Sixteen years and as many as 21 rounds of negotiations—that is what it took India and the four-nation European bloc of Iceland, Switzerland, Norway, and Liechtenstein to sign the Trade and Economic Partnership Agreement (TEPA) on March 10.
Through the agreement, the European Free Trade Association (EFTA) is committed to promoting foreign direct investments of $100 billion in the next 15 years. It is also likely to create 1 million jobs in that period.
The EFTA is offering 92.2% of its tariff lines, which covers 99.6% of India’s exports, while India is offering 82.7% of its tariff lines which covers 95.3% of EFTA exports. A tariff line is an item listed in a country’s tariff schedule. This means that gradual reductions in customs duty would help lower the prices of a number of goods imported from these countries. An analysis by the Global Trade Research Initiative (GTRI) revealed that for wines priced between $5 and $15, the import duty will be cut to 100% from the prevailing 150% in the first year, and gradually thereafter in 10 equal instalments. This will take the final duty to 50% at the end of the tenth year. Tariffs on clocks and watches will be lowered to zero in seven years, while tariff on items like olives, avocados, apricots, coffee, and chocolate would be reduced to zero in 10 years.
While there remain questions about how investments and consequent job creation will pan out, given that they will be driven by the private sector, experts note that this free trade agreement (FTA) is significant as it is the first to be signed with an important European economic bloc. Pacts with the European Union and the UK are still under negotiation. Agneshwar Sen, Partner-Tax and Economic Policy Group at EY India, says the pact is different from the previous agreements, which were limited in scope.
“For the first time in the EFTA pact, India has stepped into the next phase, where we are now looking at issues like sustainability, labour, and gender. India has given concessions on tariff, but we have also sought what we require from these countries—investments,” he says.
For now, with the EFTA pact done, hopes remain that similar agreements with Oman and the UK will materialise soon. @surabhi_prasad