Third-country economic relationships with the European Union

EU relationships

The European Union has a number of relationships with foreign states. According to the European Union's official site, and a statement by Commissioner Günter Verheugen, the aim is to have a ring of countries, sharing EU's democratic ideals and joining them in further integration without necessarily becoming full member states.


The European Free Trade Association (EFTA) was created to allow European countries to partake in a free trade area with less integration as within the European Communities (later European Union). Most of the countries initially in EFTA have since joined the EU itself, so only four remain outside, Norway, Iceland, Liechtenstein and Switzerland.

The European Economic Area (EEA) agreement allows Norway, Iceland and Liechtenstein to have access to the EU's internal market and vice versa. The four basic freedoms (goods, services, people, and capital) apply. However, some restrictions on fisheries and agriculture take place.


Norway is a member of the EEA, therefore it participates in the single market, and most EU laws are made part of Norwegian law. Norway has signed the Schengen treaty, which means border checks are no longer made.


Like Norway, Iceland joined the EEA, and is considered part of the European Single Market. Iceland has also signed the Schengen treaty. In 2009 Iceland applied to join the Union but the application was controversial and the Icelandic government withdrew it in 2015.[1]


Liechtenstein joined the EEA in 1995 and participates in the European Single Market.


The Swiss referendum to join the EEA in 1992 failed, so Swiss products do not participate in the European Single Market. However the country negotiated two series of bilateral agreements with the Union. The first series, Bilateral Agreements I, consists of seven bilateral agreements and was signed in 1999 (entry into force in 2001), the main part being Free Movement of Persons (full text of the agreement). The second series, Bilateral Agreements II, relates to nine areas and was signed in 2004 (entered into full force on 30 March 2005) and includes the Schengen treaty and the Dublin Convention (full text of the agreement) (official press release).


There are countries which, though not official members of the Eurozone, still use the euro as legal or de facto currency, through official agreements with the EU. These are European microstates which are largely economically dependent on their larger Eurozone-member neighbours.

  •  San Marino: San Marino is not a member state of the EU, but had a special agreement with Italy to mint a limited number of Lira coins. With the passage to the Euro, the agreement was updated so that San Marino could mint specific Euro coins that can be used in all the Eurozone.
  •   Vatican City: The Vatican City State is not part of the EU, but like San Marino, there is an agreement to mint its own Euro coins (limited) which are legal tender in the Eurozone.
  •  Monaco: Monaco is not a member state of the EU, but French VAT applies. The Monegasque state had a special agreement with France (and now the EU) to mint its own Euro coinage, which is legal tender in all the Eurozone.

Some other countries unilaterally decided to use the Euro without having currently a formal agreement with the EU.

Customs unions

Certain countries are in customs union with the EU. These are:

European Union free trade agreements

EU Free trade agreements

EU has concluded free trade agreements with many countries in the world, and negotiating with more through Stabilisation and Association Process, Association Agreements and Economic Partnership Agreements.

European Neighbourhood Policy

EU European Neighbourhood Policy
  Eastern Partnership ENP countries
  Other ENP countries (all but Libya are UfM members)
  UfM members, which are not an ENP country, part of the EU or its enlargement agenda)

Covers Morocco, Algeria, Tunisia, Libya, Egypt, Jordan, Lebanon, Syria, Israel, Palestinian Authority, Moldova, Ukraine, Georgia, Armenia, Azerbaijan, Belarus, and Russia (through the formation of common spaces).

According to the European Union's official site, the objective of the European Neighbourhood Policy (ENP) is to share the benefits of the EU's 2004 enlargement with neighbouring countries. It is also designed to prevent the emergence of new dividing lines between the enlarged EU and its neighbours. The vision is that of a ring of countries, drawn into further integration, but without necessarily becoming full members of the European Union. The policy was first outlined by the European Commission in March 2003. The countries covered include all of the Mediterranean shores of Africa and Asia, as well as the European CIS states (with the exception of Russia and Kazakhstan) in the Caucasus and eastern Europe. Russia insisted on the creation of the four EU–Russia Common Spaces instead of ENP participation. Kazakhstan's Foreign Ministry has expressed interest in the ENP [1][permanent dead link]. Some MEPs also discussed Kazakhstan's inclusion in the ENP.[2]

The European Neighbourhood Instrument (ENI), came into force in 2014. It is the financial arm of the European Neighbourhood Policy, the EU's foreign policy towards its neighbours to the East and to the South. It has a budget of €15.4 billion and provides the bulk of funding through a number of programmes. The ENI, effective from 2014 to 2020, replaces the European Neighbourhood and Partnership Instrument – known as the ENPI.

The Euro-Mediterranean Partnership or Barcelona Process is a wide framework of political, economic and social relations between member states of the EU and countries of the Southern Mediterranean. It was initiated on 27–28 November 1995 through a conference of Ministers of Foreign Affairs, held in Barcelona. Besides the 27 member states of the European Union, the remaining "Mediterranean Partners" are all other Mediterranean countries without Libya (which has had 'observer status' since 1999). Since the establishment of the European Neighbourhood and Partnership Instrument in 2007 (see below) the Euro-Mediterranean Partnership initiative will become fully a part of the wider European Neighbourhood Policy. The Association Agreements signed with the Mediterranean states aim at establishing of a Euro-Mediterranean free trade area.

