Unveiling the Potential: TEPA as a Path to Transforming India-EFTA Economic Relations

It has 14 chapters that are focused on various aspects of market access, such as rules of origin, technical barriers, and trade remedies. It also includes horizontal and vertical provisions that will help promote trade and investment. The European Free Trade Association is a vital regional group that has numerous opportunities for enhancing global trade in services and goods. It is one of the three economic blocs in Europe along with the UK and the EU. Among the countries that are part of the association, Switzerland is the biggest trading partner of India. Norway is the second largest trading partner of the country.

More balanced and competitive global trade system:

The EFTA, which includes Switzerland, Liechtenstein, Iceland, Norway, and the UK, has entered into a comprehensive trade and investment agreement with India. The objective of the agreement is to boost two-way trade between the countries. It is expected to provide numerous benefits to both the economy and consumers in India.

After 16 years of hard work and negotiations, India and the EFTA countries, which include Switzerland, Liechtenstein, Norway, and Iceland, have concluded a historic free trade agreement. This agreement is expected to boost the trade and investment opportunities between the two countries. It is expected to create around a million jobs and attract around $100 billion worth of foreign direct investment within the next 15 years. The agreement provides India with duty-free access to the European Free Trade Association's (EFTA) markets for a wide range of products, such as chocolates and Swiss watches. It also promises substantial investment opportunities in the country. The agreement is a reflection of the two countries' commitment to fostering a more equitable and open trade environment. In addition to immediate economic benefits, it marks a strategic move to leverage the expertise of the participating countries' R&D departments. However, the governments of the participating nations will only encourage private investors to come into the country. India can also partially withdraw its tariff concessions if the commitments of the investors are not met.

Prime Minister Narendra Modi described the free trade agreement as a historic moment for both the countries. It is aimed at creating a more level playing field for the companies and individuals operating in both the private and public sectors. He also noted that the countries' leadership in the field of R&D would help develop new opportunities for collaboration. Helene Budliger Artie, who was the Swiss representative in the negotiations, stated that the commitment was neither legally binding nor an agreement.

When it comes to implementing a free trade agreement, it was very challenging to make it work seamlessly. For instance, with over 1.4 billion people and the 15 million members of the European Free Trade Association (EFTA), how can it be balanced? That's why jobs and investment pledges are linked to market access. As part of the free trade agreement, India has promised to remove tariffs on around 80-85 percent of products from the EFTA nations. It will also provide duty-free access for almost 99 percent of goods, including rice. However, dairy and agri products were excluded from the agreement to protect the interests of farmers. Despite the free trade agreement, India has not agreed to reduce the effective tariffs on various products, such as gold, dairy products, and automobiles. About 82 percent of the country's imports from Switzerland are gold. It has also agreed to reduce its bound rate on gold to 39 percent from 40 percent. Investment from other countries outside the European Free Trade Association (EFTA) will be considered if it is shown that the investors are from an EFTA state. However, the obligation does not apply to the investments of sovereign wealth funds. Investment from other countries that are not part of the EEA but have substantial business in one of the participating countries will not be considered.

Apotheosis of the event:

?      As part of its efforts to promote investments, the EFTA has stated that it aims to increase the foreign direct investment stock in India by about $100 billion within the next 15 years. This will help in generating 1 million jobs in the country. In the history of free trade agreements, this is the first time that a legal commitment has been made regarding job creation and targeted investments.

?      The 92.2% tariff lines that the EFTA offers to India are currently applicable to 99.6% of the country's exports. The EFTA's market access offer also covers 100% of non-agricultural products (PAP).

?      As per the agreement, India is providing 82.7% of the country's tariff lines on products that are included in the list of eligible products for the market access offer. Some of the other sectors that are included in the list include medical devices, pharmaceuticals, and processed food.

?      In addition, India has offered over 100 sub-sectors to the organization. The commitments from Norway, Switzerland, Iceland, and Liechtenstein were also secured.

?      TEPA is expected to boost India's services exports, particularly those related to information technology, business services, and cultural and recreational activities.

?      Various services offered by the EFTA include better digital access, commercial presence, and increased commitments related to the temporary and entry of key personnel.

?      One of the provisions of the TEPA is the establishment of mutual recognition agreements for various professional services, such as nursing and chartered accountants.

?      TEPA's commitment to intellectual property rights is also at the level of TRIPS. Through its chapter with Switzerland, India has been able to fully address the concerns related to the evergreening of patents. TEPA will foster transparency, efficiency, and uniformity in the procedures related to trade. It will help India's exporters by providing them with access to various specialized inputs and creating a conducive environment for trade. It is also expected to boost the country's services exports.

?      The commitment of India to the advancement of inclusive growth, sustainable development, and the protection of the environment is evidenced by the TEPA's chapter on intellectual property rights.

