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The Hindu
The Hindu
National
Suhasini Haidar

India signs free trade pact with 4 European countries

India signed a free trade agreement (FTA) with four European countries — Iceland, Liechtenstein, Norway, and Switzerland — on Sunday, with a goal of reaching $100 billion in investments in India and one million jobs.

The Trade and Economic Partnership Agreement (TEPA) marks the second such full-fledged FTA signed after India’s agreement with the United Arab Emirates, and will see considerable tariff reductions, increase market access, and simplify customs procedures. The EFTA countries, which are separate from the European Union, said that, for the first time, the FTA also included a chapter on commitments to human rights and sustainable development.

The agreement will come into force after ratification by the EFTA states according to their parliamentary procedures, expected possibly by the end of the year.

Investment: commitment or goal?

Touting the clauses on investment as a unique achievement, Commerce Minister Piyush Goyal said that it was “for the first time in the history of the world that we are inking an FTA with a binding commitment to invest $100 billion in India from EFTA countries”.

However, EFTA ministers clarified that the commitment was in fact, a “goal” for both sides, based on the current levels of investment pegged at about $10.7 billion, as well as GDP predictions, and the estimated value of the TEPA. According to the TEPA’s Chapter 7 that deals with “Investment Promotion and Cooperation”, the two sides had shared “objectives” to increase foreign direct investment from EFTA states into India by $50 billion within 10 years and another $50 billion in the next five years. EFTA states would also “aim to facilitate the generation of 1 million jobs within 15 years in India” resulting from those investments.

Periodic assessments

“States cannot decide where companies invest,” Norwegian Trade Minister Jan Christian Vestre told journalists in a briefing, explaining that EFTA would nonetheless “work hard “ to ensure the goals were realised. “It’s about creating the right environment, setting up offices, speaking to our companies and then tracing and tracking development”, he said, adding that the investments by EFTA companies would be assessed periodically.

If the goals are not achieved within 15 years, with a three-year grace period and another two years in negotiations, India will be entitled to withdrawing some of its trade concessions “temporarily”, the agreement says.

Apart from Mr. Vestre, the EFTA Ministers who flew into Delhi for the signing of the agreement were Swiss Federal Councillor Guy Parmelin, Iceland Foreign Affairs Minister Bjarni Benediktsson, and Liechtenstein Foreign Affairs Minister Dominique Hasler.

21 rounds of talks

The final rounds of negotiations went down to the wire, said officials, with both sides holding many rounds of meetings virtually and in-person over the past few months in order to complete the agreement ahead of India’s announcement of parliamentary elections, which is expected later this month. 

Talks for an FTA between India and the EFTA states began in in 2008, and were resumed in 2023, after a decade-long break. The 14-chapter treaty was concluded after 21 rounds of negotiations, including specific chapters on investment, rules of origin, intellectual property rights and sustainable development that were particularly tricky. A breakthrough came in December 2023, as the two sides agreed on putting the investment goals into a separate chapter, and they were able to conclude the agreement, which was cleared by the Union Cabinet on March 7.

In a written message, Prime Minister Narendra Modi called the TEPA a “win-win” agreement for all nations, and said its signing marked a “watershed moment” in ties between India and the European Trading bloc.

Controversial pharma clause

In particular, Swiss negotiators in the EFTA team had bargained hard for a clause on “data exclusivity” for pharma, which was criticised by health activists who claimed that it would, over time, increase the burden on Indian manufacturers of life-saving generic medicines. Indian negotiators rejected its inclusion in the agreement, although the appendix of the TEPA chapter on Intellectual Property Review (IPR) includes a review of the regulatory mechanisms attached to it.

“We would have loved to have included that clause,” State Secretary for Economic Affairs Helene Budliger told The Hindu in an interview on Sunday, calling IPR a “bread and butter issue” for the Swiss economy that depends heavily on research and development revenue. Ms. Budliger said that India had agreed to meet EFTA states “half-way” on the IPR chapter, and rejected the allegations by health activists, including Medecins Sans Frontiers (MSF), that the EFTA states had tried to bully India on the clause. “How could a country of nine million bully a G-20 country of 1.4 billion? We negotiated our position with Indian negotiators, who are very good, “ she added. 

However, the Geneva-based MSF (otherwise known as Doctors without Borders) said that even the review mechanism established under the TEPA agreement could be a problem for patient rights and access to medicines. “The Joint EFTA-India Committee comprising senior government officials will be a form of continuous pressure on India to adopt TRIP-plus [extra measures] like data exclusivity,” MSF Access Campaign’s regional head Leena Menghaney told The Hindu.

The concluded TEPA is expected to increase trade in sectors like pharmaceuticals, medical devices, food products and processing as well as R&D in many areas, raising it from current levels of about $25 billion, with a massive trade deficit of $18.58 billion.

(with inputs from Jacob Koshy)

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