On Sunday, India signed a Trade and Economic Partnership Agreement (TEPA) with a bloc of four European countries — Iceland, Liechtenstein, Norway and Switzerland, formally known as the European Free Trade Association (EFTA). The pact has been in the works since 2008 but slipped off India’s to-do list after the UPA government’s exit. In market access terms, the deal offers more room for Indian services firms, with easier visa rules, so that they can also tap other European markets using these countries as a base. Professionals (architects, accountants and nurses), can also expect more opportunities. Most goods exports already get duty-free treatment in Switzerland, India’s largest EFTA trade partner, so the lynchpin in this deal is the in-built goal to nudge $100 billion of fresh foreign direct investment into India and create a million jobs over 15 years. Indian consumers can expect cheaper wines and chocolates, while producers may access cheaper machinery. India’s tariff cuts are linked to investment inflows, but a full assessment of those outcomes will only happen after 20 years, so persistent hard work is needed on both sides to realise these goals.
For India, the speed with which the EFTA deal has been dusted off and sealed within months of resuming negotiations is creditable. It constitutes the second major trade pact in recent years since the deal with the United Arab Emirates, and the first such arrangement with a western nations’ grouping. An interim deal with Australia that kicked in late 2022, is yet to be followed through to a comprehensive agreement. Parleys for a deal with the Gulf Cooperation Council, mooted since 2004, are yet to take off. A deal with Canada has been waylaid by political frictions. Talks are on with the European Union (EU) and the United Kingdom, with the latter likely in the last mile. The EFTA deal assumes greater symbolic significance than the size of trade flows involved. It signals that India’s apparent aversion to such trade pacts since 2014, capped by its walkout from the Regional Comprehensive Economic Partnership in 2019, is likely a thing of the past. A country that has often been criticised for its high import tariffs and protectionist approach, now seems willing and able to walk the talk on free trade when many nations are turning protectionist. The EFTA pact, expected to be ratified by the end of 2024, also marks the first time that India has agreed to include non-trade issues such as labour, human rights, environment and gender in an economic agreement. Whether the inclusion of these issues in trade deals is necessary can be debated, but this is a positive augury for potential allies such as the EU that consider them critical.