The free trade agreements of the EFTA countries with the EC —experiences and problems
By SVEN NORBERG*
Background
The foundation of the European Free Trade Association (EFTA) in 1960 came as a reaction to the formation of the European Economic Community (EEC) by the Rome Treaty three years earlier. Already from the outset it was intended to counter the evident risk of a division of the market in Western Europe. The founders of EFTA wanted instead to lay the ground for the realization of the idea of one wideopen market in Western Europe that had been tried but had failed in the OEEC in the 1950s. The preamble of the Stockholm Convention (curiously enough in Sweden better known as the EFTA Convention) clearly spells out the desire of the EFTA countries for a wider European solution.
Throughout the sixties the EFTA countries continued their efforts to find an acceptable solution. Individual EFTA countries made applications for membership of or association with the Communitiesbut it was only in the autumn of 1969 that political conditions in the Community made a new initiative possible. While negotiations on Community membership started for Denmark, Norway and the United Kingdom during the second half of 1970, the remaining EFTA countries waited for negotiations aiming at finding suitable tradingarrangements with the Community.
It may, in this context, be appropriate to recall that of the remaining EFTA countries, Austria, Finland, Iceland, Portugal, Sweden and Switzerland, only Sweden (in July 1967) had asked for negotiations with the Community aiming at a participation in the enlargement of the Community in a form which made it possible to maintain Swedish
Svensk Juristtidning
neutrality. It was not until March 1971 that the Swedish Government finally declared that it had drawn the conclusion that membership was not a realistic possibility for Sweden. At the same time, however, Sweden expressed its wish to participate in a customs union comprising notonly industrial but also agricultural goods. In a declaration by the Swedish Government presented to parliament on 31 March 1971,1 the Government said that the co-operation between Sweden and the Community would have to take the form of a particular Agreement in which the rights and obligations of the parties were clearly stipulated. Since Sweden would not be a member of the EC Council or the Commission, one would have to find particular forms for co-operation which corresponded to the scope and character of the Swedish obligations. The Swedish position at that stage was thus different from the othernon-candidate EFTA countries which already at an early stage had asked for a Free Trade Agreement with the Community. Sweden was striving for a deeper, broader and more intimate co-operation than any other of the non-candidate countries. This fact seems so interesting that in my view it also merits recollection of the arguments presented in favour there of.
The EC Commission in a report to the Council in June 1971 recommended two alternative solutions. The first one aimed at the preservation of free trade between the remaining EFTA countries and those new EC Members leaving EFTA while waiting for a decision on how to settle the relations between the EFTA countries and the EC. The second alternative, which later was supported by the Council, aimed at the extension of the EFTA free trade to the enlarged Community.
Sweden, in a memorandum to the Communities in September 1971,2 presented its arguments for a customs union as a basis for close, extensive and lasting economic relations with the Communities, taking due account of its neutrality. This memorandum, inter alia, addressed the competition rules that should be laid down on cartels, companiesin a dominant position and State aids. Here Sweden was prepared to examine various possibilities for solving the question of the administrative and judicial forms for the application of these rules in order to guarantee uniformity therein. The Swedish Government also expressed the view that the customs union should be supplemented byco-operation in fields such as economic policy, industrial policy, technical research policy, energy policy and nuclear questions.
In November 1971 the EC Commission presented its proposal for negotiations with the remaining EFTA countries. They were all offered negotiations aiming at a Free Trade Agreement for trade in industrial goods. The Swedish requests for a customs union not only for industrial but also for agricultural goods had thus been turned down.
After the conclusion of the membership negotiations in January 1972, the remaining EFTA countries were able to conclude and sign their Free Trade Agreements with the Communities on 22 July 1972.3 For each country there were two Agreements, one with the EEC andone with the ECSC (the European Coal and Steel Community).4Although negotiated bilaterally they are almost identical (cf. a "Master" text at Annex).
Most of the Free Trade Agreements (FTAs) with the EEC came into force on 1 January 1973 and the first tariff cuts with the EEC and the Coal and Steel Community took place on 1 April 1973. In general, the FTAs provided for the step-by-step reduction of import duties, arriving at zero duties on 1 July 1977, by which date virtually all trade in industrial products between the sixteen countries concerned was free of tariffs. The final elimination of the last duties on products under these Agreements took place at the end of 1983.
The Free Trade Agreements have resulted in the successful dismantlement of tariffs and quotas in trade in industrial goods between the EFTA countries and the Community. These Agreements, which initially resulted in the creation of a free trade area of sixteen countries, have, after the enlargement of the Communities in 1981 and 1986, led to the creation of the world's largest free trade area, comprising eighteen countries and a population of more than 350 million people.
The economic importance of these Agreements for the EFTA countries is undeniable already due to the fact that in 1985 53 % of the exports from the EFTA countries went to the Community. The FreeTrade Agreements are, however, also quite important for the Community. As much as 22% of the external exports from the EC went to theEFTA countries, making the EFTA countries the most important trading partner of the EC. Together the EFTA countries take more ofthe exports from the Community than the United States. In other
words, the 32 million inhabitants in the EFTA countries buy more from the Community than the 240 million Americans do. More than 70% of Sweden's trade is with Western Europe and the Community represents around 70% there of. In 1985 Sweden's exports to the ECamounted to 112 billion SEK (14.8 billion US$) and its imports fromthe EC to 132 billion SEK (16 billion US$). The situation is similar in other Nordic EFTA countries.
The Free Trade Agreements have resulted in a complete abolitionof tariffs and import quotas upon trade in industrial goods between the EFTA countries and the EC and thereby led to a considerable expansion of trade between the EFTA countries and the Community. They have thus proved to be a far more viable instrument than probably anyone had expected at the time. If the objective of EFTAEC co-operation would not go beyond the goals set up in the FTAs, i.e. the achievement of free trade mainly in industrial goods, it would not be necessary to say much more. However, in view of the decisionat the first EFTA-EC Ministerial meeting in Luxembourg on 9 April 1984 to create a dynamic European Economic Space and the subsequent decisions in the EC to complete its internal market by the end of 1992, there seems to be good reasons to examine the present legalbases for EFTA-EC co-operation and also somewhat the future needs.
Experiences
(a) Some general remarks
With regard to the experiences of the operation of these Free Trade Agreements, it would be presumptuous of me to pretend that I could give an overall account of the experiences during the fourteen years of operation of these twelve Agreements between the Communities and the six EFTA countries. I would here, instead, only like to make some general observations regarding the functioning and operation of the Free Trade Agreements as well as regarding some of the provisionstherein. In doing this, I will limit myself to the FTAs with the EEC. If my references sometimes concern the Swedish FTA it may be becauseit is better known to me and also due to the lack of any more comprehensive assessment of the operation of all the FTAs.
The traditional assessment by the Joint Committees set up under the FTAs or in Declarations from the EC or EFTA side is that the FTAs have functioned well. Taking into account their economic importance one might even say that it is striking how few disputes that have arisen between the parties to the FTAs regarding the interpretation there of. Normally, if a contract does provoke so little discussionor disagreement this would either be due to its extreme clarity and the
high degree of "clairvoyance" ofits authors or to the fact that it does not play any practical role. In this case obviously the latter reason does not prevail.
As to the provisions of the Agreements, an assessment by one of the Swedish legal advisors involved in the negotiations, Ambassador Hans Danelius, may be recalled. He presented these Agreements in 1973 in an article in the main Swedish law review "Svensk Juristtidning".5 His excuse for doing this was that, although the Agreements mainly concerned tariffs and rules of origin, there were, however, also a few aspects that were worth while noting from a legal point of view. These were in particular the competition rules, the institutional aspects and the absence of a dispute settlement procedure.
