EFTA-India free trade agreement: How does the Swiss economy benefit?

On 10 March 2024, the EFTA states (Switzerland, Iceland, Liechtenstein and Norway) signed a free trade agreement (hereinafter: FTA) with India in Delhi (officially: Trade and Economic Partnership Agreement, TEPA).

1. As an exporting nation, Switzerland thrives on access to large markets. India is currently still a relatively small trading partner for Switzerland. However, as the world's most populous country with ambitious growth targets, India is a strategic economic partner for Switzerland with huge potential.
2. In addition to broad market access, the FTA also improves the legal framework, legal certainty and predictability for Swiss companies.
3. In view of potentially escalating tensions between the USA and China, the FTA with India is a basis for further diversifying Switzerland's economic relations with its trading partners.
4. EFTA is the first European partner with which India has concluded an FTA – even before the EU or UK. The FTA therefore currently provides Swiss companies with an important competitive advantage over their competitors.

India previously levied very high tariffs on imported products. With the FTA, India will abolish or partially remove customs duties on 95.3 percent of imports of Swiss industrial products (excluding gold) immediately or with transitional periods.

• For 84.6 per cent of Swiss exports, all customs duties will be abolished once the tariff dismantling periods (between 0 and 10 years) have expired.
• 10.1 per cent of Swiss exports receive partial concessions (most of these correspond to a 50 per cent reduction in customs duties with transitional periods of up to 10 years).
• SECO estimates that Swiss companies will be able to save up to around CHF 167 million per year once the tariff dismantling periods expire. Another estimate (Prof. Ziltener, 2024) even assumes potential savings of over CHF 210 million per year.
• Switzerland has already unilaterally abolished its tariffs on industrial goods as of 1 January 2024, which is why they played no role in the negotiations with India.

Under the FTA, India grants the EFTA states significantly more concessions than provided for in the General Agreement on Trade in Services (GATS).

• Swiss financial service providers benefit from clear and transparent deadlines for the approval of licenses. In addition, the share of foreign capital in the insurance sector will be permitted to be up to 49 per cent and increased from 51 to 74 per cent for banks.
• India undertakes to authorize machine installation and maintenance personnel for a stay of up to 3 months per year.

The FTA safeguards the core idea of protecting intellectual property and basically corresponds to the level of protection of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Nevertheless, further improvements will be needed here in the future.

• The FTA contains guarantees that patent-protected Swiss exports will not be discriminated against in favor of locally produced products («working the patent»). This principle is already legally binding under the TRIPS Agreement but has repeatedly led to problems in India. This long-standing legal uncertainty has now been eliminated by the FTA.
• In the area of test data protection for pharmaceuticals, the level of ambition of the FTA is in accordance with the TRIPS Agreement. It does not restrict access to medicines in India. Nevertheless, further progress will be needed in this area in the future. The protection of test data must be sufficiently high to prevent unfair competition.
• Substantial improvements were also achieved in the protection of Swissness and geographical indications (e.g. the designation for cheese). These are key for many Swiss industries, such as the watchmaking and food industries.

In the FTA negotiations, Switzerland has campaigned for a solution that considers both the promotion of innovative medicines and ensures access to medicines for the Indian population.

• The FTA confirms the TRIPS regulation on compulsory licenses.
• The FTA contains simplifications in relation to patent granting procedures. This is also in the interests of Indian generics producers.

In order to further reduce poverty, India urgently needs to create jobs. In view of the low demand in the domestic market, the country wants to focus on exports in the coming years. This will require more foreign direct investment in order to reach the product standards of major markets such as the USA and Europe more quickly. Switzerland, which is one of the world's 12 largest direct investors, is an interesting partner here.

• As part of the FTA, the EFTA states undertake to promote their investments in India. The target in this regard is USD 100 billion in investments and the creation of 1 million jobs over the next 15 years.
• India, for its part, is committed to creating and maintaining a favorable investment climate.
• The FTA provides for a three-stage, multi-year consultation procedure (Joint Committee, Sub-committee, Ministerial level), which can be invoked by India if the target has not been reached after 15 years.

The EFTA states and India have agreed on a legally binding chapter on trade and sustainable development as part of the FTA. This applies to all aspects of the FTA, including the area of investment.

• The parties reaffirm their commitments to implement the international conventions on labor, environment and climate protection that they have ratified.
• It has also been agreed to set up a Joint Committee where topics such as human and labor rights can be discussed with India.