stockholm and agreed in principle to a seven-country free-trade area. They then refined the provisions, initialed the text in Stockholm on November 20, signed the convention formally on January 4, 1960, and brought it into force on May 3.
How the Convention Defined the Trading Area
The Stockholm Convention identified expanded economic activity, trade and fair competition as objectives, principally through gradual removal of tariffs and quantitative restrictions on industrial trade among members. Members retained their tariff arrangements toward outside countries, so the association was not a customs union with a common external tariff.
This made rules of origin indispensable: a product manufactured outside the area could not automatically receive preferences merely by being re-exported through a member. The convention and annexes used criteria including wholly obtained production, specified processing and material value to determine originating status. Listed agricultural products and seafood were subject to special provisions, while some Portuguese products had longer transition periods, reflecting differences among the seven economies.
A Council with One Vote per Country
Article 32 established a Council representing all members, each with one vote, to supervise implementation and further cooperation. Decisions and recommendations normally required unanimity, but specified matters could be decided by majority; the original seven-state threshold was four votes. Council decisions could bind all members.
For disputes unresolved through bilateral consultation, Article 31 allowed members to seek Council examination, with a committee of examination establishing facts if necessary before recommendations or authorization of suitable measures. The structure operated through national representatives, expert investigation and continued consultation. Specialized committees prepared everyday customs, trade and budget matters so ministerial political commitments could become administrative procedures.
The Geneva Secretariat and Initial Funding
Swedish official Sten Linde initially organized the Secretariat as Executive Secretary. He returned to Stockholm in September 1960, and Frank Figgures became Secretary-General. The Secretariat moved into permanent Geneva offices that month. The October EFTA Bulletin reported fewer than thirty staff and four departments: trade policy, general and legal affairs, information and press, and administration and finance. An economics department was still being organized.
Members shared administrative costs, with Article 34 leaving budget procedures and allocation to the Council. The October 1960 estimate of expenditure for 1960–1961 was approximately 1.75 million Swiss francs, a projected figure rather than an audited final account. The Secretariat supplied continuing support for meetings, legal interpretation, economic information and communications.
The First Tariff Cuts and Customs Cooperation
On July 1, 1960, the seven countries cut tariffs on industrial imports from one another by 20% of the base rates and expanded most industrial import quotas. On July 1, 1961, internal tariffs fell by another 10% of the base rates, six months ahead of the convention's original January 1962 schedule, showing that the Council could coordinate acceleration.
Tariff reductions also required checking eligibility. The Customs Committee, composed of national customs representatives, exchanged implementation experience, coordinated origin documentation and investigative assistance, devised suitable certification for engineering exports and simplified procedures for low-value goods. The first annual report also recorded accounting arrangements distinguishing materials from inside and outside the area, so businesses did not lose preferences merely because they could not physically segregate each batch of raw material.
The Scope and Early Significance of Cooperation
From the outset, the association included wider links with other European countries among its objectives. On March 27, 1961, the seven states concluded an association agreement with Finland, using a separate arrangement to include it in trade concessions while preserving special provisions for its existing bilateral trade relations. Finland then held associate status and should not be included among the seven founding members of 1960.
Historian Wolfram Kaiser treated early EFTA as a test of industrial free trade within a looser institutional framework and noted that interaction with the Community affected the direction of European integration. Its initial achievements comprised not only a seven-state convention but observable tariff cuts, origin checks, cost-sharing and secretariat work, bringing intergovernmental cooperation into everyday trade.