The European Economic Area and Andorra: why the Principality is not part of it

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🏁 Europe beyond the European Union

Europe is not limited to the European Union (EU). Around the community project, other forms of integration allow participation in the European market without assuming the full political and institutional dimension of the EU.

The European Economic Area (EEA) is the clearest example: it extends the EU’s Single Market to the countries of the European Free Trade Association (EFTA) that chose economic integration without becoming EU Member States.

To understand why Andorra is not part of the EEA — and which alternative model it is building — we must consider three key components: EFTA, the EU, and the EEA, and then see how Andorra connects to them through tailored agreements.

🌍 EFTA: free trade without political integration

The European Free Trade Association (EFTA) was created in 1960 to bring together European states that wanted free trade without political integration within the European Community. It currently has four members:

• Iceland / Liechtenstein / Norway / Switzerland

Its foundations are straightforward:

• promoting free trade in industrial products among members,
• jointly negotiating trade agreements with third countries.

Unlike the EU, EFTA is neither a customs union nor a complete internal market: there is no common external tariff nor a harmonised regulatory framework. It is, above all, a flexible platform for economic cooperation.

🇪🇺 The European Union: single market and political project

The European Union is a far deeper form of integration. It is not only a free-trade area but also:

• a customs union, with a common external tariff,
• a Single Market, ensuring the free movement of people, goods, services and capital,
• a shared legislative framework in areas such as competition, VAT, consumer protection and the environment,
• supranational institutions (Commission, Parliament, Court of Justice) with binding decision-making powers.

All EU Member States automatically belong to the Single Market and, therefore, to the European Economic Area.

🔄 The European Economic Area (EEA): the bridge between the EU and EFTA

The EEA was created in 1994 with a precise objective: to extend the EU Single Market to the EFTA countries that sought economic integration without joining the Union.

Why does the EEA exist?

It allows certain European countries outside the EU to:

• access the Single Market under conditions similar to those of Member States,
• apply the four fundamental freedoms:
  • free movement of persons,
  • goods,
  • services,
  • capital,
• and participate in selected EU programmes.

All of this without assuming full political integration into the EU.

Who belongs to the EEA?

The EEA includes:

• the 27 EU Member States,
• Iceland, Liechtenstein and Norway, as EFTA states integrated into the Single Market.

Switzerland, although an EFTA member, is not part of the EEA and maintains a separate model based on bilateral agreements.

What is the purpose of the EEA?

The EEA aims to ensure that much of Europe operates as a single economic space:

• with common rules,
• harmonised supervision,
• and free movement that is nearly identical to that of the EU.

In return, participating EFTA members must continuously incorporate EU Single Market legislation and comply with specific monitoring and dispute-resolution mechanisms.

🏔️ Andorra’s position: sectoral integration, but outside the EEA

Andorra cannot join the EEA because membership is restricted to:

• EU Member States, or
• EFTA Member States.

The Principality is neither, so the EEA is not legally accessible.

Even so, Andorra has progressively developed its own model of European integration, advanced in several areas and increasingly close — in practical effect — to certain outcomes of the EEA.

🤝 The 1990 Customs Agreement: opening doors for trade

The Customs Agreement between Andorra and the European Economic Community establishes:

• a full customs union for industrial products,
• specific, more limited rules for agricultural and processed agricultural products.

In practice, this greatly facilitates access for Andorran companies to the European market in key sectors.

If you wish to explore this in more detail, you may find our article “The Customs Agreement between Andorra and the European Union” helpful.

💶 The 2011 Monetary Agreement: the euro as Andorra’s currency

The Monetary Agreement allows Andorra to:

• legally use the euro as its official currency,
• mint its own coins with national designs,
• adopt significant parts of the EU financial regulatory framework.

This strengthens trust in the Andorran financial system and reduces friction for cross-border operations.

For a deeper look, you can read “The Monetary Agreement between Andorra and the European Union”

🔔 Other sectoral agreements with the EU

Beyond customs and monetary matters, Andorra has concluded several sector-specific agreements with the EU, including:

• tax cooperation and information exchange, aligned with international standards.
  You may be interested in our article “Common Reporting Standard (CRS)”:
  https://www.elysiumconsultingfirm.com/common-reporting-standard-crs
• integration into European payment systems, such as SEPA, which enables euro transfers under conditions similar to those in the eurozone.
  You can learn more in “SEPA in Andorra”:
  https://www.elysiumconsultingfirm.com/sepa-andorra

These steps significantly reinforce Andorra’s practical integration into the European economic space while maintaining its status as an independent state.

📜 Towards an Association Agreement: a “tailor-made framework” for microstates

The Association Agreement between Andorra and the European Union, now in an advanced stage, is the most ambitious of all integration instruments.

It pursues objectives similar to those of the EEA, but adapted to the specific realities of microstates (Andorra, Monaco, San Marino):

• expanded access to the Single Market,
• progressive alignment with EU legislation,
• supervision mechanisms tailored to institutional capacity,
• specific exceptions in sensitive areas such as mobility and certain services.

To understand its implications, you may consult “The Association Agreement between Andorra and the European Union: objectives, scope and consequences”.

Conclusion: Andorra’s own path to European integration

The EEA is designed to allow certain countries to access the EU Single Market with rights and obligations similar to those of Member States — without joining the Union politically. But this framework is reserved exclusively for EFTA members.

Since Andorra is neither in the EU nor in EFTA, it cannot join. However, the Principality has built its own path, based on:

• a Customs Agreement,
• a Monetary Agreement,
• and a future Association Agreement, which aims to achieve results similar to the EEA but through a structure specifically designed for microstates.

If you would like to assess how this European integration framework may affect your personal or business project — residence, investment or operations — you can request a personalised meeting below or fill in the contact form.

Last reviewed: November 2025.