India-EFTA Trade and Economic Partnership Agreement (TEPA)

#### GS Paper 3

Syllabus: Indian Economy: Free Trade Agreement

Source: PIB

Context: India and the European Free Trade Association (EFTA) signed a Trade and Economic Partnership Agreement (TEPA) on March 10, 2024.

What is EFTA?

EFTA, the European Free Trade Association, is an intergovernmental organization founded in 1960 to promote free trade among its member states, which include Iceland, Liechtenstein, Norway, and Switzerland. It operates independently of the European Union (EU).

Importance of EFTA States:

The EFTA states, despite their small population of just over 14 million, wield significant economic influence. Their advanced economies rank among the world’s highest in innovation, competitiveness, and wealth creation. In 2021, they collectively traded close to over USD 1 trillion in goods and services, making them formidable players in global trade. EFTA companies are renowned world leaders in various sectors, including pharmaceuticals, biotechnology, machinery manufacturing, technology products, and financial services.

India-EFTA Trade:

What is TEPA?

The India-EFTA Trade and Economic Partnership Agreement (TEPA) is a trade agreement between India and the EFTA countries. It focuses on market access, investment promotion, Intellectual Property Rights (IPR), and other trade-related aspects to enhance economic cooperation between India and the EFTA states.

Major Benefits for India from TEPA:

• Increased Foreign Direct Investment (FDI): TEPA aims to increase the stock of foreign direct investments by USD 100 billion in India over the next 15 years, providing a significant boost to the country’s economy.

• Job Creation: The agreement is expected to facilitate the generation of 1 million direct employment opportunities in India through investments from EFTA countries. Legal commitment made about promoting target-oriented investment and creation of jobs.

• Legal commitment made about promoting target-oriented investment and creation of jobs.

• Market Access: TEPA provides enhanced market access for Indian goods, with tariff concessions and favourable rules of origin, enabling Indian exporters to access EFTA markets more competitively.

• Services Sector Growth: The agreement stimulates growth in India’s services exports, particularly in key sectors like IT services, business services, personal, cultural, sporting and recreational services, and other education services.

• Intellectual Property Protection: TEPA ensures robust protection of Intellectual Property Rights (IPR) for Indian products and innovations, addressing concerns related to generic medicines and patents.

• Sustainable Development: The agreement signals India’s commitment to sustainable development, environmental protection, and inclusive growth, fostering transparency and efficiency in trade procedures.

• Domestic Manufacturing: TEPA encourages domestic manufacturing in sectors such as Infrastructure, Machinery, Pharmaceuticals, Chemicals, Food Processing, Transport and Logistics, Banking and Financial Services, and Insurance, supporting the “Make in India” initiative.

• Human Rights and Sustainable Development: For the first time, the FTA also included a chapter on commitments to human rights and sustainable development.

• Template for other FTA negations: E.g., TEPA can act as a model for negotiation with the European Union FTA

Major Benefits for EFTA from TEPA:

• Market Access: EFTA members gain improved access to the Indian market

• Investment Opportunities: TEPA provides avenues for them to invest in various sectors and industries.

• Services Trade: EFTA countries benefit from better access to Indian services through provisions for digital delivery of services, commercial presence, and improved commitments for entry and temporary stay of key personnel.

• Intellectual Property Rights: The agreement ensures strong protection of Intellectual Property Rights (IPR) for EFTA countries in India

• Mutual Recognition Agreements: TEPA includes provisions for Mutual Recognition Agreements in Professional Services, allowing professionals from EFTA countries to practice in India and vice versa

• Enhanced Economic Integration: TEPA strengthens economic ties between EFTA countries and India

Challenges include:

• Economic Structure Differences: EFTA states’ focus on high-tech industries contrasts with India’s diverse economy, requiring alignment.

• Regulatory Hurdles: Varied regulations and standards necessitate harmonization efforts for seamless trade.

• Competition: EFTA’s competitiveness in key sectors demands measures for fair competition.

• Environmental and Social Considerations: Prioritizing sustainability and social equity is vital.

Way Forward:

Moving forward, it is crucial for strong political involvement and guidance to be provided by both India and EFTA, ensuring that TEPA is streamlined to facilitate the swift establishment of a balanced agreement that serves the interests of all parties involved.

Insta Links

India-Australia Economic Cooperation and Trade Agreement (ECTA) approved

Prelims Links

‘Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and (UPSC 2017)

(a) European Union

(b) Gulf Cooperation Council

(d) Shanghai Cooperation Organization

Ans: A

The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following: (UPSC 2010)

• Development of infrastructure facilities.

• Promotion of investment from foreign sources.

• Promotion of exports of services only.

Which of the above are the objectives of this Act?

(a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3

Ans: A

A “closed economy” is an economy in which (UPSC 2011)

(a) the money supply is fully controlled (b) deficit financing takes place (c) only exports take place (d) neither exports nor imports take place

Ans: D