What it means
The three non-EU countries are members of the European Free Trade Association (EFTA), and they join the EU's single market through the EEA Agreement. This means that companies in those countries can sell into the EU, and EU companies can sell into them, under largely the same rules.
Switzerland is also an EFTA member but takes part through a separate set of bilateral agreements. To take part, the three countries adopt most of the EU's single market legislation.
These laws cover areas such as competition, consumer protection, company law and financial services. They do not formally vote on the EU rules, although they are consulted when new laws are drafted, and they must write the new rules into their own national law before they apply.
The EEA Agreement does not cover everything. The three countries are outside the EU's customs union, so goods may still face customs checks and rules of origin tests at the border.
They also have their own arrangements for agriculture, fisheries and trade policy, and they do not use the EU's common external tariff. Participating countries contribute financially to the EU's efforts to reduce economic differences between regions.
They also have to follow rules on state aid, which limit how far governments can support particular businesses. Some of these obligations are controversial at home, but they come as part of the package.
For a business, the agreement makes cross-border activity simpler. A company based in Norway, for instance, can offer financial services in EU countries using a "passport" arrangement, and it can hire workers across the area.
Finance teams should still check tax, customs and local regulations, because the EEA does not remove all differences. The EEA is a good example of partial integration.
It gives access to the single market without full EU membership, and some countries have studied it as a model. Its value depends on whether a business needs the full benefits that come with a customs union and shared trade policy, or can manage with market access alone.
In practice
Real-world examples.
Example
A Norwegian software company wins a contract with a customer in Germany. Under the EEA rules it can provide its services and employ staff there without a separate work permit for each employee. The finance team still has to register for payroll and social security in the country where the work is done.
Example
A fund manager in Liechtenstein markets an investment fund to investors across the EU. The fund follows EU financial rules and uses the passport arrangement to reach clients in several countries. The manager needs only one authorisation at home, instead of a separate licence in every market.
Example
An Icelandic seafood exporter sells to a French supermarket chain. The company handles customs paperwork and origin checks at the border, because the EEA does not make Iceland part of the customs union. The exporter budgets for broker fees and the occasional delay at the border, which are costs a German competitor would not face.
Case study
Seen in the real world.
Fjordline Components is a fictional engineering firm based in Norway. It supplies parts to manufacturers across the EU, and its managers worried that being outside the European Union would make sales difficult.
The finance director reviewed the situation and found that the EEA Agreement meant the firm's products faced the same technical standards as EU rivals and there were no tariffs on industrial goods. Customs declarations were still required, which added around 1% to administrative costs. The finance director also noted that Norway contributes to EU programmes, a cost that is paid by the state rather than by the company.
In this illustrative case, Fjordline decided to keep its position and invested in an automated customs system. The board noted that the arrangement gave most of the benefits of membership while leaving trade policy and agricultural rules in national hands. The decision was reviewed again two years later, and nothing in the numbers suggested a change.
Watch out
Common mistakes.
- Assuming EEA countries are EU members, when they take part in the single market without joining the Union.
- Thinking customs checks disappear, when the countries remain outside the EU customs union.
- Treating Switzerland as an EEA member, when its relationship with the EU is based on separate agreements.
Questions
People also ask.
Which countries are in the EEA?
The EU member states plus Iceland, Liechtenstein and Norway. The United Kingdom was part of it as an EU member but left the area when it left the Union.
Do EEA countries have a say in EU laws?
They are consulted when laws are drafted, but they do not vote on them. This is often described as accepting the rules without a seat at the table.
Does the EEA Agreement cover financial services?
Yes, firms can generally use passporting to offer services across the area, subject to the rules that apply.
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