India-EFTA Trade and Economic Partnership Agreement

India-EFTA Trade and Economic Partnership Agreement

Subject: IR

Section: Trade

Duties Phased Out:

• Duties on a substantial number of goods imported from EFTA countries (Switzerland, Norway, Iceland, and Liechtenstein) will be phased out by India under the agreement.

Offered Tariff Lines:

• India is offering 82.7% of its tariff lines, covering 95.3% of EFTA exports. More than 80% of this import is gold.

Sensitivity Consideration:

• Sensitivity related to Production-Linked Incentives (PLI) in sectors such as pharmaceuticals, medical devices, and processed food have been considered while extending offers.

Exclusion List:

• Sectors such as dairy, soya, coal, and sensitive agricultural products are kept on the exclusion list.

Immediate Elimination of Tariffs:

• Coal (except steam and coking coal), most medicines, dyes, most textiles and apparel, and iron and steel products will have zero tariffs immediately upon the entry into force of the FTA.

Gradual Elimination of Tariffs:

• Tariffs on various products will be eliminated over different time frames:
  • Cod liver oil and fish body oil: Five years
  • Tuna, trout, salmon, olive oil, cocoa bean, powder, malt products, corn flakes, instant tea, roasted chicory, most machinery, bicycle parts, clocks, and watches: Seven years
  • Smartphones, chocolates, medical equipment (most), chocolate, caramel, coffee, avocado, apricot, and olives: Ten years

Exclusive Duty Cut Offers:

• Some duty-cut offers are exclusive to Switzerland due to its status as the largest trade partner among the EFTA countries.

Duty Cuts on Wines:

• Duty cuts on wines from Switzerland will align mostly with concessions extended to Australia under the Australia-India Economic Cooperation and Trade Agreement.

Tariff Cuts in Sugar and Diamonds:

• India commits to a 50% tariff reduction in sugar over ten years and a 50% tariff reduction for cut and polished diamonds to 2.5% in five years.

Industrial Products:

• 98% of India’s exports to Switzerland (accounting for 70% of India’s exports to EFTA) are industrial products, which will now be imported duty-free.

Agricultural Exclusions:

• Switzerland has excluded most agricultural items such as dairy products, honey, various vegetables, wheat, maize flour, and cane sugar from these concessions.

Conclusion:

The India-EFTA Trade and Economic Partnership Agreement aims to gradually eliminate tariffs on a wide range of goods traded between India and EFTA countries. This move is expected to boost trade relations, create new market opportunities, and promote economic cooperation between the parties involved.

Highlights of the TEPA:

• Scope of the Agreement:
  • The TEPA covers a wide range of areas including tariff reductions, increased market access, and streamlined customs procedures.
  • It includes a chapter on commitments to human rights and sustainable development, a first for an FTA involving EFTA countries.
• Goal of $100 Billion Investment:
  • Commerce Minister stating that it includes a “binding commitment” for EFTA countries to invest $100 billion in India.
  • However, EFTA ministers clarified that this commitment is a “goal” based on current investment levels, GDP projections, and the estimated value of the TEPA.
• Investment Promotion:
  • The TEPA’s Chapter 7 focuses on “Investment Promotion and Cooperation,” outlining shared objectives to increase foreign direct investment (FDI) from EFTA states into India.
  • Aims include $50 billion increase in FDI within 10 years and another $50 billion in the subsequent five years.
  • Additionally, the agreement targets the generation of 1 million jobs in India resulting from these investments.

Negotiation and Ratification:

• Extensive Negotiations:
  • Talks for the India-EFTA FTA began in 2008, with a significant break before resuming in 2023.
  • The 14-chapter treaty was concluded after 21 rounds of negotiations, covering crucial areas such as investment, rules of origin, intellectual property rights (IPR), and sustainable development.
• Expected Ratification:
  • The agreement will come into force after ratification by EFTA states through their parliamentary procedures, expected possibly by the end of the year.

Significance and Implications:

• Export Boost:
  • India anticipates a significant increase in exports to EFTA countries, especially in sectors such as textiles, leather, gems, and jewelry.
  • Reduction of tariff disadvantages will enhance India’s competitiveness in the EFTA market.
• Cheaper Raw Materials:
  • Indian industries will benefit from access to cheaper raw materials from EFTA countries, particularly in sectors like steel, aluminum, and engineering.
• Strengthening Indo-Pacific:
  • The TEPA contributes to a stronger Indo-Pacific economic architecture, fostering cooperation and capacity-building among nations.

Controversies and Concerns:

• Pharma Clause Dispute:
  • The inclusion of a “data exclusivity” clause for pharmaceuticals was a point of contention.
  • Indian negotiators rejected this clause, citing concerns over access to generic medicines and patient rights.
• IPR Review Mechanism:
  • The TEPA includes a review mechanism for intellectual property rights, which some activists fear could pressure India into adopting stricter measures.
• Assessment and Monitoring:
  • Continuous monitoring through the Joint EFTA-India Committee will ensure progress towards investment and job creation goals.
  • India retains the option to withdraw trade concessions temporarily if targets are not met within the stipulated timeframe.

What is Data Exclusivity?

Data exclusivity is a provision within trade agreements that imposes a specific period during which the clinical trial data for a drug developed by a pharmaceutical company is protected from use by competitors. This protection means that generic drug manufacturers cannot rely on the original clinical trial data to support their own applications for market approval during this exclusivity period.

Key Features:

• Duration: The duration of data exclusivity can vary but typically ranges from 5 to 10 years.
• Purpose: It is intended to reward innovation by providing a period of market exclusivity to the originator company, during which they can recoup their investment in research and development without competition from generic versions of the drug.
• Impact: Data exclusivity can delay the entry of generic versions of drugs into the market, which may limit competition and keep prices higher for consumers.

Impact on India’s Generic Drug Industry:

• Affordability of Medicines: India’s generic drug industry is renowned for providing affordable medications, not only to its own population but also to many countries around the world. Data exclusivity could hinder the availability of these cost-effective alternatives.
• Competition and Innovation: By delaying the entry of generic versions, data exclusivity may reduce competition in the pharmaceutical market. This could potentially stifle innovation and limit patients’ access to newer treatments.