- India and the European Free Trade Association (EFTA) signed the Trade and Economic Partnership Agreement on 10th March 2024. The Agreement was concluded after comprehensive negotiations spanning 15 years.
- The Agreement provides for elimination of tariffs across 92.2% tariff lines for imports into the EFTA, which cover 99.6% of the exports from India. In return, India has allowed duty-free access to 82.7% tariff lines, which cover 95.3% of imports from the EFTA into India.
- The EFTA countries have committed to raising the stock of foreign direct investment in India by USD 100 billion over the next 15 years, which is expected to create 1 million new jobs in India.
- The Agreement would allow increased market access and promote foreign investment while strengthening economic ties between India and the EFTA.
Introduction and Background
On 10th March 2024, India and the European Free Trade Association (EFTA) marked a significant milestone with the signing of the Trade and Economic Partnership Agreement (TEPA). This Agreement represents India's first trade deal with the European bloc, signifying an important step towards increased economic cooperation.
EFTA is an intergovernmental organization established in 1960 to promote free trade and economic integration among its member states: Iceland, Liechtenstein, Norway, and Switzerland. Though the EFTA countries are not part of the European Union, they maintain strong economic ties with the bloc. TEPA paves the way for India to tap into these markets and potentially leverage them for further trade opportunities within Europe.
The negotiating history of the Agreement spanned more than 15 years and numerous rounds of discussions.
- Formal Negotiations Begin (2008): After a report by the Joint Study Group, official negotiations for a Comprehensive Economic Partnership Agreement (CEPA) commenced in February 2008.
- Progress and Stalemate (2008-2013): Thirteen rounds of talks took place until November 2013. However, the negotiations stalled due to unresolved issues.
- Resumed Talks and Conclusion (2020-2024): Negotiations recommenced in 2020, and after eight more rounds, a final agreement, the Trade and Economic Partnership Agreement (TEPA), was signed on 10th March 2024.
Such prolonged history of negotiations between the parties highlights the complexities involved in balancing market access concerns and domestic sensitivities in both India and the EFTA countries.
Key Provisions of the Agreement
- Tariff Reduction: The Agreement eliminates or reduces customs duties on a large number of goods traded between India and the EFTA countries. EFTA has committed to offer duty-free access for 92.2% of its tariff lines, covering 99.6% of India's exports. India, on the other hand, has offered duty-free access for 82.7% of its tariff lines, covering 95.3% of EFTA's exports. It is important to note that gold, which makes up a significant portion of Indian imports from EFTA countries, is excluded from tariff reductions.
- Trade in Services: The Agreement also liberalizes trade in services between India and the EFTA countries. This includes commitments from both sides to open up their markets in a number of sectors, such as financial services, telecommunications, and professional services.
- Investment Promotion: The TEPA includes provisions for promoting investment between India and the EFTA countries. The EFTA countries have committed to raising the stock of foreign direct investment in India by USD 100 billion over the next 15 years, which is expected to create 1 million new jobs in India.
- Intellectual Property Rights: The Agreement includes provisions on intellectual property rights (IPRs), such as patents, trademarks, and copyrights. These provisions aim to strike a balance between protecting the rights of IPR holders and promoting access to affordable medicines and other goods.
- Dispute Settlement: The Agreement also includes a mechanism for settling disputes that may arise between India and the EFTA countries in relation to the interpretation and implementation of the agreement.
- Non-Trade Concerns: The TEPA addresses non-trade concerns, such as labour standards, environmental protection, and sustainable development. This is the first time that India has included such provisions in an FTA.
Impact on India and the EFTA Countries
The TEPA holds the potential to boost economic growth and prosperity for both India and EFTA nations by increased trade and investment, improved market access, stronger economic ties and economic growth by stimulating exports from India in key sectors such as textiles, gems, and IT services.
Challenges and Considerations
While the TEPA offers promising opportunities, it also presents certain challenges:
- Regulatory Alignment: Harmonizing regulations across diverse legal systems poses a significant challenge, requiring effective coordination between Indian authorities and EFTA member states to ensure compliance with TEPA provisions.
- Non-Tariff Barriers: Addressing non-tariff barriers such as technical standards and sanitary measures is crucial for smooth implementation of the agreement. Regular monitoring and evaluation are essential to identify and mitigate emerging obstacles.
Outlook & Conclusion
The India-EFTA TEPA is a landmark agreement that holds immense potential to transform economic ties between the two regions. With reduced trade barriers, increased market access, and streamlined procedures, TEPA is expected to generate significant economic benefits for India and EFTA member states. The signing of the TEPA is a positive development for both India and EFTA countries. It could promote stronger economic relationships, increase employment, and accelerate economic progress. The success of the Agreement will depend on its effective implementation and the ability of businesses on both sides to capitalize on the new opportunities it presents.
By leveraging the provisions of the Agreement, both India and EFTA countries can unlock new avenues for trade expansion and deeper integration.
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Originally Published May 2024
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