Financial cooperation and assistance programmes

For the 2000–2006 budgetary period

CARDS programme

CARDS, short for "Community Assistance for Reconstruction, Development and Stabilisation", was established on 5 December 2000 through Council regulation Number 2666/2000.

Its scope is the Western Balkans countries (Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia). The programme's wider objective is to support those nations in the Stabilisation and Association Process.

TACIS programme

The TACIS programme, established in 1991, was a programme of technical assistance that supports the process of transition to market economies for the 11 CIS countries and Georgia. Until 2003, Mongolia was also included in the programme but is now covered by the ALA programme.

MEDA programme

The MEDA programme was the principal financial instrument for the implementation of the Euro-Mediterranean Partnership, offering technical and financial support measures to accompany the reform of economic and social structures in the Mediterranean partner countries.

The first MEDA programme was established for the period of 1995–1999. In November 2000, a new regulation established MEDA II for the period of 2000–2006.

ACP programme

ACP stands for "Africa, Caribbean and Pacific". The programme applies to 71 countries, among which are all African nations with the exception of the Mediterranean countries of northern Africa (covered by the MEDA programme above). The ACP is currently covered by the Cotonou Agreement, which replaces the Lomé Convention.

External links: ACP Countries at official EU site

ALA programme

ALA, standing for "Asia and Latin America" is a programme for financial aid and cooperation with those regions.

For the 2007–2013 budgetary period

  • ENPI, standing for "European Neighbourhood and Partnership Instrument". This is a financial instrument that covers the ENP countries. Russia is also covered by ENPI (it chose not to participate in the European Neighbourhood Policy (ENP) and opted for the formally different, but practically similar EU–Russia Common Spaces. Because of this is the "Partnership" part of ENPI). ENPI therefore merges the former MEDA (as all of its current beneficiaries are ENP states) and the European part of the former TACIS structure.[3] The ENPI Info Centre was launched in January 2009 by the European Commission to highlight the relationship between the EU and its Neighbours.
  • The Pre Accession Instrument replaces the former Enlargement programmes Phare, SAPARD and ISPA and CARDS (current CARDS beneficent states were moved to the Enlargement policy segment as "potential candidate countries").
  • The Development Cooperation and Economic Cooperation Instrument covers all countries, territories and regions that are not eligible for assistance under either the PAI or ENPI (Asia, including Central Asia, Latin America, Africa, Caribbean and Pacific). Thus it will replace ALA, ACP and the rest of TACIS.
  • Horizontal instruments, that cover countries regardless of their region, are:
    • the Instrument for Stability, a new instrument to tackle crises and instability in third countries and address trans-border challenges including nuclear safety and non-proliferation, the fight against trafficking, organised crime and terrorism.
    • Food aid is added to the Humanitarian Aid instrument.
    • the Macro Financial Assistance will remain unchanged.

Economic variation

Below is a table and three graphs showing, respectively, the GDP (PPP), the GDP (PPP) per capita and the GDP (nominal) per capita for some of the third countries that the European Union has relations with. This can be used as a rough gauge to the relative standards of living among member states.

The table is sorted by GDP (PPP) per capita to show the relative economic development level of the different countries. Reference values for the EU average, highest and lowest are included.

Third country GDP (PPP)
millions of
int. dollars
per capita
int. dollars
GDP (nominal)
per capita
int. dollars
European Economic Area:
 Luxembourg (EU highest) 38,808 78,395 104,512
 European Union (EU average) 14,793,000 29,729 33,052
 Bulgaria (EU lowest) 90,869 12,067 6,722
 Iceland 12,148 38,022 37,976
 Liechtenstein 4,160 122,100 113,210
 Norway 259,054 52,964 88,590
European Free Trade Association:
  Switzerland 314,869 43,007 69,838
European Microstates:
  Vatican City
unique noncommercial economy
252 273,615 no data
 San Marino 1,170 35,928 44,208
 Monaco 4,888 65,928 88,761
 Andorra 4,220 44,900 34,240
Current Enlargement Agenda:
 Albania 40,151 13,991 5,373
 Bosnia and Herzegovina 49,794 14,220 5,742
 Kosovo (under UNSCR 1244) 23,524 13,017 4,649
 Montenegro 12,516 20,074 8,749
 North Macedonia 34,267 16,486 6,096
 Serbia 137,126 19,767 7,992
 Turkey 2,346,000 28,264 8,958
European Neighbourhood Policy:
 Israel 158,350 23,416 18,266
 Libya 67,244 11,630 6,699
 Russia 1,575,561 11,041 5,369
 Tunisia 83,673 8,255 2,978
 Belarus 75,217 7,711 3,031
 Algeria 237,684 7,189 3,086
 Ukraine 338,486 7,156 1,727
 Lebanon 24,420 6,681 6,033
 Jordan 27,960 4,825 2,219
 Azerbaijan 38,708 4,601 1,493
 Morocco 135,742 4,503 1,725
 Egypt 305,255 4,317 1,316
 Armenia 14,167 4,270 1,137
 Syria 71,736 3,847 1,418
 Georgia 15,498 3,616 1,493
 Moldova 8,563 2,374 825
 Palestinian Authority 2,568 660 no data

Source: CIA World Factbook [2], IMF

See also


  1. ^ "Timeline of events – Iceland's application for membership of the EU". Icelandic Ministry of Foreign Affairs. Archived from the original on 3 September 2011.
  2. ^ Kazakhstan
  3. ^ European Commission website:European Neighbourhood Policy: Funding

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