Indeed, the main content of these Agreements is made up of the provisions concerning the dismantlement of tariffs and other traderestrictions. The provisions hereon are, however, to their substance, static. When the tariffs are dismantled these provisions, and thereby also to some extent the Agreement, have fulfilled their function. As mentioned before, this stage was achieved by the end of 1983.
Over the years there have been many attempts to bring about more dynamism in the content of the Agreements, but this has in practiceled to very limited results. There has not been any progress regarding the extension of the scope of the Agreements. For instance, there have been suggestions on various occasions to extend the coverage of Protocol No. 2 of the Agreement, the Protocol concerning processed agricultural products, but these have not led to any results. I do not think it isan exaggeration to say that, so far, the provision in Article 15 of the Agreement stating that the parties are ready to foster the harmonious development of trade in agricultural products to which the Agreement does not apply, has remained a dead letter.
Different from the Rome Treaty and the Stockholm Convention, the Free Trade Agreements do not contain any provisions on exportrestrictions, public procurement or establishment. In spite of discussions on some of these matters, both by several EFTA countriesduring the negotiations and later, the regime has remained unchanged. This means, inter alia, that the trade regime under the FreeTrade Agreements is less liberal for those areas than under the EFTAConvention or the Rome Treaty. This has led to the somewhat awkward situation that, for example, in the fields of public procurement and establishment, most EFTA countries continue, on a reciprocal basis, in principle to apply the EFTA provisions with their former EFTA colleagues, Denmark, Portugal and the United Kingdom.
Nor do the FTAs contain any provisions on invisible transactions and transfers or on economic and financial policies as are contained inthe Stockholm Convention.
The absence of an appropriate dispute settlement procedure, which during the negotiations was asked for by Sweden and Switzerland, may not, so far, have caused any greater difficulties. Switzerland has, however, continued to press the EC for a solution to this question.
The so-called evolutionary clause contained in all Free Trade Agreements except for that of Finland was, at the time, considered as an expression for the developable character of the Agreements. I will come back to this particular provision somewhat later, but would already now say that it would seem that the extended co-operation that has taken place over the years between the EFTA countries and the Community also could have taken place without this clause. It seems rather that the development of this bilateral co-operation reflects the priorities at any given moment within the EFTA countries and the Community. Initially, this clause probably served the purpose of providing a basis for launching further co-operation ideas but it can hardly be said that it has played a major role for this co-operation.The fact that this clause was not included in the Finnish FTA does notseem to have led to any particular limits to the Finnish co-operation with the Community beyond the Agreement.
Finally, as a more general remark, I would also like to mention the question of the implementation and interpretation of these Agreements by the Contracting Parties. It is in particular the question of theso-called direct effect of individual provisions of these Agreements that I am thinking of. After the decision in 1982 by the EC Court of Justice in the first Kupferberg case6, it has been pointed out from the EC side that there is a risk for a legal imbalance arising between the EC Member countries on the one hand, which are bound to respect the decisions by the EC Court of Justice, and the EFTA countries, with regard to which there so far seems to exist a rather uncertainsituation. In particular this concerns the possibilities for an individual to claim his rights under the Agreement by invoking the Agreementsin courts, a possibility which after the Kupferberg case exists in the EC, and not only for EC citizens but also for an EFTA trader. I think it is extremely important for the EFTA countries to be aware of thisdifference and its impact upon the possibilities of extending the scope of co-operation between them and the Community.
(b) Specific provisions
The rules of origin
I will then continue and, in the following, briefly comment more specifically upon a few of the provisions of the Free Trade Agreements. Article 11 concerns the rules of origin which are laid down inProtocol No. 3 to the Agreement. If the Swedish Government, which was the only one of the remaining EFTA Governments that had asked for a customs union agreement with the Community, had succeeded in its efforts, no origin rules would have been necessary in trade between Sweden and the Community. A cumbersome, costly and bureaucratic procedure for the traders and the customs could thus have been avoided. Since the Free Trade Agreement solution meant that each EFTA country as well as the Community retained its national external tariffs towards third countries, a system of origin rules had to be devised. This was necessary in order to avoid possible trade deflections through imports from third countries entering the area by the country with the lowest external tariff and then circulating freely within the area.
However, in addition, the Community insisted that the Free Trade Agreements of the EFTA countries should be bilateral with each of the EFTA countries. The formally bilateral character does not acknowledge the existence of EFTA as a group, although the Free Trade Agreements are identical and any change in them would have to bemade for all of them. The consequence of this has been, inter alia, that an EFTA exporter is not able to cumulate, for the purpose of calculating the origin percentage in trade, inputs from other EFTA countries.On the other hand, a Community trader has this possibility to cumulate freely within all twelve countries.
In spite of very strong pressures from the EFTA countries for many years it has not been possible to change the origin rule system. This does not only seem to be in clear contradiction to the philosophy of the already mentioned EFTA-EC Luxembourg Declaration and later declarations by the EC Council, but it also discriminates the EFTA traders when they export to the EC.
Quantitative restrictions on imports and measures having equivalent effect
The next Article that I would like to address is an Article which probably has not been given very much attention on the EFTA side, although the corresponding Article in the Rome Treaty has been perhaps one of the most important vehicles for the achievement of the goal of the free movement of goods. The Article I have in mind is
Article 13. This is the Article which prohibits quantitative restrictionson imports and measures having equivalent effect in trade between the Community and each of the EFTA countries. When I say that this Article probably has not been given very much attention from the EFTA side, I do not mean that any of the EFTA countries intentionally would ignore the Article or violate it. I think it is well honoured in particular as far as quantitative restrictions on imports are concerned. My question mark rather concerns the part dealing with measures having equivalent effect to quantitative restrictions.
This Article was clearly inspired by, and is to its content and wording also very close to, its most famous counterpart in the EC, Article 30 of the Rome Treaty. As the latter Article should be read inconjunction with especially Article 36 of the Rome Treaty, Article 13of the FTAs should be read together with Article 20 of the FTAs.7 Taking into account the important role for the free movement of goodsin the EC played by the vast case law (cf. for instance the Cassis de Dijon case)8 regarding the interpretation of Articles 30—36 of the Rome Treaty, which by far exceeds the scope of the corresponding provisions of the GATT, it is surprising that these very similar Articles of the FTAs have not given reason for more attention and discussion in or among the EFTA countries or between the EFTA countries and the EC. It would also seem that those provisions have more or less been overlooked as a possible instrument in the fight against non-tariff barriers to trade and the tendencies to increased protectionism. Especially, in view of the objective set for the creation of the European Economic Space it would seem necessary to make a further examination of the questions related to the direct effect of those provisions and to what extent the interpretation there of should be similar to or different from Articles 30 and 36 of the Rome Treaty.
The rules ofcompetition
The competition rules of the FTAs are contained in Article 23 and are worded in a way similar to Articles 85 and 86 of the Rome Treaty. These were probably the provisions of the FTAs that already at a nearly stage were most noticed and discussed among lawyers on the EFTA side. Paragraph 1 deals, firstly, with anti-competitive practices between undertakings which, as their object or effect, prevent, restrictor distort competition as regards the production of or trade in goods. Furthermore the provision deals with abuse of a dominant position of
market power and finally with public aids distorting or threatening to distort competition by favouring certain undertakings or the production of certain goods. All such practices are considered incompatible with the proper functioning of the Agreement in so far as they may affect trade between the Community and the individual EFTA country. These provisions correspond to similar provisions in the EFTA Convention.
