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India’s gains from the proposed free trade agreement with the European Free Trade Association (EFTA) countries, to be signed on Sunday, will have to mostly flow from the $100-billion investment and 1 million jobs promised by the bloc over 15 years as goods exports may gain minimally due to insignificant existing tariffs, a report by research body Global Trade Research Initiative has indicated.
New Delhi convinced the EFTA countries, which include Switzerland, Iceland, Norway and Liechtenstein, to weave in commitments on minimum investment flow and job creation keeping in mind that the existing goods tariffs in the bloc are already zero or very low, an official told businessline. This is especially true for Switzerland, which accounted for $1.38 billion of the total $1.87 billion of Indian exports to the EFTA in Calendar Year (CY) 2023.
“Since 98 per cent of India’s exports to Switzerland are industrial goods already entering at zero tariffs, they won’t benefit from the FTA. India’s agricultural exports are minimal and unlikely to increase significantly due to strict quality standards and non-tariff barriers,” the report by Ajay Srivastava, co-founder, GTRI pointed out.
The signing ceremony of the proposed pact in New Delhi on March 10, officially called the India-EFTA Trade and Economic Partnership Agreement (TEPA), is likely to include Trade Ministers of some EFTA countries as well, such as Norway, apart from Commerce & Industry Minister Piyush Goyal.
“Successfully concluding an FTA with developed countries like Switzerland, and Norway would send a positive signal to the world. It will showcase India’s firm commitment to trade liberalisation when the world is turning protectionist,” the report said.
The low scope for increasing market access for goods in EFTA could be of concern as India had a trade deficit of $18.58 billion with the bloc in CY2023, with its imports at $20.45 billion. Of this, gold and other precious metals, stones and coins, all imported from Switzerland, accounted for $16.7 billion. Gold, accounting for 80 per cent of India’s imports from Switzerland, is a critical factor, the report said.
On the promised $100 billion investments from the EFTA countries and creation of a million jobs, the report said it was mostly private firms that decided on investments based on their own criteria.
However, another official indicated that dealing with the private sector may not be an issue as investments could flow from the countries’ provident funds.
The JV areas that the countries have short-listed, where investments are to be made, mostly don’t have competition from India, the official said. “EFTA has agreed to the condition of investments being made in India because they are getting market access. Also, they are not our competitors in the identified sectors. For instance, in India, most medical devices are imported from China. The pact will lead to diversification of imports, which is absolutely necessary,” the official added.
The India EFTA FTA talks officially began in January 2008, but stalled in 2013. The negotiations re-started in October 2016.
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