WORLD TRADE  
ORGANIZATION  WT/REG85/R/B/4 
G/L/805 23 November 2006 
 
(06-5664) 
Committee on Regional Trade Agreements Original: English 
  
 
EUROPEAN FREE TRADE ASSOCIATION 
 
Biennial Report on the Operation of the Convention
 
 
Communication from the EFTA States 
 
 
 The following communication, dated 21 November 2006, is being circulated at the request of 
the EFTA States.  It is organized  in accordance to the Standard Format for Information on Regional 
Trade Agreements (WT/REG/W/6). 
 
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 In accordance with the guidelines approve d by the Council For Trade in Goods,
1 as 
recommended by the Committee on Regional Trade Agreements,2 the European Free Trade 
Association (EFTA) hereby submits its periodical  report on the operation of the EFTA Convention 
(Convention).  The last such report was issued on 6 September 2004.3  The EFTA Secretariat 
publishes annual reports, which are made av ailable on the EFTA Secretariat web page.4  T h e  
web page also provides comprehensiv e information on EFTA and its activities.5 
 
 In the reporting period (September 2004 to August 2006), the EFTA Council, responsible for 
the Vaduz Convention, updated the Convention on four occasions to reflect legislative developments 
in the EEA Agreement and the Swiss-EU agreemen ts.  A list of the amendments made to the 
Convention since its entry into force on 1 June 20 02 is set out in the Annex to this report.  
  I. BACKGROUND INFORMATION ON THE AGREEMENT 
1. Membership And Dates Of Signature, Ratification And Entry Into Force 
 Since 1 January 1995, the European Free Trade Association consists of Iceland, 
Liechtenstein, Norway and Switzerland.
6  In June 1999, EFTA Ministers decided to update the 
EFTA Convention of 1960 in response to an invitatio n by Switzerland to extend to the EFTA partners 
the same level of integration as the one achie ved under its bilateral agreements with the 
European Union signed on 21 June 1999.  The new Vaduz Convention entered into force on 1 June 2002.  The EFTA Convention regulates th e preferential trade relations between the 
Member States and provides the legal fr amework for EFTA as an organisation. 
                                                     
 
1 G/L/286. 
2 WT/REG/4. 
3 WT/REG85/R/B/3 - G/L/685. 
4 http://secretariat.efta.int/W eb/Publications/AnnualReport/ 
5 http://secretariat.efta.int/  
6 For information on previous membership, dates of signature, ratification, entry into force and 
withdrawal, reference is made to the biennial report of 28 May 1999 (WT/REG85/R/B/1). WT/REG85/R/B/4 
G/L/805 Page 2 
 
 
  4. Trade Data 
 According to the statistical sources available to the EFTA Secretariat,
7 total merchandise 
trade among the four EFTA States (imports plus exports) increased from 1.74 billion USD in 2000 to 
2.59 billion USD in 2005, representing an increase ar ound 49% in nominal value terms.  In 2000, 
intra-EFTA trade accounted for around 0.67% of the EFTA States’ total trade with the world. The 
share of intra-EFTA trade as compared to their trade with the rest of the world has remained fairly 
stable between 2000 and 2005 – varying between 0.61% (in 2005)  and 0.71% (in 2001);  see table 
below.   
 By comparison, the EFTA States’ trade with th e world (imports plus exports) increased from 
261.4 billion USD to 424.2 billion USD between 2000  and 2005, a 62% rise in nominal terms. 
 Trade between the EFTA States and the 25 Member States of the EU expanded from 
184 billion USD in 2000 to 310 billion USD in 2005, representing an increase around 68 per cent in 
nominal value terms.  EFTA imports  from the EU increased by 65% between 2000 and 2005 in 
nominal terms, while EFTA’s exports  to the EU increased by 72% over the same period, partly also 
reflecting changes in world commodity prices.  The share of the EFTA States’ trade with the EU as 
compared to their trade with the world increased  slightly, from 70.4% in 2000 to 73.1% in 2005. 
 More detailed EFTA trade statistics are ava ilable at the EFTA Secretariat’s website:  
http://secretariat.efta.int/Web/ExternalR elations/TradeStats/trade_statistics , as well as in the latest 
issue of the Secretariat’s annual publication: http://secretariat.efta.int/Web/Publications/  
this_is_EFTA/note/  
 