With regard to the interpretation of these provisions, the Community declared that in the context on the autonomous implementation of this provision it would assess any practices contrary to the Article on the basis of criteria arising from the application of the rules of Articles 85, 86, 90 and 92 of the Rome Treaty. This statement did not provoke any opposition from the side of the EFTA countries.9 As far as Sweden is concerned, it was stated in the Bill to the Swedish Parliament for the approval of the Free Trade Agreements that the application of the rules of the Rome Treaty in this field showed that the basic view of the Community on restrictions to competition in all main parts coincided with the view of Swedish law.10
It would be interesting to examine somewhat further the role played by Article 23 in the light of the intentions of the Contracting Parties when this Article was negotiated. In practice, the Community institutions have continued as before their practice of applying the principle of economic unity and the effects doctrine in their application of Articles 85 and 86 directly to EFTA enterprises doing business with orwithin the Community. In reality, all EFTA companies which are engaged in activities which have an effect upon trade within the Community have to observe Community competition law to the same extent as their Community competitors. It does not seem that Article 23 has been invoked either in the EC or in the EFTA countries when anti-competitive behaviours by EC or EFTA companies have been challenged.11
From the wording of this provision, it could hardly be imagined that it would be one of those which could be considered as having direct effect. To me it would rather seem that through this provisioneach Contracting Party has in principle agreed to the other Contract-
ing Party being free to take action against anti-competitive behaviours having effect on his market. At the same time, however, it would also seem to be right to say that Contracting Party A on the basis of this provision would be entitled to request Contracting Party B to stop anti-competitive behaviours originating in country B but having effectin country A.
A more in-depth analysis and evaluation of this provision and the implementation there of would probably be needed in the context of a further developed EFTA-EC co-operation in this field and in particular in the context of the problems experienced by EFTA industries with regard to EC anti-dumping measures.12
Dumping
Article 25 deals with dumping and it is not my intention here to go into any detail. I would just like to say that personally I find the application of anti-dumping measures between so closely integrated tradingpartners as the EFTA countries and the European Communities to beout of date. Since in the Customs union of the EC antidumpingmeasures only can be undertaken against imports from a third country but not against imports from another EC country, it is clear that the present situation allows for a discrimination of EFTA traders operating in the Community. They are not allowed to engage in pricecompetition to the same extent as their EC competitors, the behaviour of which only falls under the competition rules in Articles 85 and 86 of the Rome Treaty. Needless to say, the Swedish clog manufacturers whose exports of wooden clogs in 1985 and 1986 became subject to antidumping measures would today have been free to compete in the European market with their Danish colleagues, had the Swedish Government in 1972 achieved its objective to negotiate a customs union agreement with the EC.
The Joint Committee
The provisions laying down the administrative arrangements for these Agreements are Articles 29—31 which deal with the Joint Committee. As mentioned earlier, at least from the Swedish13 and Swiss side, there was, during the negotiations, expressed a wish to have some kind of dispute settlement procedure for possible cases concerning the inter-
pretation and application of the Agreements. This was, however, not acceptable to the Communities, who feared that to some extent anarbitration procedure might run counter to the principle of the independent decision-making power of the Communities. One such example seems to have been the competition rules where the Communities unilaterally delivered interpretative statements. It is clear that the setting up of a dispute settlement procedure could result in decisionsby an arbitration tribunal which could lead to a development where the rules of competition in the Free Trade Agreements might develop in a way different from the case law of the EC Court of Justice.
However, it would seem that this line of argument would have lost some weight after the decisions of the EC Court of Justice in thePolydor and Kupferberg cases,14 where one conclusion was that it would not automatically be possible to transpose the interpretations of EC case law to corresponding provisions in the FTAs.
Furthermore, it should be mentioned that the Communities not only in several association agreements (for instance, the Association Agreements with Greece and with Turkey) but also in other agreements, for instance, in a co-operation agreement Euratom-Switzerland (O.J. L 242/6 of 4.9.78), in the EEC-Swiss Insurance Agreement (not yet in force) and in an EEC-Sweden fishing agreement (O.J. L226/6 of 29.8.80), have accepted independent dispute settlement procedures in case the parties would not be able to settle a dispute themselves. In this context in particular the procedure contained inthe Association Agreement with Greece seems quite interesting.
Admittedly, over the years there does not seem to have been a great number of disputes arising between the Community and the EFTA countries regarding the interpretation or application of the Free TradeAgreements. However, this is not always easy to find out, since no official reports on Joint Committee meetings are available. The only one really to know this would be the EC Commission, representing one of the parties to all those agreements. The fact that the Joint Committee is more of a political than a judicial body which only can act by mutual agreement might also have lead parties from bringing up more legal disputes there.
However, a few such cases could be mentioned here. One arose in 1975 when the Swedish Government, with reference to the provision of Article 21 (c) of the Free Trade Agreement, introduced quantitativerestrictions on all imports of shoes into Sweden, including such im-
ports from the Community and the EFTA countries. This led to quite negative reactions both from the Community side and from the EFTA countries. The Community considered that the Swedish measures violated the Free Trade Agreements and thought that Sweden, instead, should have invoked Article 26 of the Agreement concerning serious disturbances in any sector of the economy. Under that Article of the Agreement, however, the introduction of measures would followo nly after consultations between the parties.15
Other cases of disagreement or disputes between the parties of the FTAs have risen, for instance, regarding the procedures to be taken in anti-dumping cases. It has in particular been the interpretation of Article 27(c) and the obligation to hold consultations with the other parties that has been discussed. From the side of the EFTA countriesit has been maintained that the Article provides for a more far reaching and in particular more early consultation procedure than the Commission has been prepared to accept.
I think these few examples, and there are certainly more, is evidence enough that the absence of a dispute settlement procedure inthe FTAs is regrettable. For the EFTA country concerned it would seem quite important to have an independent procedure for settlement of disputes on the interpretation of the FTAs. It is not only that each of them economically is much weaker than the EC. Also the fact that the EC Court of Justice can and does interpret, on behalf of the whole Community, these Agreements binds the position of the Community in a way that increases the imbalance between the parties infavour of the Community side.
The evolutionary clause
I have already briefly mentioned the evolutionary clause, Article 32,and somewhat questioned the practical importance today of thatprovision. Of the EFTA countries that, in July 1972, concluded theirnegotiations with the Community, Sweden was the one that arrived atthe most farreaching formulation of this evolutionary clause. In particular, it is worth while noting the last sentence of paragraph 1 whichwas not contained in any of the other FTAs. In particular the formulation that the recommendations by the Joint Committee "may aim atthe attainment of concerted harmonization" is interesting in thiscontext, since it seems to imply a more far-reaching co-operation.While the Finnish FTA does not contain any evolutionary clause, the
FTA negotiated with Norway after the referendum in September 1972 contains the same evolutionary clause as the Swedish FTA. It may finally be added that the Free Trade Agreement between the EEC andIsrael contains exactly the same evolutionary clause as the one contained in the Austrian, Icelandic and Swiss FTAs.
In spite of the seemingly high ambitions from the side of the EFTA countries and the fact that some times you in EFTA countries now and then hear references to the evolutionary clause as the means to achieving an extended and deepened co-operation with the EC, itremains still to be proved that the "evolutionary clause" has a prominent role to play.
