India-EFTA trade deal

​India-EFTA trade deal

India needs a clear free trade agreement policy, for international trade and foreign investment laws

Election and Hold conversation 

1 India’s free trade agreement (FTA) negotiations with countries such as the United Kingdom and the European Union (EU) seem to be on hold due to the in India. 

2 India managed to clinch a deal, in March, with the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway and Switzerland. 

3 The FTA between India and EFTA is also important because, as economist Biswajit Dhar has argued, India has agreed to include issues such as environment and labour, which it has traditionally opposed incorporating in trade agreements.

On investment

और किसके साथ किए हैं ? और क्या थी कमियाँ 

Another reason sets this FTA apart from those India signed recently with countries such as Australia, the United Arab Emirates (UAE), and Mauritius.

 The India-EFTA FTA includes a somewhat detailed investment chapter, which is missing in the other recent Indian FTAs.

 This chapter focuses 

on investment facilitation issues, not investment protection. 

they shall “aim to” increase foreign direct investment (FDI) to India to $50 billion within 10 years of the FTA coming into force, 

followed by another $50 billion in the succeeding five years.

 Likewise, Article 7.1(3)(b) of the investment chapter provides that the EFTA states shall “aim to” facilitate the generation of one million jobs in India. 

obligation of conduct — 

an obligation to make an honest endeavour towards achieving a goal, notwithstanding the outcome or the result. 

This differs from an obligation of result

the EFTA countries are legally obligated to make an honest effort to invest $100 billion and generate one million jobs in India. 

Notably, this creates a template worth emulating in the ongoing negotiations with the U.K., the EU, and other countries.

Trade and investment

linkage between trade and investment

1 This is truer in a world where the production process is scattered along global supply/value chains, a function of trade and investment. 

2 FTAs routinely contain binding rules 

These are binding on both trade and investment. India’s FTAs signed in the first decade of this century with countries such as Japan, Korea, Malaysia and Singapore are based on this economic logic. 

3 In addition to binding trade rules, they all contain an investment chapter with provisions for protecting investment. 

But, India departed from this model as part of its FTA 2.0 approach

 In other words, India decoupled international trade law from international investment law.

 This is evident in its FTAs with Australia, Mauritius, and the UAE which contain binding trade but not investment rules. 

separate agreements on trade and investment 

1 India’s approach seems to be to have separate agreements on trade and investment with the same country. 

2 This is most markedly seen in the case of the UAE. After signing the FTA with the UAE in 2022, New Delhi and Abu Dhabi entered into a bilateral investment treaty earlier this year

.3  India follows a similar decoupling approach to the U.K., where trade and investment agreements are seemingly negotiated as two disparate treaties.

4 In this context, the India-EFTA FTA, which contains an investment chapter within the trade agreement, assumes pivotal significance.

FTA 3.0

as part of one comprehensive economic treaty

First, India should negotiate trade and investment as part of one comprehensive economic treaty. Decoupling trade from investment is not a good idea. 

Combining the two would give India a clear negotiating leverage to strike a beneficial deal. For example, India can argue that it needs more concessions in trade in return for offering something on investment or vice-versa. 

Second, India should consider expanding the scope of investment issues 

from mere facilitation to effective protection, with an efficacious dispute settlement mechanism under international law. Providing enforceable legal protection to foreign investors under international law will boost their confidence. 

This is critical at a time when foreign direct investment levels in India have dropped. A clear and comprehensive FTA policy is imperative for launching India to a higher economic growth trajectory.

From The hindu newspaper