Setting an ambitious trajectory of growth in trade and economic relations with a Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association on Sunday, India has achieved a binding commitment of USD 100 FDI, a window to Indian exporters to access large European and global markets and an impetus to ‘Make in India’ 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.
The deal with EFTA — comprising Switzerland, Iceland, Norway & Liechtenstein – an 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, follows approval by the Union Cabinet chaired by Prime Minister Narendra Modi and marks the most substantial gains ever by India in the history of its free trade agreements.
As per the deal, the EFTA will promote investments with the aim to increase the stock of foreign direct investments by USD 100 billion in India in the next 15 years. The investments do not cover foreign portfolio investment. For the first ever time in the history of FTAs, a legal commitment is being made about promoting target-oriented investment and creation of jobs.
The TEPA, though, has been long in the making with discussions on expediting the India – EFTA trade negotiations going way back to 4 May, 2022 during Modi’s bilateral meeting with Katrin Jakobsdottir, Prime Minister of Iceland, in Copenhagen on the sidelines of the 2nd India- Nordic Summit. The importance of the agreement is underlined by the comprehensive scope and the bloc’s role as an important regional group, with several growing opportunities for enhancing international trade in goods and services.
Among EFTA countries, Switzerland is the largest trading partner of India followed by Norway. Besides, the 14 chapters of agreement has main focus on market access related to goods, rules of origin, trade facilitation, trade remedies, sanitary and phytosanitary measures, technical barriers to trade, investment promotion, market access on services, intellectual property rights, trade and sustainable development and other legal and horizontal provisions. In a significant breakthrough, the group is offering 92.2 per cent of its tariff lines which covers 99.6 per cent of India’s exports.
The EFTA’s market access offer covers 100 per cent of non-agri products and tariff concession on processed agricultural products (PAP). India is offering 82.7 per cent of its tariff lines which covers 95.3 per cent of EFTA exports of which more than 80 per cent import is gold. The effective duty on gold remains untouched. Sensitivity related to PLI in sectors such as pharma, medical devices and processed food etc. have been taken while extending offers. Sectors such as dairy, soya, coal and sensitive agricultural products are kept in exclusion list.
India has offered 105 sub-sectors to the EFTA and secured commitments in 128 sub-sectors from Switzerland, 114 from Norway, 107 from Liechtenstein and 110 from Iceland. With this, TEPA opens up to Indian exporters access to specialized inputs and offers creation of a 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.
The TEPA will also provide an opportunity to integrate into EU markets. Over 40 per cent 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. In other takeaways, the TEPA promises to stimulate Indian services exports in sectors of India’s key strength and interest such as IT services, business services, personal, cultural, sporting and recreational services, other education services, audio-visual services etc. In the service sector, 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).
Besides, the trade agreement with EFTA has provisions for mutual recognition agreements in professional services like nursing, chartered accountants, architects etc. Further strengthening the bilateral ties, commitments related to intellectual property rights in TEPA are at TRIPS level. The IPR chapter with Switzerland, which has high standards in this area, shows India’s robust IPR regime.
India’s interests in generic medicines and concerns related to evergreening of patents have been fully addressed. 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.