India-EFTA Deal: A New Chapter in Trade Agreements The new tripartite Trade and Economic Partnership Agreement sign by India and EFTA.
- The four countries Iceland, Liechtenstein, Norway, and Switzerland represent non-European Union nations that comprise EFTA.
- Established in 1960 to promote free trade and economic integration.
- However, it also poses challenges to a more integrated and prosperous global economy.
- Main tasks include maintaining and developing the EFTA Convention, managing the EEA Agreement, and developing EFTA’s worldwide network of free trade agreements.
- Mission: Promote free trade and economic integration for the benefit of its four member states and global trading partners.
- Member States: Open, competitive economies committed to progressive liberalization of trade in multinational arena and free trade agreements.
European Free Trade Association (EFTA)
- It was founded in the year 1960. It was intended to form an alternative trade bloc for the European states that could not join the EEC.
- Their main functions are to maintain and progress the EFTA Convention, manage the Agreement on the European Economic Area (EEA Agreement), and develop EFTA’s network of free trade agreements around the globe.
Trading of EFTA with India
India exported USD 1.92 billion worth of goods to EFTA countries in 2022-23, and imports stood at USD 16.74 billion.
- Total trade between India and EFTA has been worth USD 18.65 billion so far.
- The largest trading partner of India is Switzerland, followed by Norway for trade purposes.
- India has finalized a Trade and Economic Partnership Agreement with the European Free Trade Association in March 2024.
Overarching Trade and Economic Partnership Agreement (TEPA)
The objectives:
- Reduction of tariffs and non-tariff barriers in generation of trade and investment opportunities between India and EFTA.
- Conditions for market access for service providers and investors in a predictable and fair manner.
- Increased cooperation regarding the protection and enforcement of intellectual property rights.
- Tied trade facilitation and customs cooperation, as well as mechanisms for disputes resolution.
Coverage:
- 14 chapters covering, trade in goods, rules of origin, IPRs, trade in services, investment promotion, government procurement, technical barriers to trade, and trade facilitation.
Key Take-Aways:
- Investment and employment promotion are now upon EFTA.
- EFTA provides market access on 92.2% of tariff lines amounting to 99.6% of India’s exports.
- EFTA’s market access offer includes 100% on non-agri products and concession on Processed Agricultural Products (PAP).
- A total of 105 sub sectors are offered by India to EFTA being state parties include commitments by Switzerland, Norway, Liechtenstein, and Iceland.
Importance of India-EFTA Deal:
Economic Growth and Employment Generation:
- Investment Boost: Based on FDI, the deal is expected to attract about 100 billion US dollars within the next 15 years, which is extremely significant for infrastructure development, upgradation of technology, and generating employment.
- Trade Promotion: It establishes parameters for services exports in the following sectors: IT services, business services, personal services, cultural services, sporting and recreational services, other education services, audio-visual services, and so forth.
- Geopolitical Importance: Sweetens the already strong economic bond of India with Europe toward a multipolar trade landscape of the world.
- Knowledge Sharing and Innovations: This will provide a framework for collaborative transfer in the field of technology, getting access to cutting-edge technologies in precision engineering, health sciences, renewable energy, innovative areas, and R&D.
Precedent Act
Template for Future Deals: Template for all similar deals that could be signed now with other European nations like the UK and possibly extended to the EU as well.
- Free Trade Champion: Relishes India’s champion status in free trade and furthered foreign investment influx.
Beyond Trade: Long-Term Benefits
- Seamless Processes: Part of the agenda are intellectual property rights, services trade, and government procurement.
- Sustainable Development: This treaty stipulates provisions on the improvement of sustainable development practice concerning trade-investment.
Important Issues: India-EFTA Agreement
- Exclusion from FTA: Sensitive sectors like agriculture and dairy are excluded from tariff reductions by India.
- USD 100-Million Legal Commitment: In case of failure to comply with the commitment, India would have an opportunity to re-balance or suspend duty concessions to the four countries.
- Data Exclusivity: This addition of IP barrier called data exclusivity can possibly delay this manufacture of generic versions of new medicines, biologics, and preventive HIV therapy.
- Income Level Gap: Making per capita incomes very disparate between India and EFTA countries-enough to justify the demands of level playing fields for the latter.
- Non-Tariff Barriers (NTBs): Need to simplify NTBs such as divergent product standards and technical regulations.
- Domestic Politics: Some Indian industries would raise issues about the loss of jobs or unfair competition.
Suggested Solutions:
- Investment Protection: This agreement should entail investment clauses that cover protection.
- Phased Reductions: Tariff reduction may be gradual for vulnerable sectors, for example, agriculture.
- Compensation Package: These may be greater than adequate compensation packages for these affected industries in order to remove their concerns and allow restructuring as necessary.
- Mechanism for Trade-Related Dispute Settlement: Have a good working mechanism regarding trade-related disputes.
- Streamlining Regulatory Gaps: Reduce non-tariff barriers; establish MRAs; institute joint technical committees.
- Building Capacity: In service delivery and customs infrastructure and logistics networks, the training establishes programs for customs officials and businesses.
- Foster Collaboration: Regular stakeholder dialogues, sharing knowledge, so that the concerns may be assuaged and achieved transparency.
