Why in the news?

  • The free trade pact between India and European Free Trade Association (EFTA) will kickstart from October 1, 2025.

European Free Trade Association (EFTA)

  • What is it?: It is an intergovernmental organization established in 1960 by the Stockholm Convention.
  • Objective: Promotes free trade and economic integration between its members within Europe and globally.
  • Member countries: Iceland, Liechtenstein, Norway and Switzerland.
  • Features:
    • The EFTA countries have developed one of the largest networks of Free Trade Agreements (FTAs). 
    • These FTAs span 60 countries and territories, including the European Union (EU).
    • EFTA is not a customs union.
  • Governing Structure:
    • EFTA’s highest governing body is the EFTA Council. It generally meets 8 times a year at the ambassadorial level and twice a year at the ministerial level.
    • The headquarters of the EFTA Secretariat is located in Geneva. It assists the EFTA Council in managing relations between the 4 EFTA States and deals with the negotiation and operation of EFTA’s FTAs.
    • EFTA Surveillance Authority (ESA): It monitors compliance with European Economic Area (EEA) rules in Iceland, Liechtenstein and Norway. 
    • EFTA Court: It is based in Luxembourg and has the competence and authority to settle internal and external disputes regarding the implementation, application, or interpretation of the EEA agreement.

India – European Free Trade Association (EFTA) Deal

  • EFTA, founded in 1960 (by the Stockholm Convention in 1960), comprises Iceland, Liechtenstein, Norway, and Switzerland, aiming to promote free trade and economic integration among its members.
  • The agreement covers trade in goods and services, rules of origin, intellectual property rights (IPR), investment promotion, government procurement, competition, sustainable development, labor issues, human rights, and dispute settlement mechanisms.
  • It seeks to attract $100bn in fresh FDI to India and create a million jobs over 15 years.
  • It includes safeguard measures, trade remedies, and review clauses, with dairy and Agri products mostly on sensitive lists to protect farmers.
  • Labour commitments include eliminating forced or compulsory labour, abolishing child labour, and ending discrimination.
  • Benefits:
    • Indian consumers may enjoy lower prices on seafood, Swiss chocolates, watches, medical equipment, certain medicines, minerals, dyes, and machinery equipment.
    • It ensures a level playing field for both parties regarding regulatory and information transparency, licensing, and application procedures.
    • TEPA could serve as a model for ongoing trade agreements under negotiation with the European Union and the United Kingdom.
  • Challenges:
    • The deal, without the India-EU FTA, may create distortions, as EFTA countries are part of the Schengen area.
    • Exporting farm produce from India could remain challenging due to tariffs and quality standards.
    • The trade gap favors the EFTA group, and future trends are uncertain.