Europe Forges Landmark Pact on Free Trade

LUXEMBOURG —  A landmark accord reached Tuesday between the European Community and the European Free Trade Assn. will create the world’s biggest common market, a free trade zone of 19 nations that will stretch from Iceland to the Mediterranean.

The pact between the 12-member European Community, which is rapidly moving toward fuller economic integration, and the seven-nation trading bloc is likely to increase the continent’s political clout and serve as a litmus test for ultimately enlarging the EC. It is scheduled to be fully implemented by 1993.

The agreement came after the groups reached solutions on free trade in fisheries products, EFTA’s financial contribution to the EC and Alpine truck transit, all of which had threatened to block a deal.

The tentative agreement must be initialed, then signed. Once it is signed, the long process of ratification by the 19 countries will start.

Officials said small technical problems remain to be settled but none is seen as capable of blocking the initialing.

The EC and EFTA already conduct about 60% of their external trade with each other--and the transactions account for 40% of world trade.

Under the deal, EFTA--consisting of Austria, Iceland, Lichtenstein, Norway, Finland, Sweden and Switzerland--will implement hundreds of EC rules on such matters as the free movement of goods, capital, services and people among countries. The rules will also cover European Community competition policy.

The two blocs will set up a joint ministerial council and a joint court to settle disputes.

Among the other varied elements of the agreement, the EFTA agreed to provide loans and grants to be spent on environmental and educational projects in Spain, Portugal, Ireland and Greece, and the EC agreed to take steps to reduce truck emissions by 60% over a 12-year period.

The European Community consists of Belgium, France, Italy, Luxembourg, Netherlands, Germany, Britain, Denmark, Ireland, Greece, Spain and Portugal.