India-EFTA Desk

Syllabus: GS2/IR/GS3/Economy

Context

• India and the European Free Trade Association (EFTA) have taken a significant step towards deeper economic collaboration with the inauguration of the India-EFTA Desk.

About

• This initiative follows the recently concluded India-EFTA Trade and Economic Partnership Agreement (TEPA), making EFTA the first European bloc to formalize a trade pact with India. 
  • India has received an investment commitment of $100 billion in 15 years from the EFTA, allowing several products such as Swiss watches, chocolates and cut and polished diamonds at lower or zero duties.
• India-EFTA Desk will serve as the bridge between businesses on both sides, promoting ease of doing business.
  • It will support EFTA businesses looking to invest, expand, or establish operations in India. 
  • It will drive investment in renewable energy, life sciences, engineering, and digital transformation.

Significance for India

• EFTA has a strategic importance to India’s development goals.
  • Norway’s expertise in green shipping, Switzerland’s advancements in rail networks, Iceland’s leadership in geothermal energy, and Liechtenstein’s high-value manufacturing. 
• The research collaborations between IITs and the Arctic University of Norway, will demonstrate TEPA’s broader scope beyond trade.

About 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.
• Trade with India: India-EFTA two-way trade was about $24 billion in 2023-24 against $18.65 billion in 2022-23.
  • Switzerland is the largest trading partner and investor in India followed by Norway in the bloc.

India-EFTA Trade and Economic Partnership Agreement

• Market Access: The EFTA states has imports and exports of goods and services close to $1.3 trillion in 2021, making them the 10th largest merchandise traders and eighth largest services traders worldwide.
  • It would provide Indian businesses with improved access to the markets of EFTA member countries. 
• Diversification of Trade Partners: Reducing dependency on a few key trading partners can help mitigate risks associated with economic fluctuations in specific regions.
• Tariff Reductions: The trade agreements typically involve the reduction or elimination of tariffs on goods traded between the participating countries.
  • This can make Indian goods more competitive in EFTA markets, potentially boosting exports.
• Technology and Innovation Exchange: EFTA companies are world leaders in pharmaceuticals, biotechnology, machinery manufacturing, R&D-driven technology products, geothermal-related technologies, marine technology, energy-related services, financial services, banking and insurance.
  • Collaboration in research, technology transfer, and innovation can be enhanced through a trade agreement. 
• Potential for Increased Foreign Direct Investment (FDI): It can attract foreign direct investment by creating a more favorable and predictable business environment. 
• Mutually Beneficial Trade: EFTA has a track record of negotiating mutually beneficial trade agreements, which to date cover an extensive network of 29 free trade agreements (FTAs) with 40 partner countries. 

Concerns 

• Divergent Regulatory Standards: Harmonizing standards related to product quality, safety, and environmental regulations is crucial for smooth trade, and differences may lead to additional compliance costs for businesses.
• Intellectual Property Rights (IPR): Both parties need to agree on the standards and enforcement mechanisms for patents, copyrights, trademarks, and other intellectual property issues.
• Services and Investment Barriers: Concerns may arise if there are obstacles to the free flow of services or restrictions on foreign investment in certain sectors.
• Labor and Environmental Standards: Ensuring that the trade deal includes provisions for maintaining or improving labor rights and environmental protections is essential.

Way Ahead

• The potential benefits of a TEPA between India and EFTA states are significant. 
• This is not merely a transactional arrangement to improve market access, but the basis for a long-term relationship grounded with a vision for mutual growth. 
• The EFTA desk embodies this commitment by fostering connections that benefit economies and societies of all parties, not just economically but socially and environmentally as well.

Source: PIB