India-EFTA Free Trade Agreement, $100 Billion Investment and Job Creation

The recent conclusion of the Free Trade Agreement (FTA) between India and the European Free Trade Association (EFTA) — comprising Iceland, Liechtenstein, Norway, and Switzerland — marks a significant leap in bilateral relations. Helene Budliger Artieda, Switzerland’s State Secretary for Economic Affairs, sheds light on the potential and expectations from this landmark deal.

Investment and Employment Prospects

The FTA sets an ambitious target of $100 billion investment and the creation of 1 million jobs, emphasizing the pivotal role of the private sector from the EFTA countries in achieving these goals. While the governments can facilitate, the actual investment flow depends on the European private sector’s engagement with India’s burgeoning market.

The Catalyst for the Agreement

A “breakthrough moment” in the negotiations was the inclusion of a chapter on direct investment, which paved the way for a balanced and mutually beneficial agreement. This chapter not only signifies the commitment to bolster investments but also underscores the heightened interest in India’s market, especially given the deal’s completion ahead of a similar agreement with the EU.

India-EFTA Trade Deal

This agreement between India and the European Free Trade Association (EFTA), which includes Switzerland, will gradually reduce tariffs on a variety of goods imported from EFTA countries. This means Indian consumers will benefit from:

• Lower Prices: Over time, customs duties will be phased out, making imported goods more affordable. This includes popular items like Swiss watches, chocolates, and biscuits.
• Wider Selection: The agreement covers a range of products beyond luxury goods. Indian consumers will have access to a wider variety of seafood, fruits, coffee, wines, processed foods, and more.

Here’s a breakdown of some key products included in the agreement

• Food and Beverages: Seafood (tuna, salmon), Mediterranean fruits, coffee, various oils, sweets, processed foods, and wine.
• Consumer Goods: Watches, smartphones, bicycle parts, medical equipment, and clocks.
• Industrial Products: Medicines, dyes, textiles, apparel, iron and steel products, and machinery equipment.

Note: Not all tariffs are eliminated immediately. For example, duties on some wines will be reduced gradually over 10 years.

Gold, A Notable Exclusion

While the agreement includes tariff reductions on various products, gold remains an exception. India offered a minimal concession that has no real impact on the effective duty, leaving gold prices largely unchanged.

Switzerland- A Key Trading Partner

India’s primary imports from Switzerland include:

• Gold (though not impacted by the agreement)
• Machinery
• Pharmaceuticals
• Coal
• Optical instruments
• Watches
• Soybean oil
• Chocolates

Collaboration and Innovation

Prime Minister Modi sees the agreement as a chance to promote open trade and collaboration. He emphasizes the potential for India to leverage EFTA’s leadership in innovation and R&D across diverse sectors. This could lead to joint ventures and investments in areas like:

• Digital trade
• Banking and financial services
• Transport and logistics
• Industrial machinery
• Biotechnology
• Pharmaceuticals
• Chemicals
• Food processing
• Clean energy

A Long-Awaited Milestone

After 16 years of negotiations, with a break between 2013 and 2016, India and EFTA countries have finally reached this agreement. This 21-round negotiation process represents a significant milestone in their trade partnership.

The India-EFTA trade agreement holds immense potential to boost bilateral trade and investments, strengthening economic ties between the regions.

Ratification and Implementation

The FTA’s ratification timeline varies across the EFTA bloc, with Switzerland aiming for parliamentary approval by the end of 2024. The agreement’s entry into force is expected shortly thereafter, contingent on the completion of ratification processes by all EFTA countries.

Navigating Intellectual Property Rights

Intellectual Property Rights (IPR) was a focal point, with Switzerland advocating for data exclusivity to protect its interests. Although this clause was not included in the final agreement, a compromise was reached, reflecting the evolving landscape of innovation and IPR significance in both regions.

India’s Expanding Trade Network

India has been actively forging trade partnerships through Regional Trade Agreements (RTAs) and Free Trade Agreements (FTAs). As of 2021, India has signed 13 such agreements with various countries and regions, including:

• ASEAN: This includes the India-ASEAN FTA and separate agreements with Singapore, Malaysia, and Thailand.
• East Asia: Agreements exist with Japan and South Korea.
• South Asia: The South Asian Free Trade Area (SAFTA) encompasses India, Sri Lanka, Nepal, and Bhutan.
• Mauritius: A Comprehensive Economic Cooperation and Partnership Agreement was signed in 2021.
• United Arab Emirates: A similar agreement with the UAE was signed in 2022.
• Australia: An Economic Cooperation and Trade Agreement was signed in 2022, but not yet implemented.

Trade Growth with RTA Partners

India’s merchandise exports to these RTA partner countries have witnessed significant growth in the past decade. Here’s a glimpse into some key figures (in US$ billion)-

While agreements with Mauritius and the UAE are recent, the initial years will provide a clearer picture of their impact. The recently signed pact with Australia holds promise for further trade expansion once implemented.

This focus on RTAs reflects India’s commitment to strengthening economic ties with regional partners, fostering trade growth, and creating a more integrated market landscape.

Sustainability and Human Rights

The Trade Sustainability chapter of the FTA addresses crucial issues like environmental protection, labor rights, and gender equality. Both parties have shown a keen interest in incorporating global standards and agreements, such as the Paris Accord, into their trade practices, underscoring a shared commitment to sustainable and ethical trade.

Conclusion

The India-EFTA FTA exemplifies a strategic partnership that promises economic growth, job creation, and enhanced bilateral relations. With the private sector’s active participation and the supportive frameworks established by the agreement, this FTA is poised to unlock new horizons for cooperation between India and the EFTA countries.

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