In summing up this part dealing with the experiences of the FTAs, I would like to underline the following. The few somewhat critical views that I may have expressed must not be misunderstood. In my view these Agreements have worked remarkably well. They have led to the creation of the world's largest free trade area and a development ofeconomic relations which probably is far better than even the negotiators ever had imagined. The FTAs provided smooth solutions to the problems that faced the remaining EFTA countries and Denmark andthe United Kingdom when the two latter countries acceded to the Community. But they also solved the problems resulting from thedivision of the European market that prevailed during the whole of the'sixties.
The experience of the FTAs provides thus an excellent and promising example for a successful further development of the EFTA-ECrelations.
Problems
There is a saying that solving one problem means the creation of a new one. This saying might also be applied to the FTAs. Through their successful solving of the problems that were facing the West European markets at the beginning of the 'seventies they have drawn attention to the importance of providing a good legal basis for close,lasting and intensive relations between the EFTA countries and the Community.
In order to address the question of the possible problems I would like to substitute "problems" by "future", and here I would like to address two main questions. The first one is the question of what liesahead?, or more precisely: which are the purposes of the EFTA-EC cooperation in the years to come? The second question to be addressed would then be what tools will be needed to meet these purposes? Will the FTAs suffice? Or will they have to be amended, supplemented or
replaced by other instruments, including changes in the organizational setup?
(a) The dynamic European Economic Space (EES)
The answer to the first question would seem to lie in three letters, EES, the European Economic Space. The notion of the creation of a dynamic European Economic Space appeared first in the Ministerial declaration from the Luxembourg meeting of EC and EFTA Ministers on 9 April 1984.
What did these Ministers mean by the creation of a dynamic European Economic Space? The EFTA countries are at present internally examining the matter of an EFTA conception of the EES and ofcourse I cannot prejudge the outcome there of. Let me just as anassumption for the following state as my own personal belief that a"homogeneous and dynamic European Economic Space"16 must as one of its main prerequisites have the creation of as identical conditions for economic operations in all these eighteen countries as possible.
Already in the Luxembourg Declaration the EFTA and EC Ministers identified a large number of areas for further co-operation between their countries. This co-operation has during the years that have elapsed, in a very informal way, developed into a great number of various fields. Some of them concern matters which are already covered by the Free Trade Agreements, for instance, rules of origin,anti-dumping practices and State aids. Others, such as technical barriers to trade, quantitative export restrictions, research and development, environment, education, intellectual property rights or trade in services, do not fall within the scope of the Free Trade Agreements.
The first two concrete results of such expert work between the EC and EFTA experts are also the first two multilateral agreementsbetween the EFTA countries, on the one side, and the EC, on theother side. The Agreements are the Convention on the Single Administrative Document and the Convention on a Common Transit Procedure.17 From the negotiation of these two Conventions one can draw two conclusions. The first is that the creation of the European economic space will require further instruments besides the Free TradeAgreements. Secondly, for practical but probably also for political reasons it will in many, perhaps most cases probably be necessary for
the EFTA countries to carry out such negotiations in a multilateral fashion. Such a multilateral appearance should be open to all EFTAcountries but would perhaps in all cases not necessarily have torequire from the outset a participation of all of them.
In talking about the definition of the European economic space one should, of course, also bear in mind the EC White Paper on the completion of the internal market, which was adopted by the ECStates in 1985 and lays down a very detailed action programme for the completion of the internal market until the end of 1992. The presentation of this programme and the clear political ambitions on the ECside has of course played a very important role also for the increased co-operation between the EFTA countries and the Community. For the EFTA countries it is more easy now to imagine what in reality acompleted internal market in the Community would mean for themand their economies and to draw the consequences in the case that they on their side would not try in parallel those developments.
In concluding this first question regarding the future, it must first of all be assumed that the EFTA Governments and the Community, in their repeated declarations regarding the creation of a dynamic European Economic Space, are serious. 18 Secondly, we would have further to assume that the EFTA Governments are equally serious when they say that whilst they appreciate the Community's efforts to completethe internal market, they "stress the need for parallelism between this and other relevant Community policies on the one hand, and the evolution of EFTA-EC co-operation on the other, in order to secure for all the greatest possible benefits from a homogeneous and dynamic European economic space". The reference in this statement by EFTA Ministers in December 1986 in a response to an EC Council Declaration from September the same year to the work of the Community towards completing the internal market is a clear reference to the Community's White Paper programme.
(b) The tools to create the EES
(i) The legal framework
I would first like to put the question: How far will the present legal framework, i.e. the bilateral Free Trade Agreements, as supplementedby other bilateral or multilateral Agreements between the EFTA
countries and the EC, be able to serve as a basis for the creation of the dynamic European Economic Space?
The answer to this question depends of course upon how you define the European Economic Space. Since there does not yet seem to existany clear definition of this concept or of the objectives of the parties, I would like to limit myself to briefly outlining the various options that seem to exist.
The first possibility is obviously to use the present Free TradeAgreements. They have since their coming into force been supplemented by a great number of bilateral Agreements between the individual EFTA countries and the Communities regarding areas or questions of particular interest for the parties concerned. A great number of these Agreements concern trade in agriculture or fish butthere are also quite a number of other Agreements for instance in the field of research and development. The co-operation entered into between the EFTA countries and the Community under the general heading of the Luxembourg follow-up has already resulted in activities in fields both within and outside the present Free Trade Agreements. There is a quite obvious and considerable scope for extending the co-operation on the basis of the Free Trade Agreements both within existing and in new fields. It should, however, be kept in mind that an extension in a bilateral way of the co-operation between the EFTA countries and the EC beyond the actual scope of the Stockholm Convention would necessitate additional Agreements in EFTA. If not, the other EFTA countries would be kept outside the scope of cooperation entered into with the Community.
It is also quite clear that for certain subjects the most appropriate legal basis will be the negotiation of separate instruments between the EFTA countries and the Communities. We have already seen thecreation of two such Agreements, the two Conventions on the Single Administrative Document and on Transit mentioned earlier. Anotherone would be the Parallel Convention to the 1968 Brussels Conventionon the Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, which at present is being negotiated between the ECMember States and five EFTA countries.19
The reasons for particular Agreements in these fields are several. First of all, certain particular subjects would most suitably be dealt with in a separate form. Secondly, the negotiation of a multilateral Agreement between the EFTA countries, on the one side, and the ECon the other side, has two advantages. It provides first of all a
framework also for the regulation of the relations in these fields among the EFTA countries. One has to keep in mind that apart from the EFTA Convention there are hardly any other arrangements providinga common legal basis for the EFTA countries. It was also thanks to this common legal basis that it was possible for the EFTA countries tonegotiate the Free Trade Agreements with the European Community. Furthermore, the multilateral appearance of the EFTA countries has no doubt the effect of strengthening the EFTA position vis-à-vis the Community which also as seen from the Community side would seem desirable and practical. Finally, to the extent that this co-operation is based upon an already existing Community instrument it might bepreferable also to create a separate EFTA-EC instrument.
The question is sometimes raised whether there would be a need to replace the Free Trade Agreements by a new treaty between the EFTA countries and the Communities. In my view, a new joint treaty would be called for if the parties would like to take up the old Swedish wish of creating a customs union, an idea which, by the way, also lately has been launched by various persons, in particular in Switzerland and Austria.20 Whether there otherwise in a short term perspective would be any such need to have a complete new treaty seems more unclear. However, the provision of some joint arrangement or "umbrella" for the Free Trade Agreements might be worth considering and I will come back to that somewhat later on.
(ii) The institutions
I have already mentioned that in my view within the question of instruments would also fall the question of the institutional or organizational setup.
