EC SLATES TALKS TO DRAW EFTA INTO NEW BLOC

EC SLATES TALKS TO DRAW EFTA INTO NEW BLOC

The European Community is poised for a final push to create a huge 19-nation trading bloc of 350 million people stretching from the Arctic to the Mediterranean.

After six months of frantic activity, digesting German unification and forging new trade links with the emerging democracies of Eastern Europe, the EC is seeking to forge closer ties with the six nations of the European Free Trade Association, or EFTA.The EC and EFTA, which consists of Austria, Finland, Iceland, Norway, Sweden and Switzerland, will start formal negotiations on June 20 to establish a so-called European Economic Space in which goods, services, labor and capital would flow freely across the borders.

Liechtenstein, the tiny principality nestled between Switzerland and Austria, also would be a member of the proposed EES.

The two sides have sketched out the broad outlines of an agreement that centers on EFTA compliance with EC rules on technical standards, competition and public procurement, among others. Other sticking points include EFTA's reluctance to accept current EC regulations on agriculture, fisheries, the movement of workers, the free establishment of banks and the flow of capital.

But these difficulties pale in comparison with the tricky constitutional and legal questions that the negotiators must confront. The key problem is how to make European Economic Space decisions in a way that safeguards the EC's autonomy to write its own rules and, at the same time, satisfies EFTA's desire for a meaningful place at the table.

The two sides also must agree on establishing a joint body to supervise the regulations covering the EES and a legal institution to enforce laws covering the EC and the EFTA parts of the "space."

The EC's position is that EFTA should "shape but not take" decisions, while EFTA is demanding equal participation in drawing up new rules and laws covering the European Economic Space.

The two sides are aiming to reach agreement by 1991 at the latest so that a treaty can be concluded and ratified by the end of 1992, when the EC is scheduled to complete its single market initiative.

The negotiations are complicated because while the EC is presenting a united front, the EFTA countries remain deeply divided on a negotiating strategy just a week and a half before they start talking with Brussels. The major sticking point is Switzerland's insistence the EFTA should seek many exceptions from the common rules and laws covering the EES.

EFTA nations will attempt to settle their differences this week, when their leaders meet in Gothenburg, Sweden, to celebrate the organization's 30th anniversary.

EFTA's cohesion has been under growing strain since Austria broke ranks last summer and formally applied to join the EC.

The move toward closer economic integration started with the 1984 Luxembourg Declaration, which committed the EC and EFTA to creating the EES. But the pressure to create a more tightly knit trade bloc has intensified in the past two years with speedy implementation of the EC's single market program, the collapse of the economic and political division between Western andEastern Europe, and increased competition from the United States, Japan and other dynamic Asian economies.

The economies of the EC and EFTA are already tightly enmeshed as there are no tariffs or quotas on trade in industrial goods.