Syllabus
GS Paper 2 – Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
GS Paper 3 – Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.
Applications where to apply?
When asked about
– TEPA
– Economic and Strategic relations with the west
– Liberalisation and Globalisation
Context
The India-EFTA Trade and Economic Partnership Agreement (TEPA) is the latest in India’s recent Free Trade Agreements (FTAs).
Source
The Hindu | Editorial dated 19th March 2024
On FTAs with European countries
The India-EFTA Trade and Economic Partnership Agreement (TEPA) marks a significant milestone in India’s pursuit of deeper economic engagement with the European Free Trade Association (EFTA) countries , comprising Switzerland, Norway, Iceland, and Liechtenstein. This agreement, the first of its kind between India and any European country, signifies India’s strategic pivot towards the western world in its free trade initiatives.
Key Highlights of the Trade Pact
- Tariff Concessions:
- The agreement covers tariff concessions for key sectors like pharma, chemicals, and minerals to facilitate increased bilateral trade.
- Foreign Direct Investment (FDI) Commitments:
- Binding commitments are made to boost FDI from EFTA countries into India by $50 billion within the first ten years and an additional $50 billion in the following five years.
- Investment Facilitation Mechanisms:
- Mechanisms are outlined to facilitate private sector investment from EFTA countries, ensuring transparency and accountability.
- Provision for Withdrawal:
- Provisions are in place to withdraw tariff concessions if expected investment commitments are not met, ensuring adherence to agreed terms.
- Market Access for Service Providers:
- The agreement opens avenues for Indian service providers, particularly in audio-visual services, with commitments from EFTA nations for non-discrimination and market access.
- Visa Facilitation:
- Visa categories for intra-corporate transferees and independent professionals are provided by EFTA countries, enhancing opportunities for Indian service providers.
- Tariff Elimination:
- Tariffs on industrial goods exported to India by EFTA companies, including pharmaceuticals, machinery, watches, and chemicals, will be eliminated.
- Agricultural Tariff Concessions:
- While agricultural items are largely excluded, meaningful tariff concessions are granted for both basic and processed agricultural products.
Challenges in India-EFTA Trade Agreement
- Tariff Limitations:
- Existing zero or low tariffs in EFTA countries limit potential gains for Indian goods exports.
- Trade Imbalance:
- India’s trade deficit with EFTA, particularly in gold and precious metals, raises concerns about trade relations imbalance.
- Limited Market Access:
- Limited scope for increasing market access for Indian goods in EFTA poses challenges for trade expansion.
- Competition:
- Competition from other countries like Vietnam and Mexico may impact India’s ability to attract investment.
- Political Uncertainty:
- Political uncertainty due to upcoming elections could delay future trade agreements and geopolitical opportunities.
Opportunities in India-EFTA Trade Agreement
- Sustainable Development:
- The TEPA includes a chapter on Trade and Sustainable Development, addressing environmental and labor concerns.
- While not subject to dispute resolution, this chapter highlights India’s willingness to engage on these issues within the framework of multilateral agreements.
- Intellectual Property Rights:
- The agreement acknowledges the concerns of EFTA countries regarding intellectual property rights, pushing for commitments beyond those outlined in the WTO’s TRIPS Agreement.
- This includes requirements for streamlined patent opposition processes and adjustments to India’s patent filing regulations.
- Investment Inflow:
- $100 billion investment commitments over 15 years offer significant economic opportunities, including job creation and sectoral growth.
- Services Sector Development:
- The agreement could bolster India’s services sector competitiveness and contribute to economic growth.
- Sectoral Benefits:
- Key sectors like pharma, chemicals, food processing, and engineering could benefit from investment inflow.
- Commitments by Norway for access to yoga instructors and practitioners of traditional medicine from India offers key benefits
- Joint Ventures:
- Collaboration through joint ventures could facilitate technology transfer, skill development, and product diversification.
- Economic Stimulus:
- Investment from EFTA countries, including Norway’s sovereign wealth fund, could stimulate economic activity and fuel India’s growth trajectory.
Conclusion
TEPA represents a significant step forward in India’s trade relations with developed economies, signaling its openness to deeper economic integration and cooperation. The agreement’s success hinges on effective implementation and adherence to its provisions over time.
Related Topics
Key Terms in the article
India and Most Favored Nation (MFN) Status
India, as a member of the World Trade Organization (WTO), automatically extends MFN status to other WTO members. This means it treats all WTO members equally in terms of trade privileges, like tariffs.
- Exceptions can be specified in agreements or schedules notified to the WTO.
Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement
The TRIPS Agreement of WTO is the most comprehensive international agreement on intellectual property to date
It came into effect in 1995 and is part of the agreements establishing the World Trade Organization (WTO).
- The agreement establishes minimum standards for the protection of various types of intellectual property, including:
- Copyrights and related rights (performers, producers, broadcasters)
- Trademarks (including service marks)
- Industrial designs
- Patents (including protection for new plant varieties)
- Layout designs of integrated circuits (microchips)
- Undisclosed information (trade secrets)
References
Practice Question
Discuss the implications of the India-EFTA Trade and Economic Partnership Agreement (TEPA) on India’s trade policy. [150 words]
How to approach this question?
Introduction:
- Briefly introduce the India-EFTA Trade and Economic Partnership Agreement (TEPA), mentioning the countries involved and the date of signing.
Body:
- Discuss the key outcomes and implications of TEPA on Indian businesses.
- Highlight the expected benefits for India, such as promoting investment, generating employment, and providing exporters access to quality inputs.
- Discuss how TEPA is seen as a gateway for Indian exporters to access European and other global markets.
- Mention the unique features of TEPA, such as the binding obligation on EFTA countries to invest 100 billion USD into India and facilitate the generation of 1 million jobs in India within 15 years.
Conclusion:
- Conclude by discussing the potential impact of TEPA on India’s trade policy, such as how it could lead to higher imports of machinery, pharmaceuticals, medical instruments, and machinery due to a reduction in Indian tariffs.
- Also, mention how TEPA aligns with India’s Atmanirbhar Bharat and Make in India programs.
Remember to provide a balanced answer, incorporating relevant facts and figures, and propose feasible solutions. Structure your answer well, with a clear introduction, body, and conclusion. Also, ensure that your answer is within the word limit specified for the exam. Good luck!