New Delhi: India and the four-nation European bloc EFTA on Sunday signed a free trade agreement under which New Delhi received an investment commitment of $100 billion in 15 years from the grouping while allowing several products such as Swiss watches, chocolates and cut and polished diamonds at lower or zero duties.
The European Free Trade Association (EFTA) members are Iceland, Liechtenstein, Norway and Switzerland.
The bloc committed an investment of $100 billion – $50 billion within ten years after the implementation of the agreement and another $50 billion in the next five years – which would facilitate the creation of 1 million direct jobs in India.
This is a first-of-its-kind pledge agreed upon in any of the trade deals signed by India so far. The commitment is the key substance of TEPA (Trade and Economic Partnership Agreement), which took almost 16 years to conclude.
Shortly after the agreement was signed, Norway on Sunday said it will eliminate customs duties for almost 98% of the imports from India under the framework of the pact.
Switzerland said its parliamentary approval process for TEPA will be initiated immediately so that the country can ratify the agreement by 2025 at the latest.
“The signing of the agreement between the countries of the European Free Trade Association and India after 16 years of negotiations is a significant milestone in Swiss trade policy,” the Swiss government said in a statement. It said India currently levies very high import tariffs on most products.
“Under the FTA, India will lift or partially remove customs tariffs on 95.3% of industrial imports from Switzerland (excluding gold) either immediately or with transition periods,” it said.
Prime Minister Narendra Modi said the signing of the trade agreement between India and the four-nation European bloc EFTA is a “watershed moment” as it symbolises a shared commitment to open, fair and equitable trade.
“EFTA countries gain market access to a major growth market. Our companies strive to diversify their supply chains while rendering them more resilient. India, in return, will attract more foreign investment from EFTA,” Federal Councillor Guy Parmelin, speaking on behalf of the EFTA member states, said.
The biggest trading partner of India in the bloc is Switzerland, which already has zero customs duties on almost all industrial goods. Due to this, the Swiss side cannot offer anything in the goods category and in the agri sector, there are sensitivities for them.
India has low trade volumes with the remaining three countries. India would get duty concessions on processed agricultural products.
“It is for the first time in the history of FTAs, a binding commitment of $100 billion and one million direct jobs in the next 15 years has been given,” Commerce and Industry Minister Piyush Goyal said.
As the investments will be made by private sector firms of the EFTA nations, the agreement will facilitate it by providing legal certainty in terms of tariff regime and in terms of regulations and this certainly is prompting them to come forward and invest, additional secretary in the Ministry of Commerce L Satya Srinivas told reporters.
An official said there is a provision in the agreement that if the proposed investments would not come because of some reasons, India can “re-balance or suspend” the duty concessions to the four countries.
India is offering 82.7% of its tariff lines or product categories, which covers 95.3% of EFTA exports of which more than 80% of imports are gold.
On gold, India has not touched the effective customs duty (15%) but reduced the bound rate by 1% to 39%, which will not have any implication on imports.
India will also provide duty concessions on certain production-linked incentive sectors like pharma, medical devices and processed food. Sensitivities related to these sectors have been kept in mind while extending offers. Sectors such as dairy, soya, coal and sensitive agricultural products are kept on the exclusion list and there will not be any duty concessions on these goods.
Domestic customers will get access to high-quality Swiss products such as watches, chocolates, biscuits, and clocks at lower prices as India will phase out customs duties under the trade pact on these goods over 10 years.
In the services sector, the commerce ministry said, India has offered 105 sub-sectors to the EFTA like accounting, business services, computer services, distribution and health. On the other hand, the country has secured commitments in 128 sub-sectors from Switzerland, 114 from Norway, 107 from Liechtenstein, and 110 from Iceland.
Segments where Indian services will get a boost include legal, audio-visual, R&D, computer, accounting and auditing.
According to the ministry, India’s interests in generic medicines and concerns related to the evergreening of patents have been fully addressed.
Further, the pact would provide an opportunity for domestic exporters to integrate into EU (European Union) markets. Over 40% of Switzerland’s global services exports are to the EU. Indian companies can look to Switzerland as a base for extending their market reach to the EU.
It will also facilitate technology collaboration and access to world-leading technologies in precision engineering, health sciences, renewable energy, Innovation and R&D.
It will take up to a year to implement the agreement due to an elaborate ratification process of these pacts in different countries.
The agreement has 14 chapters, including trade in goods, rules of origin, intellectual property rights (IPRs), trade in services, investment promotion and cooperation, government procurement, technical barriers to trade and trade facilitation.