The FTAs are bilateral Agreements between each individual EFTAcountry and the Community. Before the SAD and Transit Convention there has not existed any multilateral legal instrument between theEFTA countries and the Community. The relations between theEFTA countries and the Communities have, during the years, been dealt with bilaterally until the Luxembourg meeting in 1984. That was the first occasion where the EFTA countries also formally appeared in a multilateral context with the Community.
During the years that have elapsed since, the follow-up of the Luxembourg meeting has led to the informal establishment of a highlevel contact group composed of High Officials from the EFTA coun-
tries and the EC Commission. That group, the creation of which rather might be considered as based upon some kind of gentleman's agreement, has so far met twice a year, normally in November and in May. The High Officials have in principle carried out their work through establishing mandates for co-operation between experts from both sides. At present, some twenty such mandates exist.
In addition to the meetings of the High-Level Contact Group, there has also developed a practice that the EFTA Ministers at the spring Ministerial meeting each year, meet with the EC Commissioner in charge of external relations. At these meetings one reviews the cooperation and gives further guidelines for the co-operation.
In particular, the desire from the EFTA side to achieve this development in parallel with the completion of the internal market in theCommunity would, however, seem to require a far stronger decisionmaking procedure and a strengthening of the organizational and institutional instruments than so far has been at hand. Until the endof 1992 there are less than five years.
First of all, internally on the EFTA side, I think one should consider a strengthening of the EFTA structure. So far, EFTA formally only deals with internal EFTA matters directly related to the operation of the Stockholm Convention. These are the only matters which formallyare on the Agenda of the EFTA Council, which is the only decisionmaking body of the Association. In practice, however, the work in EFTA today can be said to be between 80 and 90% directly related to the co-operation between the EFTA countries and the European Communities. The discussion of these matters is still, however, completely informal. It is actually only on the occasion of Ministerial meetings twice a year that items concerning the co-operation with the European Community appear on the Council's Agenda.
In an article in the Finnish journal "Ekonomiska Samfundets Tidskrift" (No. 4/86, pages 201 and the following) Mr. B.G. Eriksson, former Director of Trade Policy Affairs in the EFTA Secretariat, has addressed these questions. In his view the role of EFTA must be redefined. It would be necessary in a much more clear way than before to make EFTA a common platform for the co-operation of the six EFTA countries with the Community. EFTA ought, in other words, to be transformed from a free trade organization to a common cooperation body for the negotiations between the EFTA countries and the EC.
As Mr. Eriksson points out, it is also true that the Community nowadays seems more to prefer to deal with the EFTA countries asone united group instead of having to deal individually with six different countries.
Personally, I find Mr. Eriksson's ideas quite interesting. It is clear that such a change of the role of EFTA would necessitate also formal and organizational changes of the EFTA Convention, whereby one would in a clear way also bring within the scope of the Convention matters regarding negotiations with the Community. One would, however, also have to create an appropriate machinery for the working out of joint EFTA positions. Other changes to the EFTA Convention might also be necessary.21
As regards the co-operation between the EFTA countries and the Community, it would seem clear that in order to meet the needs of the EES, it would also have to have a legal basis. The High-Level Contact Group has so far been able to develop the co-operation in quite a number of fields but it seems that the lack of a proper legal basis in the long run will make the achievement of the necessary results too cumbersome and slow. It should, therefore, in particular taking into account the timetable for the completion of the internal market by the end of 1992, be obvious to the EFTA countries and the Community that they ought to consider how to improve the forms for organizing this co-operation. It may be that some kind of joint body in which all the EFTA countries and the Community could participate and take decisions would be one solution.
As mentioned above the successful functioning of the FTAs has put us in front of these new problems or, as they rather should be seen, challenges. It is obvious that not only the institutional aspects but also questions regarding the enforcement and interpretation of new arrangements in a mutually satisfactory way are of such an importance that in depth legal studies both in the EC and on the EFTA side are called for.22
Annex: The Free Trade Agreements with the enlarged European Communities signed by the six EFTA countries
Although negotiated bilaterally, the bulk of the Agreements with the EEC is identical and they share many Artieles in common. It has therefore been thought most convenient to present the texts in theform of a "Master" Agreement, noting any deviations from the standard text in the case of particular countries. In this way the reader may know the complete text of each of the six Agreements.
For some countries, additional Articles have been included in the Agreements, or Articles have been omitted. These differences are noted at the appropriate place. The numbering of the Articles is that ofthe Swiss Agreement, but for the above reason this number can not be taken automatically to correspondwith that in other Agreements, to which direct reference must be made in case of need to quote aparticular Article by number.
Except where a note indicates a difference in the text of one or other of the Agreements, the mention of Switzerland throughout the text of this "Master" Agreement is of course replaced by the name ofeither Austria, Finland, Iceland, Norway or Sweden in their Agreements.
Since their entry into force, the Agreements and their Annexes have been amended by
— the supplementary Protocol of 29th May 1975, concerning the non-accession of Norway to the EC;
— decisions of the Joint Committees;
— agreements by way of exchange of letters.
The Protocols to the Agreements form part of the Agreements but are not reproduced in this Annex.
The headings given in this text are not in the Agreements. They have been inserted to help the readerfind the Articles dealing with some particular aspects of the Agreement.
"Additional protocols" were also concluded upon the accessions of Greece (1981) and Portugal andSpain (1986) to the EC.
The Free Trade Agreements
The European Economic Community, of the one part, and The Swiss Confederation, of the other part,
Desiring to consolidate and to extend, upon the enlargement of the European Economic Community, the economic relations existing between the Community and Switzerland and to ensure, with due regard for fair conditions of competition, the harmonious development of their commerce for the purpose of contributing to the work of constructing Europe,
Resolved to this end to eliminate progressively the obstacles to substantially all their trade, in accordance with the provisions of the General Agreement on Tariffs and Trade concerning the establishment of free trade areas.
Declaring their readiness to examine, in the light of any relevant factor, and in particular of developments in the Community, the possibility of developing and deepening their relations where it would appear to be useful in the interests of their economiesto extend them to fields not covered by this Agreement,
Have decided in pursuit of these objectives and considering that no provision of this Agreement may be interpreted as exempting the Contracting Par:ies from the obligations which are incumbent upon them under other international agreements, to conclude this Agreement:
Note:
The phrase "for the purpose of contributing to the work of constructing Europe" is omitted in the Agreement with Austria. ln the Agreement with Finland, Alinea 1 reads:
Desirous of contributing appropriate solutions to the economic problems facing Finland as a result of the enlargement of the European Economic Community and of developing the commerce between them, while retaining their autonomous power of decision and preserving, with due regard for fair conditions of competition, a satisfactory balance in trade.
Alinea 3 ("Declaring their readiness ...") is deleted.
Article 1 Objectives
The aim of this Agreement is:
(a) to promote through the expansion of reciprocal trade the harmonious development of economic relations between the European Economic Community and the Swiss Confederation and thus to foster in the Community and in Switzerland the advance of economic activity, the improvement of living and employment conditions, and increased productivity and financial stability,
(b) to provide fair conditions of competition for trade between the Contracting Parties,
(c) to contribute in this way, by the removal of barriers to trade, to the harmonious development and expansion of world trade.
Article 2 Products covered
The Agreement shall apply to products originating in the Community or Switzerland:
(i) which fall within Chapters 25 to 99 of the Brussels Nomenclature excluding the products listed in Annex I;
(ii) which are specified in Protocol No. 2 with due regard to the arrangements provided for in that Protocol.
