India and the European Union Free Trade Association (EFTA) are nearing the final stages of their negotiations for a free trade agreement (FTA), but Switzerland’s recent decision to reduce its import tariffs on industrial goods to zero has put a damper on the potential benefits for India. Switzerland, India’s largest trading partner in the EFTA, has changed the dynamics of the negotiations by eliminating import duties on all industrial goods for all countries since January 1 this year. This move has significant implications for India’s gains from the ongoing FTA.
However, the tariff removal does not extend to agriculture products, making it difficult for India to access these markets even with tariff concessions in the FTA. The complex web of tariffs, quality standards, and approval requirements hinders India’s agricultural exports to Switzerland. Ajay Srivastava, co-founder of the Global Trade Research Initiative, stated that “India’s prospective gains in merchandise exports are effectively nullified,” given the zero industrial tariffs and the challenges in exporting agricultural produce.
India already has a substantial trade deficit with Switzerland, importing $15.79 billion worth of goods in FY2023 while exporting only $1.34 billion. Swiss imports to India include gold, machinery, pharmaceuticals, coal, optical instruments, watches, cotton, soybean oil, and chocolates. EFTA countries will request India to eliminate tariffs on these items, particularly gold, which constitutes 80% of India’s imports from Switzerland.
Besides the challenges on the trade front, the FTA negotiations also face difficulties in addressing intellectual property rights protection and Switzerland’s stance on Indian professionals’ priority visas. The agreement aims to open up sectors like IT, finance, tourism, and education for service providers from both India and EFTA, but the potential gains in services are limited due to existing policy commitments.
The Global Trade Research Initiative warns that without careful negotiation, the FTA may lead to increased imports, a wider trade deficit, and minimal gains in export competitiveness for India. New Delhi must navigate these challenges strategically to ensure equitable benefits from the agreement.
