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FTA with European countries UPSC NOTE

 What are the key components? 

  • Investment: TEPA sets out a target of a $100 billion investment into India from EFTA countries, and consequent one million jobs over a 15-year period. 

  • Trade in goods: The chief gain here is for EFTA’s market, which can have more access to India due to tariff concessions. India is mandated to eliminate tariff on most products within seven to 10 years. 

  • Trade in services: On services, both India and the EFTA members have committed to liberalisation across a wide range of sectors. Some key benefits for India include commitments by Norway for

access to yoga instructors and practitioners of traditional medicine from India, subject to compliance with its legal framework. 

  • Sustainable development: the TEPA’s chapter on Trade and Sustainable Development (TSD), comprising commitments on environment and labour aspects, represents a first for India in any FTA.

  • Intellectual property rights: the EFTA countries are home to several pharmaceutical and high technology MNCs, whose ask has been commitments on protection of intellectual property rights that exceed the WTO’s Trade-Related Aspects of Intellectual Property Rights(TRIPS) Agreement. 

For trading partners, is a FTA with India attractive because they can surpass India’s high tariff walls to access a large market?

  • The chief gain here is for EFTA’s market, which can have more access to India due to tariff concessions

  • India is mandated to eliminate tariff on most products within seven to 10 years

  • This will benefit EFTA exports of seafood like tuna and salmon, fruits like olives and avocados, coffee capsules, oils like cod liver and olive oil, and a variety of sweets and processed foods including chocolate and biscuits

  • Also covered are smartphones, bicycle parts, medical equipment, clocks, and watches, many medicines, dyes, textiles, apparels, iron and steel products, and most machinery.

  • Additionally, tariffs on cut and polished diamonds will be reduced from 5% to 2.5% in five years. 

  • For wines, India has extended tariff cuts as follows: wines priced between $5 and less than $15 will see a duty reduction from 150% to 100% in the first year.

  • Which will then decrease gradually to 50% over 10 years. 

  • For wines costing $15 or more, the initial duty cut is from 150% to 75%, eventually reducing to 25% after 10 years.

  • Gold, which accounts for 80% of the merchandise imports from EFTA countries, as well as dairy, soya, coal and some sensitive agricultural products have been excluded from India’s tariff concession list.

  • With regard to India’s exports to EFTA, there will be no material impact since most products face very low or zero tariff for nations which have the Most Favoured Nation status in EFTA countries. 

  • For example, value wise, 98% of India’s $1.3 billion merchandise exports to Switzerland are industrial products where tariff is already zero.

  • The remaining 2% of India’s exports are agricultural products, where gains would be negligible due to low trade values.

  • On services, both India and the EFTA members have committed to liberalisation across a wide range of sectors. 

  • Some key benefits for India include commitments by Norway for access to yoga instructors and practitioners of traditional medicine from India.

  • Subject to compliance with its legal framework

  • Both Norway and Switzerland have committed four and three years respectively for highly skilled Indian professionals moving as intra-corporate transferees, subject to obtaining work permits.

  • The nitty-gritties of actual service delivery are often impacted by regulatory requirements in each country

  • A separate annex in the TEPA lays the framework for easing the recognition of qualifications of service suppliers through streamlining the various requirements.

  • Including the possibility of achieving equivalence by topping up academic or training requirements, rather than having to repeat the entire professional degree. 

  • Separate annexes on financial services and telecom services similarly lay down disciplines that aim to enable ease of providing such services.

  • In a departure from previous FTAs of India, benefits of the trade in services chapter would extend to any juridical person by merely being incorporated in an EFTA member.

  • While having its actual operations in any other WTO member, including those with which India does not have FTAs. 

  • This will allow free riders benefiting from the TEPA. 

  • The investment chapter stems that risk by requiring benefits to be confined only to entities having substantial business activities within the EFTA.

  • However, services related to commercial presence will be governed by the services chapter.

What are the other challenges at a time of rising protectionism across both developed and developing countries?

  • Disagreements on Tariff Reduction: EU wants significant cuts on tariffs for their goods (cars, wines, dairy) entering India, while India desires similar reductions for its exports (textiles, agricultural products) facing high tariffs and non-tariff barriers in the EU.

  • Asymmetrical Impact: Indian industry, particularly in manufacturing and agriculture, might struggle to compete with the influx of cheaper European goods

  • This could lead to job losses and closures of domestic companies.

  • Investor Protection vs. Regulatory Space: The EU might push for stronger intellectual property  rights and relaxed regulations for foreign investment. 

  • This could limit India's ability to control its markets and protect domestic industries still in their development phase.

  • Limited Mobility of Professionals: The EU might be hesitant to open its borders for Indian professionals (accountants, lawyers) due to individual member state control over work permits and differing qualification standards.

  • Protectionist Policies: Rising protectionism globally might make both sides less willing to make concessions or open up their markets


  • Negotiations could stall due to a lack of trust and a desire to prioritize domestic interests.

  • Complex Negotiations: FTAs involve intricate discussions on various sectors (services, investment, government procurement). Reaching an agreement that satisfies both parties can be a lengthy and challenging process.

  • Bureaucratic Hurdles: Differences in regulations and administrative procedures between India and the EU can create obstacles in implementing the FTA even after it's signed.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: FTA with European countries UPSC NOTE
FTA with European countries UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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