TAG: GS 2: INTERNATIONAL RELATIONS
THE CONTEXT: The recently signed Trade and Economic Partnership Agreement (TEPA) between India and the European Free Trade Association (EFTA) countries – Iceland, Liechtenstein, Norway, and Switzerland – marks a significant development in their bilateral relations.
EXPLANATION:
- The negotiations, initiated in 2008 and resumed in 2023 after a decade-long hiatus, have culminated in a comprehensive 14-chapter treaty addressing various aspects of trade, investment, and sustainable development.
Key Elements of TEPA
- Comprehensive Trade and Economic Partnership
- TEPA aims to foster economic cooperation by reducing tariffs, enhancing market access, and simplifying customs procedures.
- Notably, it is the second full-fledged Free Trade Agreement India has entered into, following the agreement with the United Arab Emirates.
- Investment Goals and Commitments
- Commerce Minister highlighted the unique aspect of the agreement, citing a binding commitment for EFTA countries to invest $100 billion in India.
- However, EFTA ministers clarified that this commitment is a goal based on current investment levels of approximately $10.7 billion, GDP predictions, and the estimated value of TEPA.
- Human Rights and Sustainable Development
- In a notable move, TEPA includes a chapter on commitments to human rights and sustainable development.
- This marks a departure from traditional FTAs and reflects a growing emphasis on ethical considerations in international trade.
- Periodic Assessments and Withdrawal Mechanism
- The agreement outlines a structured approach to assess and track investment goals.
- If the $100 billion target is not met within 15 years, with a grace period and negotiation window, India retains the right to temporarily withdraw some trade concessions.
- This mechanism underscores the significance of achieving mutually agreed-upon objectives.
Negotiation Challenges and Controversial Aspects
- Pharma IPR Mechanism
- Swiss negotiators pushed for a “data exclusivity” clause in the pharmaceutical sector, sparking controversy. Health activists, including Medecins Sans Frontiers (MSF), raised concerns about potential negative impacts on Indian manufacturers of generic medicines.
- Although the clause was not included, the TEPA’s Intellectual Property Review chapter contains a review mechanism, raising apprehensions about future pressures on India’s intellectual property rights.
- 21 Rounds of Talks and Negotiations
- The finalization of TEPA required 21 rounds of negotiations, with the last rounds going down to the wire.
- Both virtual and in-person meetings were conducted intensively in the months leading up to the agreement, emphasizing the urgency to complete negotiations before India’s parliamentary elections.
Economic Impact and Trade Sectors
- Economic Implications
- TEPA is expected to significantly impact sectors such as pharmaceuticals, medical devices, food products, and research and development (R&D).
- The agreement aims to boost bilateral trade from the current level of about $25 billion, but concerns exist regarding the substantial trade deficit of $18.58 billion.
- Increased Market Access and Tariff Reductions
- The agreement’s provisions for increased market access and tariff reductions underscore the potential for expanded economic cooperation.
- This could lead to enhanced opportunities for Indian businesses in EFTA countries and vice versa.
Political Significance and Future Prospects
- Political Endorsement and Ratification
- Prime Minister termed TEPA a “win-win” agreement, characterizing its signing as a “watershed moment” in India-EFTA ties.
- The agreement now awaits ratification by the EFTA states according to their parliamentary procedures, expected by the end of 2024.
- Potential for Further Trade Agreements
- TEPA adds momentum to India’s efforts to diversify its trade partnerships.
- The agreement sets a precedent for including commitments to human rights and sustainable development in future trade deals, aligning with global trends toward more responsible and ethical trade practices.
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.