On March 10, 2024, India solidified its economic ties by signing a significant Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA) countries, which include Switzerland, Iceland, Norway, and Liechtenstein. This landmark agreement marks a strategic move towards fostering deeper trade relations and enhancing economic cooperation between India and the EFTA states. The Union Cabinet, under the leadership of Prime Minister Narendra Modi, approved the signing of the TEPA, reflecting the Government’s commitment to advancing mutually beneficial partnerships. EFTA, established in 1960, stands as an inter-Governmental organisation dedicated to promoting free trade and fostering economic integration among its member States. Through this agreement, India aims to leverage opportunities for growth, innovation and shared prosperity while reinforcing its commitment to global economic collaboration.
Unveiling TEPA
During the event, Piyush Goyal, Minister of Commerce and Industry, Food and Consumer Affairs, and Textiles, highlighted the significance of the TEPA, emphasising its modern and ambitious nature. He underscored a historic milestone as India embarked on signing an FTA with four developed nations within the important economic bloc of Europe. Remarkably, this agreement introduces a binding commitment, promising 100 billion dollars in investment and the creation of 1 million direct jobs over the next 15 years, marking a groundbreaking precedent in the history of FTAs. Piyush Goyal expressed optimism about the TEPA’s potential to invigorate the Make in India initiative and offer unprecedented opportunities to the nation’s young and talented workforce. Moreover, he emphasised that the FTA would open doors for Indian exporters, providing access to expansive European and global markets, thus fostering enhanced economic growth and collaboration.
Unprecedented commitments and opportunities
The Transcontinental Economic Partnership Agreement marks a groundbreaking milestone in India’s trade relations, heralding an era of modern and ambitious agreements. This historic accord represents India’s first Free Trade Agreement (FTA) with four developed nations, a significant economic bloc within Europe. Unprecedented in the realm of FTAs, TEPA secures a binding commitment of 100 billion dollars in investments and pledges to create 1 million direct jobs over the next 15 years. This transformative agreement is poised to invigorate the Make in India initiative, offering a springboard for the nation’s burgeoning workforce to showcase their talents. With TEPA, Indian exporters gain a pivotal window of opportunity to tap into expansive European and global markets, paving the way for enhanced economic prosperity and strengthened international partnerships.
Comprehensive Framework: Key highlights of TEPA
The agreement encompasses 14 comprehensive chapters, each addressing crucial aspects of market dynamics and trade relations. These chapters prioritise market access concerning goods, delineate rules of origin, streamline trade facilitation processes, establish frameworks for trade remedies, and address sanitary and phytosanitary measures to ensure product safety. Additionally, they tackle technical barriers to trade, promote investment, facilitate market access for services, safeguard intellectual property rights, and underscore the significance of trade and sustainable development. Furthermore, the agreement incorporates a range of legal and horizontal provisions aimed at fostering equitable and transparent trade practices among participating entities.
Market Access
The European Free Trade Association has pledged to foster investments in India with the goal of augmenting the foreign direct investment (FDI) influx by USD 100 billion over the course of the next 15 years. This commitment is twofold, aiming not only to bolster economic ties but also to catalyse the creation of 1 million direct employment opportunities within India through these investments. Notably, the scope of these investments excludes foreign portfolio investment, underscoring a strategic focus on long-term economic growth and job creation in the Indian market.
Legal commitment: Target-oriented investment and job creation
In a historic milestone for Free Trade Agreements (FTAs), a groundbreaking legal commitment is poised to reshape economic landscapes by prioritising the promotion of target-oriented investment and job creation. This unprecedented move signals a paradigm shift in international trade dynamics, emphasising not only the facilitation of commerce but also the imperative to foster sustainable growth and employment opportunities. By embedding these commitments within the framework of FTAs, nations are forging a new era of collaboration aimed at harnessing the potential of trade agreements to drive prosperity and inclusivity on a global scale. This bold step underscores the evolving priorities of nations as they navigate the complexities of the modern economy and strive to maximise the benefits of international trade for the betterment of societies worldwide.
Tariff Reductions
The European Free Trade Association has made a significant market access offer to India, encompassing 92.2 per cent of its tariff lines. This offer effectively covers a vast majority, accounting for 99.6 per cent of India’s exports. Notably, EFTA’s proposal extends to all non-agricultural products, demonstrating a comprehensive approach to trade liberalisation. Furthermore, for Processed Agricultural Products (PAP), EFTA has proposed tariff concessions, signalling a commitment to facilitating trade across diverse sectors. This proactive engagement underscores the potential for enhanced economic cooperation and mutual benefits between India and the EFTA member states.
India’s Tariff Access Offer to EFTA: A Balanced Approach
India has made a significant move by offering access to 82.7 per cent of its tariff lines, encompassing 95.3 per cent of EFTA exports, with gold constituting a significant portion. Interestingly, the effective duty on gold remains unchanged amidst these negotiations. Sensitivity towards sectors like pharmaceuticals, medical devices, and processed food has been duly considered in extending these offers, reflecting a nuanced approach. Sectors such as dairy, soya, coal, and sensitive agricultural products have been deliberately excluded, showcasing a strategic safeguarding of domestic interests and industries. This balanced stance underscores India’s commitment to fostering international trade while safeguarding key sectors crucial for its economic stability and growth.