Notes:
a) In the Agreement with Austria there is an additional Paragraph 2 which reads:
2. The Agreement shall replace the Interim Agreement between the European Economic Community and the Republic of Austria signed this same day.
b) In the Agreements with Finland and Norway, Article 2 (i) refers to "the Annex" rather than to "Annex I".
c) ln the Agreement with Iceland, Article 2 (ii) begins: which are specified in Protocols Nos. 2 and 6.
Article 3 Import duties: timetable for reduction
1. No new customs duty on imports shall be introduced in trade between the Community and Switzerland.
2. Customs duties on imports shall be progressively abolished in accordance with the following timetable:
(a) on 1 April 1973 each duty shall be reduced to 80 % of the basic duty;
(b) four further reductions of 20 % each shall be made on:
1 January 1974
1 January 1975
1 January 1976
1 July 1977.
Notes:
a) In the Agreement with Austria, Paragraph 2 reads as follows:
2. Without prejudice to the tariff reductions made under Article 2 (2) of the Interim Agreement between the European Economic Community and the Republic of Austriasigned this same day, customs duties on imports shall be progressively abolished inaccordance with the following timetable:
(a) on 1 January 1974 each duty shall be reduced to 60 % of the basic duty:
(b) three further reductions of 20 % each shall be made on:
1 January 1975
1 January 1976
1 July 1977.
As regards trade between Ireland and Austria, an initial reduction shall be made on 1 April 1973 to reduce each duty on imports to 80 % of the basic duty.
b) In the Agreement with Iceland, Article 3 (2) begins:
The Community as originally constituted and Ireland shall progressively abolish customs duties on imports in accordance with the following timetable: (identical with theone in the Master Agreement)
c) In the same Agreement there are two additional paragraphs which are identical with Article 5 in the Master Agreement.
d) The Agreement with Iceland then contains a separate article, Article No. 4 which reads:
1. On the dates indicated Iceland shall reduce customs duties on imports from the Community as originally constituted and from Ireland to the rates of the various basic duties applicable on 1 March 1970 specified below.
2. After 1 January 1974 Iceland shall continue to reduce customs duties in respect of Denmark and the United Kingdom in accordance with the timetable shown in paragraph 1.
Basic duties 2 4 5 10 12 15 20 25 30 351 April 1973 2 4 4 7 8 11 14 18 21 251 January 1974 0 3 3 6 7 9 12 15 18 211 January 1975 0 3 3 5 6 7 10 13 15 171 January 1976 0 2 2 4 5 6 8 10 12 141 January 1977 0 2 2 3 4 4 6 7 9 101 January 1978 00022345671 January 1979 0 0 0 2 2 2 2 2 3 31 January 1980 0000000000Basic duties 40 50 60 65 70 75 80 90 1001 April 1973 30 35 40 45 50 55 55 65 701 January 1974 24 30 35 40 40 45 50 55 601 January 1975 20 25 30 30 35 35 40 45 501 January 1976 16 20 24 25 30 30 30 35 401 January 1977 12 15 18 20 21 22 25 25 301 January 1978 8 10 12 13 14 15 16 18 201 January 1979 4 5 6 6 7 7 8 9 101 Janyary 1980 0 0 0 0 0 0 0 0 0Note:In the above table, which forms Article 4 (1) of the Ieelandic Agreement, the top line shows the variousrates of basic duties. The column below each rate shows the rate to which it is to be reduced at eachstage of the transitional period.
e) In the Agreement with Norway the date of lst April 1973 in paragrcph 2 a) shall read:... on the date of entry into force of the agreement ... (i.e. Ist July 1973)
Article 4 Fiscal duties
1. The provisions concerning the progressive abolition of customs duties on imports shall also apply to customs duties of a fiscal nature.
The Contracting Parties may replace a customs duty of a fiscal nature or the fiscal element of a customs duty by an internal tax.
2. Denmark, Ireland and the United Kingdom may retain until 1 January 1976 a customs duty of a fiscal nature or the fiscal element of a customs duty in the event of implementation of Article 38 of the "Act concerning the Conditions of Accession and the Adjustments to the Treaties" drawn up and adopted within the Conference between the European Communities and the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland.
Note:
The following Paragraph 3 appears only in the Agreement with Switzerland:
3. Switzerland may retain temporarily, while observing the conditions of Article 18, duties corresponding to the fiscal element contained in customs duties on imports of products specified in Annex II.
The Joint Committee provided for in Article 29 shall examine whether the conditions set out in the preceding subparagraph are being met, particularly where a change has been made in the amount of the fiscal element.
The Joint Committee shall examine the position with a view to the conversion of such duties into internal charges before 1 January 1980 or before any other date which itmight determine in the light of circumstances.
Notes:
a) In the Agreement with Iceland this Article is numbered Article 5 and contains an additional paragraph inserted between Paragraphs 1 and 2, which reads:
2. Iceland may temporarily retain, with due regard to the conditions of Article 19, customs duties of a fiscal nature on the products specified in Annex II.
When production is started in Iceland of a product of like kind to one of those listed in Annex II, the duty to which the latter product is subject must be reduced to the level which would have been reached if that duty had been reduced in accordance with the timetable contained in Article 4 (1) since the entry into force of the Agreement. If inrespect of third countries a customs duty lower than the duty of a fiscal nature isintroduced, the tariff reductions shall be made on the basis of the former duty.
Subsequent reductions shall be made in accordance with the timetable laid down inArticle 4(1).
Article 5 Basic duty levels
1. The basic duty to which the successive reductions provided for in Article 3 and in Protocol No. 1 are to be applied shall, for each product, be the duty actually applied on 1 January 1972.
2. If, after 1 January 1972, any tariff reductions resulting from the tariff agreements concluded as a result of the Trade Conference held in Geneva from 1964 to 1967 become applicable, such reduced duties shall replace the basic duties referred to in paragraph 1.
3. The reduced duties calculated in accordance wiht Article 3 and Protocol No. 1 shall be applied rounded to the first decimal place.
Subject to the application by the Community of Article 39 (5) of the "Act concerning the Conditions of Accession and the Adjustments to the Treaties" drawn up and adopted within the Conference between the European Communities and the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland, as regards the specific duties or the specific part of the mixed duties in the IrishCustoms Tariff, Article 3 and Protocol No. 1 shall be applied, with rounding to the fourth decimal place.
Notes:
a) For Iceland, see note (c) under Article 3.
b) For Norway, paragraph 3 reads:
The reduced duties calculated in accordance with Article 3 and Protocols Nos 1 and 2 shall be applied rounded to the first decimal place.
Subject to the application by the Community of Article 39 (5) of the "Act concerning the Conditions of Accession and the Adjustments to the Treaties" as regards the specificduties or the specific part of the mixed duties in the Irish Customs Tariff, Article 3 and Protocols Nos 1 and 2 shall be applied, with rounding to the fourth decimal place.
Article 6 Charges equivalent to duties
1. No new charge having an effect equivalent to a customs duty on imports shall be introduced in trade between the Community and Switzerland.
2. Charges having an effect equivalent to customs duties on imports introduced on or after 1 January 1972 in trade between the Community and Switzerland shall be abolished upon the entry into force of the Agreement.
Any charge having an effect equivalent to a customs duty on imports, the rate of which on 31 December 1972 is higher than that actually applied on 1 January 1972, shall be reduced to the latter rate upon the entry into force of the Agreement.
