India-European Free Trade Association signeda Trade and Economic Partnership Agreement (TEPA) on 10th March 2024.
EFTA is an important regional group, with several growing opportunities for enhancing international trade in goods and services.
EFTA is one important economic block out of the three (other two – EU &UK) in Europe.
EFTA countries comprising Switzerland, Iceland, Norway & Liechtenstein.
Among EFTA countries, Switzerland is the largest trading partner of India followed by Norway.
EFTA is an inter-governmental organization set up in 1960 for the promotion of free trade and economic integration for the benefit of its four Member States.
Trade and Economic Partnership Agreement (TEPA)
The TEPA is a comprehensive agreement that covers trade in goods, trade in services, investment, intellectual property rights, competition, government procurement, trade facilitation, trade remedies, dispute settlement, and other areas of mutual interest.
“TEPA is a modern and ambitious Trade Agreement. For the first time, India is signing FTA with four developed nations – an important economic bloc in Europe.
For the first time in history of FTAs, binding commitment of $100 bn investment and 1 million direct jobs in the next 15 years has been given.
The agreement will give a boost to Make in India and provide opportunities to young & talented workforce. The FTA will provide a window to Indian exporters to access large European and global markets.”
The funds from the EFTA region include Norway’s $1.6 trillion sovereign wealth fund, the world’s largest such ‘pension’ fund, which posted a record profit of $213 billion in 2023 on the back of strong returns on its investments in technology stocks.
Objective
It aims to eliminate/reduce tariffs and non-tariff barriers on a wide range of products. It will create opportunities for trade and investment between India and EFTA.
It aims to ensure fair and transparent market access conditions for service providers and investors. It will also enhance cooperation on intellectual property rights protection and enforcement.
TEPA aims to establish effective mechanisms for dispute resolution.
The highlights of the agreement are:
TEPA would stimulate our services exports in sectors of our key strength / interest such as IT services, business services, personal, cultural, sporting and recreational services, other education services, audio-visual services etc.
Services offers from EFTA include better access through digital delivery of Services (Mode 1), commercial presence (Mode 3) and improved commitments and certainty for entry and temporary stay of key personnel (Mode 4).
TEPA has provisions for Mutual Recognition Agreements in Professional Services like nursing, chartered accountants, architects etc.
Commitments related to Intellectual Property Rights in TEPA are at TRIPS level. The IPR chapter with Switzerland, which has high standard for IPR,shows our robust IPR regime. India’s interests in generic medicines and concerns related to evergreening of patents have been fully addressed.
India signals its commitment to Sustainable development, inclusive growth, social development and environmental protection
Fosters transparency, efficiency, simplification, harmonization and consistency of trade procedures
TEPA will empower our exporters access to specialized inputs and create conducive trade and investment environment. This would boost exports of Indian made goods as well as provide opportunities for services sector to access more markets.
TEPA provides an opportunity to integrate into EU markets. Over 40% of Switzerland’s global services exports are to the EU. Indian companies can look to Switzerland as a base for extending its market reach to EU.
TEPA will give impetus to “Make in India” and Atmanirbhar Bharat by encouraging domestic manufacturing in sectors such as Infrastructure and Connectivity, Manufacturing, Machinery, Pharmaceuticals, Chemicals, Food Processing, Transport and Logistics, Banking and Financial Services and Insurance.
TEPA would accelerate creation of large number of direct jobs for India’s young aspirational workforce in next 15 years in India, including better facilities for vocational and technical training. TEPA also facilitates technology collaboration and access to world leading technologies in precision engineering, health sciences, renewable energy, Innovation and R&D.
Benefits of TEPA
For EFTA:
Trade agreements have historically helped India’s partner countries because of high average tariffs in India (hover around 18%, among the highest in the world).
After the India-EFTA deal, India could see higher imports of machinery, pharmaceuticals, medical instruments and machinery as there would be a sharp reduction in Indian tariffs.
Therefore, an investment commitment is crucial as India-EFTA trade is largely in favour of the European grouping as far as goods are concerned.
For example, India runs a high trade deficit with Switzerland, which could widen after India eliminates duties as part of the deal.
For India:
India is looking to attract investments and get better market access for its service sector workforce.
EFTA is also looking at striking joint ventures in pharma, (especially medical devices), chemicals, food processing and engineering.
India is looking at the EFTA deal to help diversify imports away from China. India currently depends on China for key medical imports.
Why will it be difficult for India to access the EFTA market?
Switzerland, which is India’s biggest trade partner among EFTA countries, decided to eliminate import duties on all industrial goods for all countries starting from January 1, 2024.
The abolition of tariffs on all industrial products, including chemicals, consumer goods, vehicles and clothing is a concern for India as industrial goods accounts for 98 per cent of India’s $1.3 billion merchandise exports to Switzerland in FY2023. India’s goods will face stiffer competition despite any tariff elimination that would be part of the deal.
Think tank Global Trade Research Initiative (GTRI) said that exporting agricultural produce to Switzerland remains challenging due to the complex web of tariffs, quality standards, and approval requirements. EFTA has not shown any inclination to make agriculture tariffs zero on most basic agricultural produce.
