After nearly two decades of negotiations, India has signed a landmark trade and investment treaty with the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway, and Switzerland. This landmark deal, the Trade and Economic Partnership Agreement (TEPA) is expected to bring investments worth $100 billion into India across various sectors over the next 15 years.

The TEPA is, first, a free trade agreement under Article XXIV of the GATT and Article V of the GATS.  It reaffirms GATT commitments, harmonizes customs regulations, and eliminate customs duties according to schedules of commitments in the annexes.  It also includes more detailed regulations on sanitary and phytosanitary measures, technical barriers to trade, and liberalization of trade in services.  In addition, the TEPA incorporates foreign direct investment protections between the EFTA states and India, and investment promotion obligations and expectations. 

Unlike free trade agreements negotiated by the United States, the TEPA includes no TRIPS-plus obligations.  However, consistent with recent EU practice, the TEPA does include obligations relating to trade and sustainable development, including some relating to climate change, compliance with International Labor Organization (ILO) standards, and cooperation in achieving and promoting sustainable development. 

The TEPA is anticipated to bring substantial investment, with the EFTA bloc committing $100 billion over 15 years in sectors like pharmaceuticals, food processing, engineering, and chemicals. Although this investment commitment, primarily sourced from provident funds in EFTA countries, is not expected to be legally binding, but it is an expected result of the conclusion of the treaty.

Prime Minister Narendra Modi emphasized the importance of this agreement in boosting economic progress and creating opportunities for Indian youth. Ratification by both parties is required for the agreement to take effect, with Switzerland aiming to complete the process as soon as next year.

India’s decision to sign TEPA marks a significant departure from its historical stance on import substitution policies.  While political factors still influence some protectionist measures, economic imperatives may eventually lead to a more open trade approach in the future. The timing of these trade deals coincides with political imperatives, particularly the need to address unemployment, which continues to pose a persistent challenge in India, despite economic growth. The TEPA is expected to generate 1 million jobs in participating countries over 15 years, aligning with the focus on job creation in India’s current election.

The TEPA paves the way for a similar deal between the much larger EU and India.  Although negotiations between these two parties had stalled in the past, they were re-launched in June 2022, along with negotiations for two additional treaties: a bilateral investment treaty and an agreement on geographical indications.  The European Commission maintains a website with the current drafts texts that form the basis of negotiations.