The European Economic Area (EEA) came into being on 1 January 1994 following an agreement between member states of European Free Trade Association (EFTA), the European Community (EC), and all member states of the European Union (EU). It allows these EFTA countries to participate in the European single market without joining the EU.
Switzerland is not part of the EEA. A referendum (mandated by the Swiss constitution) was held and rejected the proposal to join. Switzerland is linked to the European Union by the Swiss–EU bilateral agreements, with a different content from that of the EEA agreement.
The EFTA countries that are part of the EEA do not bear the financial burdens associated with EU membership, although they contribute financially to the European single market. After the EU/EEA enlargement of 2004 there was a tenfold increase in the financial contribution of the EEA States, in particular Norway, to social and economic cohesion in the Internal Market (€1167 million over five years).
EFTA countries do not receive any funding from EU policies and development funds.
The non EU members of the EEA have no representation in Institutions of the European Union such as the European Parliament or European Commission. In February 2001, Norwegian Prime Minister Jens Stoltenberg described the situation as a “fax democracy”, with Norway waiting for their latest legislation to be faxed from the Commission.
Rather than setting up pan-EEA institutions, the activities of the EEA are regulated by the EFTA Surveillance Authority and the EFTA Court, which parallel the work of the EU's European Commission and European Court of Justice. See EEA institutions for further information.