EFTA Deal: India to link duty cuts with investments from companies of member nations

India is set to tie duty reductions associated with the trade agreement with the European Free Trade Association (EFTA) to investments made by companies from member nations, including Switzerland, Norway, Iceland, and Liechtenstein, reported TOI.
These nations have collectively pledged to invest $100 billion over a span of 15 years.

The FTA is scheduled to be signed on Sunday following its clearance by the Union cabinet on Thursday evening. Negotiations for the agreement commenced in 2008 but were halted after the Modi government assumed office in 2014, as per a TOI report.

In 2023, the talks resumed as India intensified its trade interactions with various nations, including the UK, European Union, Mauritius, Australia, UAE, and Canada.

“We will evaluate the level of investment during review meetings and determine the extent of tariff reduction accordingly,” TOI quoted a senior official as saying.

The report also stated that this approach marks the first instance of such a mechanism being implemented. A potential impact
Countries like Switzerland have eliminated import duties on industrial goods while maintaining them on agricultural products. Potential tariff cuts could affect items such as watches, wine, chocolates, and machinery.Regarding the reduction of tariffs on gold, a significant demand from the trading bloc, particularly Switzerland, India will lower the bound rate from 40 per cent to 39 per cent, while maintaining the effective duty at 15 per cent, the TOI report said, citing an official.

Furthermore, the government has also maintained its stance on intellectual property rights, emphasizing that concessions related to data exclusivity are not being offered, although discussions on specific patent-related issues are welcomed. A more accommodating patent regime was strongly advocated by Swiss pharmaceutical companies.

While trade agreements with Mauritius, Australia, and UAE have been finalized, the one with Canada has been delayed due to a diplomatic dispute. Progress on the proposed agreement with the EU is sluggish, and negotiations with the UK are characterized by firmness on India’s part, ensuring its interests are fully safeguarded before proceeding. Similarly, the agreement with Oman is expected to take time as the commerce department has yet to finalize the proposal for cabinet approval, according to sources.

“Successfully concluding FTA with developed countries like Switzerland, and Norway would send a positive signal to world. It will showcase India’s firm commitment to trade liberalisation in the time when whole world is turning protectionist,” TOI quoted think tank GTRI as saying, while cautioning against limited gains on goods exports for India.

It further stated, “In services sector, the agreement aims to open up sectors like IT, finance, tourism, and education, allowing Indian and EFTA service providers to operate in each other’s markets with fewer restrictions. However, the potential gains in services are limited, as countries typically agree to bind existing levels of policy commitments, implying a continuation of the status quo.”

(With inputs from TOI)