What is the European Free Trade Association (EFTA)?

• EFTA is an intergovernmental organization of four member countries that are not part of the European Union (EU): Iceland, Liechtenstein, Norway, and Switzerland.
• The association was set up in 1960 for the promotion of free trade and economic integration for the benefit of its four Member States. 

Trade and Economic Partnership Agreement 

• India has recently signed a trade agreement with the four-nation European Free Trade Association.
• The agreement, officially dubbed Trade and Economic Partnership Agreement (TEPA), covers various aspects such as trade in goods, rules of origin, intellectual property rights, services, investment promotion, government procurement, technical trade barriers, and trade facilitation.
• This is India’s fourth such agreement since 2014. The previous agreements were signed with Mauritius, the UAE, and Australia.
• The two-way trade between India and EFTA was $18.65 billion in 2022-23, compared to $27.23 billion in the previous fiscal year, with a trade deficit of $14.8 billion.
• Switzerland is currently India’s largest trading partner in the EFTA bloc, followed by Norway.
• India is also separately negotiating a comprehensive free trade agreement with the European Union (EU), a 27-nation bloc.

Highlights of TEPA

• EFTA has committed to promote investments with the aim to increase the stock of foreign direct investments by USD 100 billion in India in the next 15 years, and to facilitate the generation of 1 million direct employment in India, through such investments. The investments do not cover foreign portfolio investment.
• For the first ever time in the history of FTAs, a legal commitment is being made about promoting target-oriented investment and creation of jobs. 
• EFTA is offering 92.2% of its tariff lines which covers 99.6% of India’s exports. The EFTA’s market access offer covers 100% of non-agri products and tariff concession on Processed Agricultural Products (PAP). 
• India is offering 82.7% of its tariff lines which covers 95.3% of EFTA exports of which more than 80% import is Gold. Sectors such as dairy, soya, coal and sensitive agricultural products are kept in the exclusion list. 
• TEPA would stimulate our services exports in sectors of our key strength / interest such as IT services, business services, personal, cultural, sporting and recreational services, other education services, audio-visual services etc.
• Services offers from EFTA include better access through digital delivery of Services (Mode 1), commercial presence (Mode 3) and improved commitments and certainty for entry and temporary stay of key personnel (Mode 4). 
• TEPA has provisions for Mutual Recognition Agreements in Professional Services like nursing, chartered accountants, architects etc.
• TEPA provides an opportunity to integrate into EU markets. Over 40% of Switzerland’s global services exports are to the EU. Indian companies can look to Switzerland as a base for extending its market reach to EU.
• TEPA also facilitates technology collaboration and access to world leading technologies in precision engineering, health sciences, renewable energy, Innovation and R&D.

Related Information

Modes of supply of services

• International trade in services typically occurs in any of these four modes of supply
  • Cross border supply of services (Mode 1): It is the supply of a service from the territory of one country into the territory of another country.
  • Consumption abroad (Mode 2): It is the supply of a service in the territory of one country to the consumer of another country.
  • Commercial presence (Mode 3): It is the supply of a service by a service supplier of one country, through commercial presence, in the territory of another country.
  • Presence/Movement of natural persons/professionals (Mode 4): It is the supply of a service by a service supplier of one country, through the presence of natural persons of a country in the territory of another country.