News
The other European FTA that India is close to signing
Summary
- Investment pledge, duty-free access for India’s animal products.
NEW DELHI : The four nations making up the European Free Trade Association (EFTA) have offered duty-free market access for India’s animal products, fish, processed food and vegetable oils in a trade pact that is expected to be signed next week, two people aware of the matter said.
The EFTA nations—Iceland, Liechtenstein, Norway and Switzerland—have also proposed $100 billion of investment in India by their companies over 15 years, which could create about a million jobs, the people said on the condition of anonymity. The two sides began negotiations for a trade treaty in 2008.
“This (entry for animal products and investments) duty-free access starts immediately and is the best offer among the other FTA partners," one of the two people said. “This is all finalized and will be signed by early next week."
According to the people cited above, this is the first time an Indian FTA comes with an investment commitment. Of this, $50 billion is to be invested in the first 10 years, and the rest in the next five. A third government official said EFTA was initially willing to commit to only $50 billion, but doubled the figure later.
In return, India has offered immediate duty elimination on 40% of trade lines where trade activities were low or nil, the people cited above said. It will allow the EFTA nations to export their goods and services without any tariff obligation.
India’s exports to the EFTA countries in FY24 (April 2023-January 2024) were at $1.87 billion, including items like chemicals, pharmaceuticals, apparel, and pearls, precious and semi-precious stones. India imported goods worth $20.45 billion from the EFTA countries in 2023, including pearls, precious or semi-precious stones, precious metals and coins valued at $16.7 billion.
“In the EFTA, we are focusing on both goods and services trade. Switzerland, in particular, is a significant market for goods, having eliminated duties on all industrial goods from January 2024. This move creates a level-playing field where every country can benefit," said Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO).
“However, the real gains are expected to come from services and investment. Gold is a crucial commodity, accounting for about 80% of trade between India and the EFTA, with India being one of the major gold importers. It’s unlikely that all gold from Switzerland will be duty-free, considering the concessions given to the UAE," Sahai added. Emerging areas like government procurement and digital trade will also be important for India, he said.
The deal will also allow India’s services sector to increase exports to Switzerland and Norway, which constitute a substantial share of exports to the EFTA nations, one of the two people cited above said.
If the EFTA treaty is signed next week, it will be the only trade deal to be finalized before the general elections, dates for which may be announced next week. India is also conducting FTA talks with the UK and Oman, which may have to wait till a new government comes.
Queries sent to the commerce minister and secretary, and spokespersons for the Prime Minister’s Office and the commerce ministry remained unanswered till press time. Asdis Olafsdottir, head of information and communication at the EFTA secretary-general’s office, declined to comment.
Signing the FTA will be a big achievement if things work according to plan, said Abhash Kumar, assistant professor of economics at Delhi University.
“While the trade agreement can offer various benefits, the matter of concern is domestic industries, labour standards and environmental regulations. India imports a huge amount of gold from Switzerland. The FTA should focus on the precious metal to ensure its availability in Indian markets at affordable rates," Kumar said.
Separately, India is nudging the UK to allow entry of Indian ghee in exchange for allowing British cheese. Trade negotiators have pressed the UK to waive its sanitary and phytosanitary rules to let in ghee and other dairy products, which remain shut out of the British market.
Founded as an association of several European countries in 1960, the EFTA was a challenger to the European Union (EU) in its early years. While most European countries hitched their wagon with the EU, the four EFTA countries have held out, though both share close trade and people links.
Among the EFTA countries, Switzerland is India’s largest commercial partner. Trade between India and Switzerland amounted to $17.14 billion in 2022-23, out of $18.66 billion with the whole group.