II. TRADE PROVISIONS 
 Limited legislative development has taken pl ace since the last biennial report of 2004. 
 
3. Rules Of Origin 
 In 2005, the EFTA Council adopted a decisi on amending Annex A to  the EFTA Convention 
on Rules of Origin, in order to adapt it to the pa n-Euro-Mediterranean cumulation model, which is an 
extension of the pan-European cumulation model.  This system is based on a preferential network of 
                                                      
7 Source for merchandise trade statis tics:  Global Trade Atlas (GTI). 
2000  2001 2002 2003 2004 2005  % Change 
2005/2000
World  261,438  262,378 270,574 310,676 367,759 424,171  62
EU-25  184,008  188,052 194,030 226,053 268,126 309,927  68
Intra EFTA-4  1,743 1,850 1,821 1,947 2,351 2,592 49
Intra-EFTA as % of 
trade with the world  0.67 0.71 0.67 0.63 0.64 0.61 
Trade with EU-25 
as % of trade with the world
 70.38 71.67 71.71 72.76 72.91 73.07 EFTA States' merchandise trade with the world, EU-25 and intra-EFTA,  
2000-2005
Partner Country  Imports plus exports, millions United States Dollars  
Source :  GTI, Global Trade Atlas WT/REG85/R/B/4 
 G/L/805 
 Page 3 
 
 
  agreements, which provides for identical rules of or igin and permits an unlimited use of components 
originating in the zone (diagonal cumulation).  Par ties forming the zone are the EC, the EFTA States, 
Romania, Bulgaria, Turkey and countries which si gned the Barcelona Declara tion, namely Algeria, 
Egypt, Israel, Jordan, Lebanon, Morocco, Syria, Tunisia and the Palestinian Authority of the 
West Bank and Gaza Strip.  The Faroe Isla nds have joined the system as well.  
IV. OTHER 
 1. Air Transport  
 Amendments to the Appendix to Annex Q on Ai r transport were made in 2004 and 2006.  The 
Appendix contains European Community legislative act s which are relevant for the application of the 
Annex on Air transport.  This Appendix is regu larly updated in order to take into account 
developments under the Agreement on the European  Economic Area and the Bilateral Agreements 
between Switzerland and the European Communi ty.  In the two decisions of 2004 and 2006, 
references to some regulations  were deleted or inserted. 
 
2. Free Movement Of Persons 
 
 The EFTA Council adopted amendments to Appe ndix 2 to Annex K of the Convention in 
July 2004.  Annex K to the Convention relates to the Free Movement of Persons.  Its Appendix 2 
regulates the co-ordination of th e social security schemes among the EFTA States.  The EFTA States 
have decided to apply among themselves the Europ ean Community acts to which reference is made in 
the Appendix.  The list of acts which are referr ed to is regularly updated taking into account 
developments under the Agreement on the Euro pean Economic Area and under the Bilateral 
Agreements between Switzerland and the European Community. 
 
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 WT/REG85/R/B/4 
G/L/805 Page 4 
 
 
  Amendments to the Vaduz Convention since 2004
 
 
DC No. Adopted In force Title Subject 
2/2004 13.07.04 13.07.04 Amendments to Appendix 2 
to Annex K Coordination of Social 
Security Schemes 
3/2004 05.11.04 05.11.04 Amendments to the 
Appendix to Annex Q Air Transport 
2/2005 25.07.05 01.08.05 Amendments to Annex A Rules of Origin 
1/2006 03.02.06 03.02.06 Amendments to the 
Appendix to Annex Q Air Transport 
 
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