TAG: GS 2: INTERNATIONAL RELATIONS
THE CONTEXT: India and the European Free Trade Association (EFTA) countries, including Switzerland, Finland, Norway, and Liechtenstein, are poised to sign a groundbreaking bilateral free trade agreement named the India-EFTA Trade and Economic Partnership Agreement (TEPA) on March 10.
EXPLANATION:
- This agreement is anticipated to significantly enhance trade and investment collaboration, fostering economic growth, job creation, and bilateral prosperity.
Key Points of the India-EFTA TEPA:
- Investment and Job Commitments:
- The TEPA is expected to facilitate investments totaling $100 billion from the EFTA bloc into India over the next 15 years.
- This substantial investment is projected to generate approximately one million jobs, marking a notable commitment from the partner nations.
- Historic FTA for India:
- This marks India’s first Free Trade Agreement where it has secured commitments on both investment and employment from partner nations, signaling a new era of economic cooperation.
- Sectors of Focus:
- The EFTA countries are keen on investing in joint ventures, emphasizing sectors such as pharmaceuticals (particularly medical devices), certain chemicals, food processing, and engineering products.
- Trade Deficit Mitigation:
- The trade pact is anticipated to address India’s significant trade deficit with the EFTA bloc.
- In 2023, India’s exports to the EFTA countries amounted to $1.87 billion, while imports stood at $20.45 billion, with pearls, precious stones, and metals dominating the inflow.
- Boost to Ongoing FTA Negotiations:
- The successful signing of the India-EFTA TEPA is poised to boost India’s ongoing Free Trade Agreement negotiations with other global partners, including the European Union (EU) and the United Kingdom (UK).
- This achievement signals India’s capability to close deals and enhances its global trade credibility.
Background and Negotiation Journey:
- The negotiations for the India-EFTA TEPA were initiated in October 2016, reflecting a comprehensive approach covering trade in goods, rules of origin, trade in services, investment promotion, cooperation, trade and sustainable development, and customs and trade facilitation.
- The agreement showcases the dedication of both parties to fostering a multifaceted and mutually beneficial economic relationship.
Future Implications:
- The TEPA is likely to set a precedent for future trade agreements, indicating that India is open for business and capable of negotiating deals with global partners.
- The promised investments from EFTA countries are expected to be sourced from provident funds, presenting a sustainable and long-term commitment.
European Free Trade Association (EFTA):
- The European Free Trade Association (EFTA) is the intergovernmental organisation of Iceland, Liechtenstein, Norway and Switzerland.
- It was set up in 1960 by its then seven Member States for the promotion of free trade and economic integration between its members.
- Relations with the EEC, later the European Community (EC) and the European Union (EU), have been at the core of EFTA activities from the beginning.
- Since the beginning of the 1990s, EFTA has actively pursued trade relations with third countries in and beyond Europe.