16 March 2024 – The Hindu

India-EFTA Agreement

• India and the European Free Trade Association (EFTA) recently inked a Trade and Economic Partnership Agreement (TEPA) following fifteen years of discussions. These days, Norway, Switzerland, Iceland, and Liechtenstein are the four non-EU members of the EFTA.
• The pact promises economic growth, job possibilities, and the improvement of bilateral relations, making it a potentially game-changing accord for both parties. It also brings with it obstacles that need to be overcome in order to advance towards a more prosperous and connected world economy.

The European Free Trade Association (EFTA): What is it?

• Established to promote free trade and economic integration for the benefit of its four member states (Iceland, Liechtenstein, Norway, and Switzerland) as well as its trading partners worldwide, it is an intergovernmental organisation.

Past:

• It was created by a convention that was signed on January 4, 1960, in Stockholm.
• It was intended to act as a substitute trading union for European nations unable or unwilling to become members of the European Economic Community (EEC), which was the principal antecedent of the European Union (EU).

Principal Purpose of the Association:

• Upholding and expanding the EFTA Convention, which governs the four EFTA States’ economic interactions.
• overseeing the “Internal Market,” also known as the Agreement on the European Economic Area (EEA Agreement), which unites the European Union’s member states with Iceland, Liechtenstein, and Norway, three of the EFTA members.
• expanding the global network of free trade agreements that makes up EFTA.

EFTA and India:

• India’s 2022–2023 exports to EFTA nations was USD 1.92 billion, compared to USD 16.74 billion in imports.
• In 2022–2023, India and EFTA’s bilateral trade was valued at USD 18.65 billion.
• Norway is India’s second-biggest trading partner after Switzerland.
• India really has a trade deficit with Switzerland, which is mostly the result of imports of gold.
• In March 2024, the Trade and Economic Partnership Agreement (TEPA) between India and the European Free Trade Association was signed.

Trade and Economic Partnership Agreement (TEPA): What is it?

Goals:

• Through the elimination or reduction of tariffs and non-tariff barriers on a wide range of items, the TEPA seeks to open up trade and investment opportunities between India and the EFTA.
• In addition to enhancing collaboration on the defence and enforcement of intellectual property rights, it seeks to provide fair and transparent market access conditions for investors and service providers.
• TEPA seeks to provide efficient dispute resolution procedures together with trade and customs cooperation facilitation.

Reportage:

• Trade in commodities, rules of origin, intellectual property rights (IPRs), trade in services, government procurement, investment promotion and collaboration, technical trade obstacles, and trade facilitation are among the fourteen chapters that make up the agreement.

Principal Aspects of the Agreement:

• Throughout the next 15 years, EFTA has pledged to encourage projects that will raise the stock of foreign direct investments in India by USD 100 billion and help create 1 million direct jobs in the country.
• A legal promise to support target-oriented investment and job creation is being made for the first time in the history of free trade agreements.
• 6% of India’s exports are covered by EFTA’s 92.2% tariff lines.
• 3% of EFTA exports are covered by India’s 82.7% tariff lines, of which more than 80% are imports of gold. There is no change to the effective duty on gold.
• The 100% non-agri product market access offer from the EFTA includes a tariff concession on processed agricultural products (PAP).
• India has acquired commitments in 128 subsectors from Switzerland, 114 from Norway, 107 from Liechtenstein, and 110 from Iceland. India has offered 105 subsectors to the EFTA.
• Mutual Recognition Agreements are covered by TEPA for professionals in fields such as nursing, chartered accounting, architecture, etc.

Why Is the India-EFTA Agreement Important?

Job Creation and Economic Growth:

• The forecast USD 100 billion in foreign direct investment (FDI) from EFTA nations over a 15-year period is critical to India’s infrastructure growth, technological improvement, and employment generation.
• By promoting domestic production in industries like manufacturing, machinery, pharmaceuticals, chemicals, food processing, transport and logistics, banking and financial services, insurance, and infrastructure and connectivity, TEPA would boost “Made in India” and Atmanirbhar Bharat.

Trade Growth:

• TEPA will encourage the export of our services in areas including business and IT services, audio-visual services, personal, cultural, sporting, and recreational services, and other forms of education.

Market Entry:

• Since India will phase down customs tariffs on these goods over a ten-year period under the trade deal, Indian buyers will have access to high-quality Swiss products like watches, chocolates, biscuits, and clocks at lower prices under the India-EFTA free-trade agreement.

Technological and Strategic Advantages:

Geographical Importance:

• By solidifying India’s economic connections with Europe, the agreement promotes a more multipolar international trading environment. This helps India strategically and lessens reliance on any one commercial partner.