?      The TEPA can help India's exporters by opening up new markets in the European Union. Over 40% of Switzerland's services exports go to the EU. This provides an opportunity for Indian companies to expand their reach in the region. TEPA aims to encourage domestic production in various sectors, such as manufacturing, transportation, and logistics.

?      In addition to creating direct jobs, the TEPA can also help India develop a skilled and diverse workforce by providing better training facilities and access to world-class technologies.

Evolution of trade between EFTA and India:

Source: trade.efta.int

Gains for the Indian populace:

One of the most important benefits of the TEPA is the reduction of customs duties on various products, which will allow Indian consumers to buy high-quality products made in Switzerland at lower prices. The agreement also provides for tariff concessions on a wide range of other products, such as wines, seafood, and processed food. The reduction of customs duties on these products will make them more accessible and affordable to Indian consumers. Wines priced below $15 will benefit from significant duty reductions. For instance, within a year, the duty on wines will be lowered from 150 to 100 percent. Over the next decade, the rate will gradually decrease to 50 percent. On the other hand, the effective duty on polished and cut diamonds will be lowered from 5 to 2.5 percent. Therefore, Indian consumers are expected to benefit from the TEPA since the government will stop implementing custom duties on certain imported goods. This will allow them to buy high-quality timepieces, chocolates, and biscuits at lower prices.

Shortcomings from TEPA:

The TEPA between India and the EFTA nations marks a significant step toward establishing a more balanced and integrated global trade system. It is expected to create a substantial number of jobs and investment opportunities. But it also has some weaknesses that need to be analyzed. One of the main concerns is the asymmetry between the economic size of the countries that are part of the TEPA. For instance, while India has a growing market and a robust labor force, its smaller EFTA counterparts are more economically developed. Also, the non-binding nature of certain investment commitments made by the European Free Trade Association needs to be highlighted. This lack of clarity can affect the flow of investments into India. It could also leave the country's expectations of job creation and economic uplift unfulfilled. Furthermore the trade aims to open up markets, the agreement does not provide adequate protection for sensitive sectors, such as small and medium enterprises.

The exclusion of certain agricultural and dairy products from the duty concessions provides some protection, the broader implications of increased competition in the Indian market remain a concern. This issue could affect the livelihoods and businesses of local residents. Hence, TEPA's focus on market access and economic growth instead of social and environmental sustainability could lead to unintended consequences. In an era when sustainable development is crucial, the omission of labor standards and environmental protections undermines efforts toward promoting eco-friendly practices. The TEPA has broader implications for the global trade landscape. It could serve as a model for future trade deals between developing nations and trade blocs. It can also be used as a test bed for the viability of such agreements by other countries that are involved in similar negotiations.

The TEPA can place India at the forefront of global trade, allowing it to shape trade patterns and influence the dynamics of the world economy. By expanding its economic engagement with the EFTA nations, India can counter the dominance of trade blocs such as the EU, as well as the influence of China-US trade dynamics. This can elevate the country's standing in the global arena and influence trade practices and policies all across the world. The TEPA's emphasis on renewable energy, digital trade, and infrastructure aligns with India's desire to diversify its economy. By removing barriers to trade in knowledge-intensive sectors, the agreement can help the country achieve its objective of becoming a more resilient and diversified economy. In addition to boosting economic growth, it can also help the country's workforce develop a more skilled and capable of handling the challenges of the 21st century.

Conclusion:

The TEPA between India and EFTA marks an important milestone in the global trade dynamics. It establishes a precedent for future trade agreements and embodies the potential for significant economic transformation. The opening up of India's market and the creation of new jobs are expected to bring significant benefits to both the country's consumers and the wider economy. However, it also presents various challenges that require careful management. The TEPA's implementation is complex due to the various factors that affect its relationship with India and the other EFTA nations. These include the lack of a comprehensive agreement on investment commitments, the asymmetry in economic development, and the potential adverse impact on domestic industries. The need for robust measures to ensure that the agreement supports inclusive and sustainable growth is also paramount. The TEPA's positive impact on regional and global trade, India's position in the international arena, and its pursuit of innovation and diversification are all illustrative of its potential. By opening up its market and supporting domestic production, the agreement can help accelerate the country's economic growth. This agreement has the potential to transform the global economy and create new jobs. However, it also poses formidable obstacles that need to be overcome in order to successfully implement it. All parties must work together to ensure that the benefits of the agreement are distributed fairly and equitably. In addition, they should address the possible adverse impacts on certain sectors and ensure that the agreement aligns with environmental and social objectives. Therefore, TEPA represents the potential of forging stronger and more balanced global trade relationships as India and the EFTA nations work toward this new phase of cooperation.

Pic Courtsey-Eugene Z at unsplash.com

(The views expressed are those of the author and do not represent views of CESCUBE.)