Important points from the EFTA free trade agreement with India
Published: Thursday, Sep 5th 2024, 12:20
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The European Free Trade Association, of which Switzerland is a member, and India have negotiated a free trade agreement over 16 years. Representatives of the countries involved signed it in March and now the Swiss parliament can decide on it. The following are important points from the agreement.
HOW DOES THE FEDERAL COUNCIL ASSESS INDIA'S POTENTIAL?
India is the country with the largest population in the world. The middle class in particular, which can afford more and more, is contributing to growth. The agreement brings customs relief for a large proportion of current Swiss exports to India. There are transitional periods in some cases. The agreement is intended to make Swiss exports to India more competitive. Switzerland hopes that the agreement will eliminate discrimination against other countries that already have free trade agreements with India. These include Australia, Japan and South Korea. Swiss companies will now have an advantage over economies without a free trade agreement with India - the Federal Council mentions the EU and the UK.
WHICH TARIFFS WILL FALL?
The EFTA states will completely eliminate customs duties on industrial products, fish and other marine products. India, in turn, will abolish customs duties on the majority of imports of Swiss industrial products (94.7 percent of the value of goods, excluding gold) immediately or with transitional periods. This will give important Swiss export products duty-free access to the Indian market. These include, for example, pharmaceutical and chemical products, machinery, certain precision instruments and watches. In some cases, there are transitional periods of up to ten years.
WHY DON'T ALL TARIFFS FALL?
For so-called sensitive products, it can be difficult for a party to grant concessions for economic and/or political reasons. India provides for a partial tariff reduction for certain precision instruments and certain chemical products. In most cases, this is a tariff reduction of 50 percent with a transitional period of up to ten years. Customs duties on gold are very important for India in fiscal terms, which is why the country only grants a symbolic concession for gold. Very sensitive products such as certain precious metals and certain electrical machinery are excluded from the Indian customs concession list.
WHAT CAN FINANCIAL SERVICE PROVIDERS EXPECT?
The financial sector is a Swiss priority. Financial service providers from Switzerland will benefit from clear deadlines for the approval of licenses. The agreement also improves transparency in the processing of license applications. The share of foreign capital will be permitted up to 49 percent in the insurance sector. In the banking sector, it will be increased from 51 percent to 74 percent.
CAN SWISS STAFF WORK IN INDIA?
Yes, but companies can only send employees to India for a limited period of time. India has committed to allowing machine installation and maintenance personnel for stays of up to three months per year.
WILL INDIAN TARIFFS FALL FOR SWISS AGRICULTURAL PRODUCTS?
For example, customs duties on Swiss chocolate, coffee capsules and various food preparations will be partially or completely abolished in India after transitional periods. For various fruits and vegetables and certain basic agricultural products of plant and animal origin, India will abolish customs duties after transitional periods of up to ten years. For wine, it is offering Switzerland staggered tariff reductions over ten years. Cheese, on the other hand, will continue to be subject to customs duties - due to its high sensitivity, as the Federal Council writes. The same applies to dried meat and cigarettes.
IS SWISS AGRICULTURE PROTECTED?
Switzerland's tariff reductions in the agricultural sector in favor of India are comparable to those granted by Switzerland in other agreements. Border protection for meat, dairy products, cereals, oilseeds, fruit and vegetables within the cultivation period, wine and sugar remains in place, writes the Federal Council. Switzerland will grant India duty-free market access for non-sensitive products such as mushrooms and certain fruit juices. For certain sugar products that are duty-free vis-à-vis the EU, Switzerland also wants to open up the market for India. For coffee, cocoa, mineral water, beer and certain spirits - which, according to the Federal Council, do not contain any raw materials that are sensitive for agriculture - Switzerland will grant India, the EU and other free trade partners duty-free access to the market.
IS INTELLECTUAL PROPERTY PROTECTED?
Yes, the free trade agreement provides comprehensive protection for intellectual property. It guarantees that patent-protected products from Switzerland are not discriminated against in India compared to locally produced goods. With regard to test data protection for medicinal and plant protection products, the agreement provides for a level of protection in accordance with the Trips Agreement (WTO Agreement on Trade-Related Aspects of Intellectual Property Rights). Access to medicines in India is not restricted. The protection of Swissness, which is important for sectors such as the watch industry, food and cosmetics, will be substantially improved.
ARE THE EFTA COUNTRIES INVESTING MORE IN INDIA?
Yes, the way to achieve this is through promotional activities. Their aim is to trigger more investment from EFTA countries in India and thus create jobs. India, for its part, wants to create a favorable climate for investment. The targets set are 100 billion US dollars in investments and 1 million jobs over the first 15 years after the agreement comes into force. If it becomes apparent during these 15 years that the defined target cannot be achieved due to external circumstances or changing assumptions, the target will be revised downwards.
WHAT ABOUT SUSTAINABILITY AND CLIMATE PROTECTION?
The European Free Trade Association (EFTA) is the first partner with which India has agreed a comprehensive and legally binding chapter on trade and sustainable development. The corresponding passage in the agreement obliges India not to deviate from applicable environmental and labor standards. There is a separate article on climate change in which the parties undertake to implement the UN Framework Convention on Climate Change and the Paris Agreement. In addition, a special subcommittee on trade and sustainable development will monitor the implementation of the commitments made.
WHAT DOES THE AGREEMENT COST THE FEDERAL GOVERNMENT?
According to the Federal Council, the costs for Switzerland as a result of the agreement are limited. In 2023, customs duties of CHF 24.6 million were paid on imports from India, with industrial products accounting for CHF 22.2 million and agricultural products for CHF 2.4 million. Switzerland abolished customs duties on all industrial products at the beginning of 2024. Conversely, the agreement had a positive impact on the Swiss economy. The Federal Council does not rule out the possibility that the promotion of investments, to which Switzerland has committed, will lead to additional costs. In principle, existing activities would be targeted.
CAN THE VOTERS EXPRESS THEMSELVES?
Yes, if enough signatures are collected against the agreement. Parliament's decision to approve the Trade and Economic Partnership Agreement (Tepa Efta-India) is subject to an optional referendum. The reason for this is that it contains important legislative provisions, such as customs concessions and equal treatment provisions.
WHEN WILL THE AGREEMENT ENTER INTO FORCE?
According to the Federal Council, the councils are expected to decide on the Trade and Economic Partnership Agreement (Tepa EFTA-India) in winter 2024 and spring 2025. Economics Minister Guy Parmelin assumes that it can enter into force from fall 2025. This date may be postponed if there is a referendum in Switzerland or if one of the parties has not yet ratified it by then.
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