Mutual commitments for enhanced bilateral cooperation
India has made significant strides in its trade negotiations with the European Free Trade Association, offering access to 105 sub-sectors while securing commitments from member countries. Specifically, India has garnered commitments in 128 sub-sectors from Switzerland, 114 from Norway, 107 from Liechtenstein, and 110 from Iceland. These agreements mark substantial progress towards enhancing bilateral trade relations and fostering economic cooperation between India and the EFTA nations. The exchange of commitments underscores the mutual benefits derived from increased market access and signifies a promising outlook for future trade partnerships between the parties involved.
Strengthening services exports through TEPA
Under the Transatlantic Economic Partnership Agreement, an array of opportunities emerges to invigorate our services exports, particularly in sectors where we hold key strengths and interests. With a strategic focus on IT services, business services, personal, cultural, sporting and recreational services, as well as other education and audio-visual services, TEPA promises to amplify our global footprint. The agreement facilitates an enriched landscape for collaboration with the European Free Trade Association, offering improved access through digital delivery of services (Mode 1), expanded commercial presence (Mode 3), and fortified commitments for the entry and temporary stay of crucial personnel (Mode 4). Through TEPA, we anticipate a symbiotic relationship that not only fosters economic growth but also promotes innovation and cross-cultural exchange, positioning our services sector as a formidable force on the international stage.
Intellectual Property Rights in Trade Agreements
In the Trade and Economic Partnership Agreement, India’s commitments regarding Intellectual Property Rights (IPR) mirror the standards set by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The comprehensive IPR chapter established with Switzerland, renowned for its high standards in intellectual property protection, underscores India’s robust IPR regime. Notably, India’s concerns regarding the production and accessibility of generic medicines, as well as issues pertaining to the evergreening of patents, have been thoroughly acknowledged and addressed within the framework of the agreement. This demonstrates a balanced approach that safeguards both the interests of intellectual property holders and the accessibility of essential medicines for the populace.
India’s commitment to sustainable development
India’s commitment to sustainable development is deeply rooted in its pursuit of inclusive growth, social development, and environmental protection. Through policies and initiatives aimed at bridging socio-economic disparities, India endeavours to ensure that prosperity extends to all segments of society, including marginalised communities and rural populations. By prioritising investments in education, healthcare, and social welfare, the country aims to enhance human capital and improve overall well-being. Moreover, India recognises the urgency of environmental conservation, implementing measures to address pollution and mitigate climate change impacts. Initiatives like the Swachh Bharat Abhiyan and the National Clean Air Programme underscore India’s holistic approach to sustainable development, reflecting its determination to build a prosperous future while safeguarding the planet’s ecological balance.
Streamlining trade procedures for global competitiveness
The Trade Facilitation Agreement stands as a pivotal mechanism fostering transparency, efficiency, simplification, harmonisation, and consistency within trade procedures. By streamlining processes and reducing bureaucratic barriers, TEPA empowers our exporters with enhanced access to specialised inputs, facilitating the creation of a conducive trade and investment environment. This, in turn, propels the export of Indian-made goods to global markets, driving economic growth and strengthening India’s position in the international trade arena. Through TEPA, India is poised to capitalise on its potential, harnessing the benefits of seamless trade operations to propel its exporters towards greater success and competitiveness on the global stage.
Implications and Opportunities: Gateway to EU Markets
Switzerland’s pivotal position as a member of the European Free Trade Association and its bilateral agreements, notably the Treaty on the Free Movement of Persons (TEPA), offer an enticing avenue for businesses seeking integration into EU markets. With over 40 per cent of its global services exports directed to the EU, Switzerland is a strategic hub for international commerce. Indian companies, in particular, can leverage Switzerland’s economic stability and business-friendly environment to establish a foothold for expanding their market reach into the EU. By capitalising on Switzerland’s advantageous trade relationships and geographical proximity to key European markets, Indian enterprises can navigate regulatory frameworks and cultural nuances while tapping into the EU market’s vast opportunities. Switzerland’s role as a conduit between India and the EU underscores its significance as a dynamic gateway for global business expansion.
Empowering Make in India and Atmanirbhar Bharat
The Technology and Economic Partnership Agreement aims to invigorate India’s ambitious “Make in India” and Atmanirbhar Bharat initiatives by fostering domestic manufacturing across key sectors.
With a strategic focus on infrastructure and connectivity, manufacturing, machinery, pharmaceuticals, chemicals, food processing, transport and logistics, banking and financial services, and insurance, TEPA aims to galvanise indigenous production capabilities. By encouraging local manufacturing, TEPA enhances self-reliance and contributes to job creation, economic growth, and technological advancement. Through collaborative efforts and investment incentives, TEPA underscores India’s commitment to harnessing its vast potential and fostering a conducive environment for sustainable development and global competitiveness.
Objectives of TEPA
The Technology and Employment Promotion Agreement stands poised to spearhead the creation of a substantial number of direct job opportunities for India’s burgeoning aspirational workforce over the next 15 years. Through TEPA, India aims to enhance vocational and technical training facilities, empowering its youth with relevant skills for the evolving job market. Moreover, TEPA fosters technology collaboration, offering access to cutting-edge advancements in precision engineering, health sciences, renewable energy, innovation, and research and development. By leveraging TEPA’s framework, India seeks to address employment challenges and propel its workforce towards global competitiveness and sustainable growth.
The India-EFTA Trade and Economic Partnership Agreement heralds a new collaboration and economic growth era. With its comprehensive framework and unprecedented commitments, TEPA strengthens India’s trade relations with EFTA countries and positions India as a key player in the global economic landscape. As India embarks on this transformative journey, TEPA serves as a testament to the nation’s commitment to inclusive growth, sustainable development, and fostering a conducive environment for trade and investment.
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