European free trade zone - Essay Example

The seven member countries of EFTA including Austria, Denmark, the United Kingdom, Norway, Portugal, Sweden, and Switzerland were not willing to be the part of the European Economic Community at that time. Finland, Iceland, and Liechtenstein joined EFTA later. Under the EFTA treaty, the member countries made a partnership in order to form and manage a free trade zone, and they initially established such a region among themselves; the free trade area then eventually broadened to include the European Community.

By the formation of a European free trade zone, the member countries aimed “increased productivity, a more efficient use of resources, the expansion of economic activity and full employment as well as promoting financial stability and improving living standards” (“European free trade area”). Gradually, some countries left the EFTA and presently the EFTA comprises Iceland, Norway, Switzerland, and Liechtenstein. In 1992, EFTA made agreements with EEA (European Economic Area) to aid its members to join the European internal market freely.

These agreements contained specific provision regarding the preservation of social policy, consumer rights, environment, and company law and statistics. In addition, the agreement also included various provisions for the mutual cooperation of EEA-EFTA Member States in various areas such as researches and development, information technology, education, industrial operations, tourism, multimedia sector and civil protection (“European free trade area”). As Ranchev and Georgi point out, in Southeast Europe, seven countries including Albania, Croatia, Bulgaria, Bosnia and Herzegovina, Romania, Macedonia, and FR Yugoslavia signed a Memorandum of Understanding on 27th June 2001 for the establishment of a free trade zone in that area (1-13).

After the collapse of the Iron curtain, two free trade areas namely Baltic Free Trade Area (BAFTA) and Central European Free Trade Agreement (CEFTA) were formed so as to stabilize the countries under these areas for membership of the EU. However, the original members from both these areas left the agreements and joined EU after the enlargement of EU in 2004. CEFTA has spread its operations to Southern Europe by adding members from Western Balkans and Moldova regions. The EU not only operates as a free trade area but it engages in more widespread operations with its predecessor, the European Economic Community.

The EU offers services to EFTA members by sharing its single market through European Economic Area and it maintains provisions for making free trade agreements with most other European countries. Presently Europe includes three multi-lateral free trade areas in addition to the European Union which maintains a single market and one former-FTA. Crises to European Free Trade Zone The European free trade area has faced a large number of crises from the beginning of its history. Although, the free trade zone implementation process for Southeast Europe has been well structured, many economists opine that this trade liberalization process may result in adverse economic impacts.

Ranchev and Georgi strongly argue that the concept of free trade zone would raise potential threats to the sustainable economic growth of the