India and the European Free Trade Association (EFTA) signed the Trade and Economic Partnership Agreement (TEPA) on March 10.

EFTA currently has four member countries: Iceland, Liechtenstein, Norway and Switzerland.

A Free Trade Agreement between India and four-nation bloc EFTA will help enhance two-way commerce, investment flows, job creation and economic growth.

What is FTA?

A Free Trade Agreement (FTA) is an arrangement between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non-tariff barriers on substantial trade between them. 

FTAs normally cover trade in goods (such as agricultural or industrial products) or trade in services (such as banking, construction, trading, etc). 

FTAs can also cover other areas such as intellectual property rights (IPRs), investment, government procurement and competition policy, etc.

European Free Trade Association (EFTA)

• The European Free Trade Association (EFTA) is an inter-governmental 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.

• There were seven founding countries: Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom (UK). They were joined by Iceland in 1970, by Finland in 1986 and by Liechtenstein in 1991. 

• Meanwhile, in 1973, Denmark and the UK joined the EU. Portugal joined the EU in 1986. Austria, Finland and Sweden joined the EU in 1995, consequently leaving EFTA.

• EFTA countries are not part of the European Union (EU).

• EFTA does not envisage political integration. It does not issue legislation, nor does it establish a customs union.

• EFTA’s first objective was to liberalise trade between its Member States.

• EFTA countries enjoy access to one of the world’s largest networks of preferential trade relations, covering 80 per cent of EFTA’s merchandise trade.

• Currently, the EFTA States together have 30 FTAs in force or awaiting ratification covering 40 partner countries worldwide (outside Europe).

• EFTA is the European Union’s third largest trading partner in merchandise, and the second largest in services.

• India’s exports to EFTA countries during April-February 2022-23 stood at $1.67 billion as against $1.74 billion in 2021-22. Imports aggregated at $15 billion during the 11-month period as compared to $25.5 billion in 2021-22. 

• The EFTA Council is the highest governing body of EFTA. The Council usually meets eight times a year at the ambassadorial level (heads of permanent delegations to EFTA) and once a year at ministerial level.

• The EFTA Secretariat is situated in Geneva.

EFTA States

• Switzerland is a world leader in pharmaceuticals, biotechnology, machinery, banking and insurance.

• Liechtenstein, like Switzerland, is highly industrialised and specialised in capital-intensive and research & development driven technology products. 

• The Icelandic economy benefits from renewable natural resources, not least rich fishing grounds, and has increasingly diversified into other industries and services. 

• Abundant natural resources also contribute significantly to Norway’s economic strength, including oil and gas exploration and production, and fisheries, as well as important service sectors such as maritime transport and energy-related services.

Highlights of the trade deal:

• The agreement has 14 chapters, including trade in goods, rules of origin, intellectual property rights (IPRs), trade in services, investment promotion and cooperation, government procurement, technical barriers to trade and trade facilitation.

• The EFTA has committed an investment of $100 billion — $50 billion within 10 years after the implementation of the agreement and another $50 billion in the next five years — which would facilitate the creation of one million direct jobs in India. 

• For the first ever time in the history of Free Trade Agreements, a legal commitment is being made about promoting target-oriented investment and creation of jobs.

• The commitment is the key substance of the TEPA, which took almost 16 years to conclude, for India in return for opening its markets for several products coming from the EFTA nations.

• TEPA would stimulate India’s services exports in sectors of key strengths/interests such as IT services, business services, personal, cultural, sporting and recreational services, other education services, audio-visual services, etc.

• TEPA provides an opportunity to integrate into EU markets. Over 40 per cent of Switzerland’s global services exports are to the EU. Indian companies can look to Switzerland as a base for extending its market reach to the EU.

• The deal would accelerate creation of a large number of direct jobs for India’s young aspirational workforce in the next 15 years in India, including better facilities for vocational and technical training. 

• TEPA is the 14th trade deal that India has signed with individual countries and regional blocs. TEPA is the first trade agreement with developed countries from the Western Hemisphere.

• This will be the fourth agreement of the Modi-led government. India signed pacts with Mauritius, the UAE and Australia. Talks are at an advanced stage with the UK, Oman and Peru for FTAs.

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