3. Charges having an effect equivalent to customs duties on impcrts shall be progressively abolished in accordance with the following timetable:
(a) by 1 January 1974 at the latest each charge shall be reduced to 60 % of the rateapplied on 1 January 1972;
(b) three further reductions of 20 % each shall be made on:
1 January 1975
1 January 1976
1 July 1977.
Notes:
In the Agreement with Austria,
a) Paragraph 3 of this Article begins:
3. Without prejudice to the reductions made under Article 2 (2) of the Interim Agreement between the European Economic Community and the Republic of Austria signed this same day, charges having an effect equivalent to customs duties on imports shall be progressively abolished in accordance with the following timetable (identicalwith the timetable in the Master Agreement):
b) In the same Agreement there is an additional sentence at the end:
As regards trade between Ireland and Austria, an initial reduction shall be made on 1 April 1973 to reduce each charge having an effect equivalent to a customs duty onimports to 80 % of the basic duty.
Article 7 Prohibition of export duties
1. No customs duty on exports or charge having equivalent effect shall be introduced intrade between the Community and Switzerland.
Customs duties on exports and charges having equivalent effect shall be abolished not later than 1 January 1974.
Notes:
a) The following Paragraph 2 appears only in the Agreement with Switzerland.
2. In the case of products listed in Annex III, the Contracting Parties may take, in
such manner as they shall determine, the measures they consider necessary to implement their supply policies.
b) In the Agreement with Iceland there is an additional Paragraph 2 of this Article which reads:2. Iceland may retain the system of export levy on fish products applicable on l January 1972 which is set out in Annex III.
Any changes must not alter the character or aims of the system. The Joint Committee shall be notified beforehand of any changes.
Article 8 Articles concerning Protocols 1, 2 and 3
Protocol No. 1 lays down the tariff treatment and arrangements applicable to certain products.
Article 9
Protocol No. 2 lays down the tariff treatment and arrangements applicable to certain goods obtained by processing agricultural products.
Article 10
1. In the event ofspecific rules being established as a result ofthe implementation of itsagricultural policy or of any alteration of the current rules the Contracting Party inquestion may adapt the arrangements resulting from this Agreement in respect of the products which are the subject of those rules or alterations.
2. In such cases the Contracting Party in question shall take due account of the interests of the other Contracting Party. To this end the Contracting Parties may consult each other within the Joint Committee.
Notes:
a) In the Agreement with Norway, paragraph 2, second sentence, reads:
To this end the Contracting Parties may consult each other within the Joint Committee, provided for in Article 29.
Article 11
Protocol No. 3 lays down the rules of origin.
Article 12 Reduction or suspension of duties
A Contracting Party which is considering the reduction of the effective level of its dutiesor charges having equivalent effect applicable to third countries benefiting from most favoured-nation treatment, or which is considering the suspension of their application,shall, as far as may be practicable, notify the Joint Committee not less than thirty days before such reduction or suspension comes into effect. It shall take note of any representations by the other Contracting Party regarding any distortions which might result therefrom.
Article 13 Quotas
1. No new quantitative restriction on imports or measures having equivalent effect, shall be introduced in trade the Community and Switzerland.
2. Quantitative restrictions on imports shall be abolished on 1 January 1973 and any measures having an effect equivalent to quantitative restrictions on import shall beabolished not later than 1 January 1975.
Note:
Paragraph 2 of this Article is replaced in the Agreement with Iceland by the following:
2. The Community shall abolish quantitative restrictions on imports on 1 January 1973 and any measures having an effect equivalent to quantitative restrictions on imports not later than 1 January 1975.
Iceland shall abolish quantitative restrictions on imports and any measures having an effect equivalent to quantitative restrictions on imports not later than 1 January 1975.
Article 14 Petroleum products
1. The Community reserves the right to modify the arrangements applicable to the petroleum products falling within headings Nos 27.10, 27.11, 27.12, ex 17.13 (paraffin wax, micro-crystalline wax, or bituminous shale and other mineral waxes) and 27.14 ofthe Brussels Nomenclature upon adoption of a common definition of origin for petroleum products, upon adoption of decisions under the common commercial policy for the products in question or upon establishment of a common energy policy.
In this event the Community shall take due account of the interest of Switzerland; to this end it shall inform the Joint Committee, which shall meet under the conditions set out in Article 31.
2. Switzerland reserves the right to take similar action should it be faced with like situations.
3. Subject to paragraphs l and 2, the Agreement shall not prejudice the non-tariff rules applied to imports of petroleum products.
Article 15 Trade in agriculture products
1. The Contracting Parties declare their readiness to foster, so far as their agricultural policies allow, the harmonious development of trade in agricultural products to which the Agreement does not apply.
2. The Contracting Parties shall apply their agricultural rules in veterinary, healthand plant health matters in a non-discriminatory fashion and shall not introduce anynew measures that have the effect of unduly obstructing trade.
3. The Contracting Parties shall examine, under the conditions set out in Article 31, any difficulties that might arise in their trade in agricultural products and shall endeavour to seek appropriate solutions.
Article 16
From 1 July 1977 products originating in Switzerland may not enjoy more favourable treatment when imported into the Community than that applied by the Member States of the Community between themselves.
Article 17
The Agreement shall not preclude the maintenance or establishment of customs unions, free trade areas or arrangements for frontier trade, except insofar as they alter the tradearrangements provided for in the Agreement, in particular the provisions concerning rules of origin.
Note:
In the Agreement with Iceland this Article is preceded by the following Article:
Protocol No. 6 lays down the special provisions applicable to imports of certain fish products into the Community.
Article 18 Internal taxes
The Contracting Parties shall refrain from any measure or practise of an internal fiscalnature establishing, whether directly or indirectly, discrimination between the products of one Contracting Party and like products originating in the territory of the other Contracting Party.
Products exported to the territory of one the Contracting Parties may not benefit from repayment of internal taxation in excess of the amount of direct or indirect taxation imposed on them.
Article 19 Payments
Payments relating to trade in goods and the transfer of such payments to the Member State of the Community in which the creditor is resident or to Switzerland shall be freefrom any restrictions.
The Contracting Parties shall refrain from any exchange or administrative restrictions on the grant, repayment or acceptance of short and medium-term credits covering commercial transactions in which a resident participates.
Note:
In the Agreements with Iceland the secondparagraph of this Article is omitted.
Article 20 Security and other exceptions
The Agreement shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, law and order or public security, the protection oflife and health of humans, animals or plants, the protection of national treasures of artistic, historic or archaeological value, the protection of industrial and commercial property, or rules relating to gold or silver. Such prohibitions or restrictions must not, however, constitute a means of arbitrary discrimination or adisguised restriction on trade between the Contracting Parties.
Article 21
Nothing in the Agreement shall prevent a Contracting Party from taking any measures:
(a) which it considers necessary to prevent the disclosure of information contrary toits essential security interests;
(b) which relate to trade in arms, munitions or war materials or to research, development or production indispensable for defence purposes, provided that such measures donot impair the conditions of competition in respect of products not intended forspecifically military purposes;
(c) which it considers essential to its own security in time of war or serious international tension.
Article 22
1. The Contracting Parties shall refrain from any measure likely to jeopardize the fulfilment of the objectives of the Agreement.
2. They shall take any general or specific measures required to fulfil their obligations under the Agreement.
If either Contracting Party considers that the other Contracting Party has failed to fulfil an obligation under the Agreement, it may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 27.
Article 23 Rules of competition
1. The following are incompatible with the proper functioning of the Agreement in so far as they may affect trade between the Community and Switzerland:
(i) all agreements between undertakings, decisions by associations of undertakings and concerned practises between undertakings which have as their object or effect the prevention, restriction or distortion of competitions as regards the production of ortrade in goods;
(ii) abuse by one or more undertakings of a dominant position in the territories of the Contracting Parties as a whole or in a substantial part thereof;
(iii) any public aid wich distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods.
