EFTA trade policies, India, Indo-Pacific, Latest news

The India-EFTA free trade agreement: what was agreed

The European Free Trade Association and India have concluded a free trade agreement.

The deal, signed on Sunday (10 March) in New Delhi, marks the culmination of 16 years of negotiations with the four-nation EFTA bloc.

The agreement is notably shorter than many recent FTAs concluded by the EU. It only covers 14 chapters and runs to a mere 69 pages, plus several annexes.

Sensitive agri-food sectors are completely excluded from the scope of the agreement and India has also shielded its automobile sector from any tariff cuts. There are minimal provisions in areas like government procurement.

But the agreement provides full or partial tariff liberalisation for around 95% of goods exported to India from Switzerland. The Norwegian government claimed that the deal would provide zero tariffs on ‘nearly every Norwegian good’.

There is also an agreement committing the EFTA countries to invest at least US$100 billion in the India economy over the next 15 years.

A six-page chapter on trade and sustainable development ‘reaffirms commitments’ by either side under both the Paris agreement on climate change and the international labour organisation.

As well as Switzerland and Norway, the agreement also encompasses the two other EFTA members – Iceland and Liechtenstein. The latter party is included in Switzerland’s provisions.

India hails ‘historic milestone’

“The India-EFTA trade and economic partnership agreement marks a historic milestone in our growing partnership,” said Indian trade minister Piyush Goyal.

Swiss federal councillor Guy Parmelin said the accord would “allow us to make better use of our economic potential and create additional opportunities for both India and the EFTA states”.

The deal is the fourth FTA to have been signed by India in the past ten years, after previous such accords with Mauritius, the UAE and Australia.

The agreement notably includes provisions which will allow Indian and EFTA nationals temporary residency rights in each other’s jurisdictions when travelling on business.

Arguments over arrangements of this type are among the main current blockers in the final phases of FTA negotiations between India and the UK.

New Delhi is also making slow progress towards a trade deal with the EU.

The India-EFTA trade agreement includes chapters on trade in goods – including rules of origin and trade facilitation – trade remedies, sanitary and phytosanitary rules, services, investment promotion, intellectual property, government procurement, competition, trade and sustainable development and dispute settlement.

Trade in goods

A feature of the agreement is the fact that India has created three separate tariff schedules, relating respectively to imports from Switzerland – including Liechtenstein – Iceland, and Norway. There are only very minor differences between these schedules.

In all cases, India has completely excluded a number of products from the scope of the agreements.

These include beef, dairy products, certain fruits and vegetables, cars and gold.

For many other products, tariffs are to be phased out over a period of seven or ten years after entry into force. For live animals, there is to be a 10-year reduction in tariffs to bring these down ultimately to 50% of the starting value.

A special annex provides for a 10-year reduction in the tariff applied on Swiss wines, from 150% to 25% – but only for high-priced quality wines.

Spirits drinks are excluded from the scope of the agreement.

The EFTA secretariat reported that pharmaceutical products, machinery, watches, fertilizers, medicines, chemical products, minerals and fish would all benefit eventually from zero tariffs.

The Swiss government said its exporters would make annual customs tariff savings of up to CHF 166 million (€173m) by the end of the various transition periods.

For the EFTA countries, who are very protective of their own agricultural markets, sensitive farm sectors are similarly excluded from the scope of the deal.

In Switzerland’s case, the agreement reflects the country’s recent decision to eliminate all tariffs on industrial products.

Sanitary and phytosanitary measures

This chapter very largely reflects relevant WTO provisions

An important concession by India is recognition of the principle of ‘regionalisation’. This is an acceptance that if a livestock disease is detected in an exporting country, any resulting restrictions on imports will be limited to the territory affected by the outbreak, and not applied to the entire country.

Technical barriers to trade

This chapter also reaffirms the WTO commitments of the various parties, and sets up mechanisms for consultation and information exchange.

Rules of origin

The agreement is based on the model initially proposed by the EFTA countries. The provisions allow for bilateral cumulation between the parties, as well as use of already widely used ‘EUR.1’ certificates. Self-declaration of origin is permitted under certain conditions.

Trade in services

This chapter builds on relevant provisions under the WTO’s GATS agreement, with additional market access commitments on telecommunications, environmental services, insurance and banking and maritime transport.

A notable aspect of the agreement relates to provisions on temporary stay for business people. This has been agreed by all parties to the agreement, although the different parties have all made different offers in terms of the maximum permitted periods for business visitors and inter-company transfers.

The agreement includes specific annexes covering financial services, telecommunication services, maritime personnel, recognition of professional qualifications and movement of natural persons.

Investment promotion

A novel feature of this FTA is a commitment by the EFTA countries to promote investment in India – a key objective of the agreement from New Delhi’s perspective.

The parties set two targets: an increase of US$100 billion in investment from EFTA over the 15 years following entry into force, and the associated creation of at least one million jobs in India.

If these targets are not met, the agreement states that India would ultimately be entitled to “undertake temporary and proportionate remedial measures to rebalance the concessions given to the EFTA states in the schedule of commitments under the chapter on trade in goods.”

Intellectual property

This chapter was sensitive for negotiators on either side.

India and Switzerland were recently on opposite sides of heated arguments in the WTO over a waiver on intellectual property protections for vaccines, tests and treatments relating to the Covid-19 pandemic.

The Swiss government said that the new FTA “guarantees that patented products exported from Switzerland to India cannot be discriminated against in favour of locally manufactured products.”

This “eliminates the legal uncertainty that has existed in India for years,” Bern said.

Switzerland also emphasised that the FTA confirms the TRIPS provision on compulsory licensing for the export of patented medicines to countries with insufficient production capacity. “Naturally, this will benefit exports of generic medicines,” the government said.

The deal also makes provisions for geographical indications to be protected in both the EFTA countries and India, for both agricultural and non-agricultural goods.

Government procurement

The agreement’s chapter on government procurement contains just three articles, and lacks commitments.

“Parties shall enhance mutual understanding of their government procurement laws, regulations, and agreements,” the text says.

Trade and sustainable development

The EFTA-India FTA devotes six pages to sustainable development.

Commitments include “not to derogate from or, through a sustained or recurring course of action or inaction, fail to effectively enforce their respective environmental and labour laws in a manner affecting trade between the parties”.

The text also reaffirms the parties’ commitments under both the Paris agreement in climate change, and the ILO conventions on labour rights.

This chapter is excluded from the scope of the agreement’s provisions on dispute settlement.

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