India-EFTA TEPA

Context

India and the four-nation European Free Trade Association (EFTA) grouping – comprising Iceland, Liechtenstein, Norway and Switzerland – are set to conclude a trade deal. The Trade and Economic Partnership Agreement (TEPA) is among three free-trade agreements (FTAs).

European Free Trade Association (EFTA)

• The EFTA is the intergovernmental organisation of Iceland, Liechtenstein, Norway and Switzerland.
• It was set up in 1960 (by the Stockholm Convention in 1960) by its then seven Member States for the promotion of free change and economic integration among its members.
• The agency operates in parallel with the European Union (EU), and all 4 member states take part inside the European Single Market and are a part of the Schengen Area.
  • However, they’re now not a party to the European Union Customs Union.
• The most important tasks of the Association are threefold –
  • Maintaining and developing the EFTA Convention, which regulates monetary relations among the four EFTA States;
  • Managing the Agreement at the European Economic Area (EEA Agreement), which brings together the EU and three of the EFTA States – Iceland, Liechtenstein and Norway – in a unmarried (inner) market.
  • Developing EFTA’s international community of unfastened change agreements.

Economic Relations Between the EFTA States and India

• Over the past two decades, the whole exchange among the EFTA States and India has been developing regularly.
  • In 2022, the blended EFTA-India merchandise trade exceeded USD 6.1 billion.
  • The number one imports to the EFTA States consisted of natural chemicals (27.5%), while machinery (17.5%) and pharmaceutical products (11.4%).
• India’s primary imports from Switzerland in FY23 included: gold: $12.6 billion, equipment: $409 million, pharmaceuticals: $309 million, coking and steam coal: $380 million, and so on.
• Furthermore, offerings trade and foreign direct funding (FDI) have also reached considerable degrees.

What is the Trade and Economic Partnership Agreement (TEPA)?

• India-EFTA TEPA might see the European bloc committing an investment of $100 billion in India over 15 years in sectors which includes pharma, meals processing, engineering and chemical substances.
• The funding commitment, the first of its kind in an FTA, could largely come from provident finances in EFTA international locations.
• These encompass Norway’s $1.6-trillion sovereign wealth fund, the arena’s biggest pension fund.
• However, the investment commitment might not be legally binding and falls beneath “investment promotion”.
• Also, this is not a Bilateral Investment Treaty (BIT), as is being negotiated with the United Kingdom and the EU.

Benefits of TEPA

• For EFTA

• • • Trade agreements have historically helped India’s partner countries due to high common tariffs in India (hover around 18%, most of the highest in the world).
    • After the India-EFTA deal, India ought to see higher imports of equipment, pharmaceuticals, clinical units and equipment as there would be a pointy reduction in Indian price lists.
    • Therefore, an investment dedication is vital as India-EFTA alternate is essentially in favour of the European grouping as far as goods are concerned.
    • For instance, India runs a high alternate deficit with Switzerland, which could widen after India removes duties as part of the deal.

• For India

• • India is trying to attract investments and get better market access for its service area personnel.
  • EFTA is also looking at placing joint ventures in pharma, (in particular medical gadgets), chemical compounds, food processing and engineering.
  • India is calling on the EFTA deal to assist diversify imports faraway from China. India presently depends on China for key medical imports.

Source: PIB

UPSC Prelims Practice Question

Q.Consider the following countries: (2018)

1. Australia   
2. Canada
3. China
4. India
5. Japan
6. USA  

Which of the above are among the ‘free-trade partners’ of ASEAN?

   a. 1, 2, 4 and 5                  b. 3, 4, 5 and 6

c. 1, 3, 4 and 5                  d. 2, 3, 4 and 6

Ans – “c”

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