2. Should a Contracting Party consider that a given practise is incompatible with this Article, it may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 27.
Article 24 Safeguard clauses
Where an increase in imports of a given product is or is likely to be seriously detrimentalto any production activity carried on in the territory of one of the Contracting Partiesand where this increase is due to:
(i) the partial or total reduction in the importing Contracting Party, as provided for in the Agreement, of customs duties and charges having equivalent effect levied on the product in question; and
(ii) the fact that the duties or charges having equivalent effect levied by the exporting Contracting Party on imports of raw materials or intermediate products used in the manufacture of the product in question are significantly lower than the corresponding duties or charges levied by the importing Contracting Party;
the Contracting Party concerned may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 27.
Article 25
If one of the Contracting Parties finds that dumping is taking place in trade with the other Contracting Party, it may take appropriate measures against this practice in accordance with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, under the conditions and in accordance with the procedures laid down in Article 27.
Article 26
If serious disturbances arise in any sector of the economy or if difficulties arise which could bring about serious deterioration in the economic situation of a region, the Contracting Party concerned may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 27.
Article 27
1. In the event of a Contracting Party subjecting imports of products liable to give rise to difficulties referred to in Article 24 and 26 to an administrative procedure, the purpose of which is to provide rapid information on the trend of trade flows, it shall inform the other Contracting Party.
2. In the cases specified in Articles 22 to 26, before taking the measures provided fortherein or, in cases to which paragraph 3 (d) applies, as soon as possible, the Contracting Party in question shall supply the Joint Committee with all relevant information
required for a thorough examination ofthe situation with a view to seeking a solution acceptable to the Contracting Parties.
In the selection of measures, priority must be given to those which least disturb the functioning ofthe Agreement.
The safeguard measures shall be notified immediately to the Joint Committee andshall be the subject of periodical consultations within the Committee, particularly with a view to their abolition as soon as circumstances permit.
3. For the implementation of paragraph 2, the following provisions shall apply:
(a) As regards Article 23, either Contracting Party may refer the matter to the Joint Committee if it considers that a given practise is incompatible with the proper functioning of the Agreement within the meaning of Article 23 (1).
The Contracting Parties shall provide the Joint Committee with all relevant information and shall give it the assistance it requires in order to examine the case and, where appropriate, to eliminate the practise objected to.
If the Contracting Party in question fails to put an end to the practise objected to within the period fixed by the Joint Committee, or in the absence of agreement in the Joint Committee within three months ofthe matter being referred to it, the Contracting Party concerned may adopt any safeguard measures it considers necessary to deal withthe serious difficulties resulting from the practices in question; in particular it may withdraw tariff concessions.
(b) As regards Article 24, the difficulties arising from the situation referred to in that Article shall be referred for examination to the Joint Committee, which may take any decision needed to put an end to such difficulties.
If the Joint Committee or the exporting Contracting Party has not taken a decision putting an end to the difficulties within thirty days of the matter being referred, the importing Contracting Party is authorized to levy a compensatory charge on theproduct imported.
The compensatory charge shall be calculated according to the incidence on the value of the goods in question of the tariff disparities in respect of the raw materials orintermediate products incorporated therein.
(c) As regards Article 25, consultation in the Joint Committee shall take place before the Contracting Party concerned takes the appropriate measures.
(d) Where exceptional circumstances requiring immediate action make prior examiniation impossible, the Contracting Party concerned may, in the situations specified in Articles 24, 25 and 26 and also in the case of export aids having a direct and immediate incidence on trade, apply forthwith the precautionary measures strictly necessary to remedy the situation.
Article 28
Where one or more Member States of the Community or Switzerland is in difficulties or is seriously threatened with difficulties as regards its balance of payments, the Contracting Party concerned may take the necessary safeguard measures. It shall inform the other Contracting Party forthwith.
Article 29 The Joint Committee
1. A Joint Committee is hereby established, which shall be responsible for the administration of the Agreement and shall ensure its proper implementation. For this purpose, it shall make recommendations and take decisions in the cases provided for in the Agreement. These decisions shall be put into effect by the Contracting Parties in accordance with their own rules.
2. For the purpose of the proper implementation of the Agreement the Contracting Parties shall exchange information and, at the request of either Party, shall hold consultations within the Joint Committee.
3. The Joint Committee shall adopt its own rules of procedure.
Article 30
1. The Joint Committee shall consist of representatives of the Community, on the onehand, and of representatives of Switzerland, on the other.2. The Joint Committee shall act by mutual agreement.
Article 31
1. Each Contracting Party shall preside in turn over the Joint Committee, in accordance with the arrangements to be laid down in its rules of procedure.
2. The Chairman shall convene meetings of the Joint Committee at least once a year in order to review the general functioning of the Agreement.
The Joint Committee shall, in addition, meet whenever special circumstances so require, at the request of either Contacting Party, in accordance with the conditions to be laid down in its rules of procedure.
3. The Joint Committee may decide to set up any working party that can assist it in carrying out its duties.
Article 32 Evolutionary clause
1. Where a Contracting Party considers that it would be useful in the interests of the economies of both Contracting Parties to develop the relations established by the Agreement by extending them to fields not covered thereby, it shall submit a reason edrequest to the other Contracting Party.
The Contracting Parties may instruct the Joint Committee to examine this requestand, where appropriate, to make recommendations to them, particularly with a view to opening negotiations.
2. The agreements resulting from the negotiations referred to in paragraph l will be subject to ratification or approval by the Contracting Parties in accordance with their own procedures.
Notes:
a) The Agreement with Finland does not contain an evolutionary clause.
b) In the Agreement with Norway and Sweden, the first two lines of this Article read:
1. Where a Contracting Party considers that it would be useful in the common interest of both Contracting Parties ...
b) In the Agreement with Norway and Sweden, an additional sentence is added at the end of Paragraph 1, reading:
These recommendations may, where appropriate, aim at the attainment of a concerted harmonization, provided that the autonomy of decision of the two Contracting Parties is not impaired.
Article 33
The Annexes and Protocols to the Agreement shall form an integral part there of.
Note:
This Article, in the Agreement with Finland—where it is numbered 32—and Norway, reads:
The Annex and Protocols ...
Article 34 Denunciation
Either Contracting Party may denounce the Agreement by notifying the other Contracting Party. The Agreement shall cease to be in force twelve months after the date of such notification.
Note:
This Article in the Agreement with Finland, where it is numbered 33, reads:
Either Contracting Party may denounce the Agreement by notifying the other Contracting Party. The Agreement shall cease to be in force three months after the date of such notification.
The Contracting Parties may, however, continue to apply the Agreement for a period not exceeding nine months from the date on which the Agreement actually terminates.
Article 35 Territorial application
The Agreement shall apply, on the one hand, to the territories to which the Treaty establishing the European Economic Community applies upon the terms laid down inthat Treaty and, on the other, to the territory of the Swiss Confederation.
Article 36
This Agreement is drawn up in duplicate, in the Danish, Dutch, English, French, German and Italian languages, each of these texts being equally authentic.
This Agreement will be approved by the Contracting Parties in accordance with their own procedures.
It shall enter into force on 1 January 1973, provided that the Contracting Parties have notified each other before that date that the procedures necessary to this end have been completed.
After this date this Agreement shall enter into force on the first day of the second month following such notification. The final date for such notification shall be 30 November 1973.
The provisions applicable on 1 April 1973 shall be applied upon the entry into force of this Agreement if it enters into force after that date.
Note:
The date of entry force of the Agreement with Norway is 1st July 1973: the last alinea is not contained in this agreement.