Round The World

New Delhi, 15 March 2024

India-FTA Trade Pact

A REAL BREAKTHROUGH

By Prof. (Dr.) D.K. Giri

(Secretary General, Assn for Democratic Socialism) 

The signing of Trade and Economic Partnership Agreement (TEPA) on 10th March between India and EFTA (European Free Trade Association) countries is a real breakthrough for India on building trade relations. This is because India has been negotiating an EFTA with European Union (EU) since 2007, which is yet to conclude. In the meantime, India managed to sign it with four EFTA countries which are small in population but strong in economy. These countries participate in European Single Market of EU and part of the Schengen area. The countries are Switzerland, Iceland, Norway and Liechtenstein. 

Negotiations for a trade agreement began with EFTA in 2008, one year later than that with EU. And it has been concluded earlier. The negotiators of EFTA felt that the agreement signifies success as it precedes any such agreement with the EU or any developed economy. The Indian side was led for the last 10 years by Minister of Commerce and Industry, Food and Consumer Affairs and Textiles, who sounded euphoric about the agreement. He said, “TEPA is a model and ambitious trade agreement”. 

It has created a couple of firsts. For the first time, India is signing an FTA with four developed countries which constitute a powerful economic bloc in Europe. “For the first time in history of FTAs binding commitment of 100 billion USD investment and 1 million direct jobs in the next 15 years has been given. The agreement will give a boost to Make in India and provide opportunities to young and talented workforce. The agreement will provide a window to Indian exporters to access large European and global markets”. 

Beginning in 2008, negotiations covered 13 rounds and then were put on hold in November 2013. They were resumed after gap of 10 years last year in October. And in less than six months, the TEPA was signed. Prime Minister Narendra Modi commended the agreement in a written message, “Despite structural diversities in many respects, our economies possess complementarities that promise to be a win-win situation for all nations”. This feeling was reciprocated by one of the top negotiators, Swiss State Secretary for Economic Affairs, Helene Budliger Artieda, “There was a sense that we could really have a fair and balanced deal, which would the win-win …. five times win for all five parties.” (four EFTA countries plus India). 

The agreement consists of 14 chapters. It focuses on market access related to goods, rules of origin, trade facilitation, technical barriers to trade, investment proportion, market access to services, intellectual property rights, trade and sustainable development and many other legal provisions. Significantly, the agreement will see considerable tariff reduction, increase in market access and simplification of customs procedure. Most of all, the investment of 100 billion USD is the highlight of the agreement which provided the breakthrough moment. 

Prime Minister Modi noted that the global leadership of EFTA countries in innovation and R&D across diverse sectors like digital trade, banking and financial services and pharma will open up new doors of collaboration. Investment in these sectors will open up great opportunities for India. This is the second such full-fledged FTA signed after India’s agreement with the United Arab Emirates.

Indian industries have welcomed the trade agreement. The Director General of Confederation of Indian Industry opined that the agreement will yield multi-dimensional gains to Indian industries. He said, “It will elevate trade, promote technology, knowledge transfer, and encourage investment”. He added that improved market access in EFTA countries for Indian goods will boost India’s export potential and greatly expand employment opportunities. 

As noted, the negotiations concluded in a fast-track mode and the deal was signed just a few days, ahead of the announcement of dates for Lok Sabha elections in India. However, the political-electoral angle in the negotiations could not be attributed to EFTA countries although the incumbent Union Government could dangle it to the electorate as a prize they have secured. A question was asked to the Swiss State Secretary by an Indian journalist, “Did you think this deal would happen before Indian elections?” Her answer was candid. She said that one can never be 100 per cent sure in such negotiations involving five countries. “But I really felt sincere interest, trust and friendship between India and EFTA negotiators”. She pointed out that the agreement on investment chapter was a breakthrough moment. 

According to TEPA’s Chapter 7 that deals with investment promotion and cooperation, both sides are agreed that first tranche of 50-billion USD will be invested within 10 years and another 50 billion in the next five years. The EFTA side clarified in terms of riders that it is not the states that make the investment; it is the companies which do. Norwegian Trade Minister said in a press conference that, “It is about creating the right environment, speaking to our companies and then tracing and tracking development. It is also recorded that if the investment is not made within 15 years with a three-year grace period and another two years in negotiations, India will be entitled to withdrawing some of its trade concessions. 

It is the investment that will define the parameters of success. India should do everything possible to facilitate that investment. Many investors know that India is a big market but are equally aware of the bottle necks. It is for New Delhi to clear such impediments and make it investment friendly. Likewise, India’s export regime has to improve. Timely clearance of goods by the Indian Custom Department is necessary. The timelines for delivery have to be adhered to by the Indian companies. The quality check is another issue that Indian exporters must be wary of. In my research on India-EU trade, these issues were pointed out by EU officials. 

The agreement will come into force after the ratification by EFTA countries expected by the end of this year. Switzerland, the biggest of the four, will possibly bring the agreement for ratification by Swiss Parliament in the autumn session. So, by the end of the year, the agreement should come into force. Other countries which have a different time span for ratification process would also complete it by the end of the year. 

The agreement is indeed a momentous occasion for Indian trade despite the murmur on timing of the agreement which is just before the elections. It is an achievement that Indians should be happy about. This will perhaps open up of the possibility of such agreements in general with other developing countries and hasten the process with the EU in particular. New Delhi should set an example by successfully implementing the TEPA.---INFA 

(Copyright, India News & Feature Alliance)