A Step into the Right Direction: The India-EFTA Trade Agreement

In March, India and the EFTA States signed a new Trade and Economic Partnership Agreement (TEPA). Beyond giving the countries a competitive edge, this agreement may help diversify global value chains. It furthermore includes an opening for strengthening sustainability in trade. To make the most of this opening, national parliaments should approve this agreement and enact further policies to better align trade with a broad sustainability agenda. EFTA’s largest economy – Switzerland – is a case in point.

On March 10, 2024, India and the EFTA states signed a Trade and Economic Partnership Agreement (TEPA). It is an agreement with several firsts: India’s first comprehensive trade agreement with a European bloc or country, India’s first trade agreement that includes provisions on trade and sustainable development as well as on intellectual property rights in a substantial way, and the first trade agreement that includes specified goals on investments with the ability to withdraw concessions if the goals are not met.

Some observers have described the agreement as a symbol of a shift in India’s trade policy marked by greater trade openness. Others have seen it falling short of expectations. For India, the agreement aligns with its aim to position itself as the country that enables companies to diversify their operations in what has been called the “China+1 strategy”. For the EFTA countries – Switzerland, Norway, Iceland, and Liechtenstein – the partnership may give their industries a competitive edge in India, a fast-growing country with the world’s largest population.

In addition, and crucially, the India-EFTA TEPA may help diversify global value chains by easing trade and investment between the signatories, chiefly in the fields of industrial products and services. Switzerland may serve as an illustration for EFTA’s side, representing more than half of the group’s GDP. Among the current exports from Switzerland that would benefit from lower tariffs and higher legal certainty are chemical, pharmaceutical, textile, and optical products, as well as machinery and watches. Barriers to several services would also be reduced. For example, short-term stays of Swiss maintenance personnel, e.g., to tend to machinery exported to India, would become easier, and the Swiss financial and insurance sector would be allowed to hold higher ownership shares in Indian firms.

The Indian government expects imports and investments from EFTA countries to boost its “Make in India” program and support job growth. “Make in India” is an official government initiative to strengthen domestic Indian manufacturing, including by modernizing its infrastructure and creating an enabling environment for investment. On services, India expects the agreement to support its aim of increasing exports of IT, business, and other services.

The partnership also creates openings for further cooperation, for example through chapter 7 on Investment Promotion and Cooperation and through chapter 11 on Trade and Sustainable Development. While both are more akin to soft law and are excluded from the agreement’s dispute settlement system, they represent an opportunity that national parliaments should seize.

To illustrate: chapter 7 on Investment Promotion and Cooperation contains the novelty of one party – the EFTA States – committing to invest a total of USD 100 billion and contribute to creating 1 million jobs in India in the 15 years after entry into force of the agreement. The cooperation activities that the chapter lists, include identifying key obstacles to investments, support for vocational education and training projects, encouragement of technical cooperation, and facilitation of partnerships among centers of excellence (e.g., on health care, digital technology, renewables, and sustainable metal making).

Furthermore, chapter 11 on Trade and Sustainable Development explicitly mentions, for example, enhanced cooperation on best practices relating to corporate social responsibility, human resources development for a just transition and decent work, best practices for sustainable management of natural resources and ecosystems, as well as cooperation on regulatory frameworks to promote renewable energy and increased efficiency in the use of resource and energy.

On their own, these lists are only an opening. Parliaments should seize the opportunities they offer and make the most of the potential synergies between these chapters. To achieve this, they need to ensure that government agencies effectively buttress the envisioned cooperation and that policies generally help align trade with a broad sustainability agenda. One specific example for this is to assess the scope for Mutual Recognition Agreements in specific service sectors. Another example is for collaboration on corporate due diligence rules to keep up with international developments, such as the Corporate Sustainability Due Diligence Directive (“CSDDD”) that the European Parliament just passed.

While many commentators have responded positively to the results of the negotiations, some words of caution remain. A case in point are concerns related to the partnership’s chapter 8 on Intellectual Property Rights (IPRs). It was only through leaks that the public learned of the specific Swiss proposal for this chapter, shortly before the end of the negotiations. Not all the controversial commitments in the leaks made it into the final text. But three commitments on patents do surpass pre-existing rules under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Specifically, the agreement is set to change Indian rules on processes through which civil society can oppose patents (“pre-grant opposition”). It will also reduce the amount of information that patent holders need to publish on their use of existing patents (“working of patents”) and it foresees further negotiations between the parties on rules for “data exclusivity”. The latter are rules meant to prevent generic drug manufacturers from relying on clinical trial data that the original producer of the drug had used to prove the safety and efficacy of the drug.

While business groups in Switzerland have welcomed these provisions, other stakeholders have flagged opposition to any further negotiations on “data exclusivity”. Médecins sans Frontières describe how the changes to pre-grant opposition and to the working of patents may weaken the transparency of the patent system in India and how negotiations over data exclusivity may unduly prolong patents and reduce public health safeguards. They write that all of these may increase costs of generics and harm patients in many countries beyond India.

Given the potential benefits, there is a robust case for national parliaments to approve this partnership. There is also a robust case for them to explore further synergies and collaboration. And there is a robust case for them to remain vigilant as controversial issues such as data exclusivity are brought onto the agenda, if and when the agreement enters into force.

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