India-EFTA Free Trade Agreement
- March 9, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
India-EFTA Free Trade Agreement
Subject: Economy
Section: External sector
- Parties Involved:
- India and the four-nation European Free Trade Association (EFTA).
- EFTA includes Iceland, Liechtenstein, Norway and Switzerland.
- Signing Date: Expected to be signed on March 10, after long negotiations.
- Aim of the Agreement:
- Increase trade and investment flows between India and EFTA countries.
- Foster job creation and economic growth in both regions.
- Expected Impact:
- The India-EFTA Trade and Economic Partnership Agreement (TEPA) is anticipated to attract investments worth $100 billion from the EFTA countries into India. These investments are projected to occur over the next 15 years.
- The influx of investments is estimated to generate approximately one million jobs in India.
- Signatories:
- Government officials and industry representatives from all EFTA countries and India are informed about the signing.
- First FTA with Investment Commitment:
- This agreement marks the first Free Trade Agreement (FTA) where India secures commitments on investment and employment from partner nations.
- Trade Deficit Mitigation:
- The India-EFTA TEPA is expected to help reduce the significant trade deficit that India currently has with the EFTA bloc.
In summary, the India-EFTA Trade and Economic Partnership Agreement (TEPA) is set to be signed on March 10, aiming to bolster trade, attract investments, create jobs, and address trade deficits between India and the European Free Trade Association (EFTA) countries of Switzerland, Finland, Norway, and Liechtenstein.
This agreement is notable as it secures commitments on investment and employment, potentially bringing substantial economic benefits to both sides.
TEPA – Trade and Economic Partnership Agreement:
- A Trade and Economic Partnership Agreement (TEPA) is a type of economic partnership agreement between countries. It offers flexibility in negotiating terms and conditions, tailored to the specific needs and interests of the involved parties.
Objective of TEPA:
- Aims to boost bilateral trade and economic cooperation between India and EFTA.
- Goals include reducing tariffs and non-tariff barriers, enhancing market access, and promoting investment flows.
About EFTA – European Free Trade Association:
- Establishment: Founded in 1960.
- Member Countries: Iceland, Liechtenstein, Norway, and Switzerland.
- Headquarters: Geneva.
- Purpose: To promote free trade and economic cooperation among member states and with other countries.
- Relationship with EU: EFTA has a close relationship with the EU, having signed several agreements facilitating the free movement of goods, services, capital, and people between EFTA countries and the EU.
- Strengths of EFTA Countries:
- These economies rank among the highest globally in innovation, competitiveness, wealth creation per inhabitant, life expectancy, and quality of life.
- EFTA companies are leaders in pharmaceuticals, biotechnology, machinery manufacturing, R&D-driven technology products, and more.
Trade with India:
- EFTA is India’s 9th largest trading partner, accounting for 2.5% of India’s total merchandise trade in 2020-21.
- Main Indian exports to EFTA: textiles, chemicals, gems, jewelry, machinery, and pharmaceuticals.
- Main Indian imports from EFTA: machinery, chemicals, precious metals, and medical instruments.
Potential Benefits of TEPA between India and EFTA States:
- Trade:
- India’s growth and leadership in green technologies could benefit from EFTA’s support.
- Market Access:
- Improved access for Indian goods to EFTA markets, where EFTA export products often serve as inputs in Indian export industries.
- Investment:
- Expected increase in investment from EFTA states (already over USD 35 billion invested in India).
- Mutual Benefits:
- EFTA states can benefit from India’s skilled workforce in the services sector.
- India can benefit from the 400+ companies established by EFTA states, generating over 150,000 jobs.
- Renewable Technologies:
- EFTA states can contribute cutting-edge technologies in solar, wind, hydro, and geothermal power to India’s green growth aspirations.
Challenges in Implementing TEPA between India and EFTA Countries:
- Economic Structure:
- EFTA countries focus on high-tech industries, while India’s industries generally serve lower and middle-tech sectors.
- Market Access:
- Addressing issues related to tariffs, quotas, and non-tariff barriers for free and fair trade.
- Regulatory Differences:
- Variances in regulations, standards, and legal frameworks between India and EFTA countries.
- Securing Domestic Manufacturers:
- Particularly important in sectors where EFTA countries have a competitive edge, such as pharmaceuticals and machinery manufacturing.
- Environmental and Social Considerations:
- Addressing challenges like promoting sustainable development and gender equality.
Conclusion:
For a successful TEPA between India and EFTA, addressing outstanding issues, identifying areas of mutual benefit, and promoting collaboration on skilled labor are crucial. Strong political involvement and guidance are necessary for a swift negotiation process.