New trade giant comes to market

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BRUSSELS - As the year changes at midnight tonight, a giant trading bloc - the European Economic Area, linking the European Union and the European Free Trade Association (Efta) - will be born, setting the stage for an enlarged EU in a year's time.

The EEA will overtake the North American Free Trade Agreement (Nafta) as the world's biggest free-trade zone by extending the EU's single market to five out of seven of the Efta countries: Austria, Finland, Iceland, Norway and Sweden. The EEA has 372 million consumers against 360 million in Nafta and is two to three times bigger in terms of trade. It is expected to bring economic benefits in an area stretching from the Arctic to the Mediterranean, but four of the five Efta states taking part see the EEA as just a stepping-stone to full EU membership.

Austria, Finland, Norway and Sweden started negotiating EU membership this year and hope to spend next New Year's Eve crossing its threshold. If they do, that will leave only Iceland and maybe Liechtenstein, which hopes to join shortly, in the EEA. But Jacques Delors, the EU President, has said he sees the EEA as a way of integrating East European countries into the European trading scene.

Officials have said the 1 January 1995 target date for EU membership is ambitious. Tough talks remain for early next year for all four applicants and they all have to get backing in referendums.

The EEA will provide more competition for public-procurement contracts and in banking and insurance. But the deal does not extend to agriculture and does not remove border controls between the different countries. Norway and Iceland stand to gain from better access for their fish to the EU.

The remaining Efta country, Switzerland, will not take part in the EEA after its people voted against membership in a referendum last December. It is seeking to cut its losses by negotiating bilateral accords with the EU.