Innovation and the Sharing of Knowledge:

• The agreement may promote information exchange and collaborative research projects, hastening India’s technological advancement.
• It makes access to cutting-edge technologies in precision engineering, health sciences, renewable energy, innovation, and research and development easier.

Establishing a Pattern:

Model for Upcoming Transactions:

• Future trade agreements with other European countries like the UK and possibly even the EU can be modelled after the successful execution of the India-EFTA TEPA.
• An chance to integrate into EU markets is presented by TEPA. The EU receives more than 40% of Switzerland’s exports of services worldwide. Indian businesses might use Switzerland as a springboard to enter the EU market.

Champion of Free Trade:

• India’s reputation as a proponent of free trade is strengthened by the TEPA, which it successfully negotiated and signed. This has the potential to draw in more foreign investment and establish India as a major player in international trade.

Long-Term Gains Not Just From Trade:

Simplified Procedures:

• The agreement covers topics like intellectual property rights, trade in services, and government procurement in addition to tariffs. This all-encompassing strategy promotes a more robust economic alliance with long-term advantages.
• TEPA’s intellectual property rights commitments are made at the TRIPS level.

Development That Is Sustainable:

• Provisions for encouraging sustainable development practices in trade and investment are included in the TEPA. This guarantees ecologically responsible expansion and corresponds with worldwide sustainability objectives.

What Aspects of the India-EFTA Agreement Are the Most Important?

Exclusion from the Free Trade Area:

• Significant tariff reductions have not been extended to India’s sensitive industries, such as dairy and agricultural. Dairy, soy, coal, and delicate agricultural products are among the industries that are kept on the exclusion list and will not receive duty breaks.
• Gold, primarily from Switzerland, is by far the largest export from FTA to India. There is no change to the effective duty on gold.
• This could reduce some EFTA exporters’ benefits.
• In the event that the USD 100 million promise is not met, the agreement states that India may “re-balance or suspend” the tariff concessions to the four nations if the planned investments are not made for any reason.
• One of the main issues is the plan to add data exclusivity (DE) as another IP barrier, which may cause a period of time-limited delays in the production of biologics, prophylactic HIV therapy, and generic versions of novel medications, even in cases where the drug is not patentable.
• Preclinical testing and clinical trials done by the original patent holders would not be available for domestic generic drug producers to use under the proposed data exclusivity requirements, which the EFTA nations insisted upon.
• The per capita earnings of the EFTA nations (USD 60,000–70,000) and India (USD 2,500) differ significantly.
• Therefore, an FTA needs to take into account how to give the latter an equal chance to catch up.
• It is imperative to streamline non-tariff barriers such as disparate product standards and technical requirements. Businesses attempting to export goods may encounter difficulties due to inconsistencies since they may need to alter their items to meet local restrictions in each area.
• Certain Indian industries may voice worries about job losses or unfair competition, especially if they are competing with imports from EFTA countries.

What Steps Should Be Taken Next to Make Sure the India-EFTA Deal Is Successful?

• Protection of Investments: The agreement should contain clauses protecting investments, guaranteeing a favourable atmosphere for companies making investments and conducting business in each other’s marketplaces.
• graduated Reductions: India may think about implementing graduated tariff reductions for delicate industries like agriculture, giving local producers time to adapt and boost their competitiveness.
• Pay Packages: Customised pay plans for impacted industries can allay fears and lend support to the necessary reorganisation.
• Dispute settlement Mechanism: In order to handle potential trade-related issues and stop them from turning into trade conflicts, it is imperative to establish an efficient dispute settlement mechanism.
• Closing the Regulatory Gap by Streamlining for Optimal Performance:
• Decrease Non-Tariff Barriers: In order to facilitate trade, efforts should be taken to decrease non-tariff barriers including technical standards, regulations, and customs processes.
• Mutual Recognition Agreements (MRAs): By creating MRAs for particular product categories, it is possible to guarantee that goods that satisfy the standards of one nation will be automatically acknowledged by another.
• Joint Technical Committees: Establishing joint committees with the goal of standardising technical regulations can help to speed up and encourage uniformity in the process.
• Training and Skill Development: To guarantee a smooth rollout of the new trade regime, firms and customs officers should invest in training programmes.
• Infrastructure Upgrade: To effectively manage the projected rise in trade volume, customs infrastructure and logistical networks should be upgraded.
• Frequent Stakeholder Discussions: Concerns can be addressed and transparency can be ensured by keeping up regular discussions between corporations, governments, and civil society.
• information Sharing Programmes: It might be advantageous for both regions to promote information exchange in areas such as technology breakthroughs and best practices.
• The agreement offers a rare chance to build a more robust and integrated collaboration that benefits all parties and establishes a favourable standard for trade deals in the future. As India and the EFTA nations set out on this exciting adventure, the priorities should continue to be cooperative efforts, transparent communication, and a common goal of a prosperous economic partnership.