Why is it in the news?

• The Global Trade Research Initiative (GTRI) reports Switzerland’s move to eliminate import duties, allowing tariff-free entry from all countries.
• This decision has substantial implications for India’s potential gains under the ongoing trade negotiations with the European Free Trade Association (EFTA).

 More about the news

• Initiated in 2008, the India’s Trade and Economic Partnership Agreement (TEPA) with EFTA negotiations resumed in 2016, covering various aspects such as trade in goods and services, rules of origin, Intellectual Property Rights (IPR), trade and sustainable development, sanitary and phytosanitary measures, technical barriers to trade, trade remedies, and customs and trade facilitations.
• Switzerland’s decision alters the dynamics of ongoing negotiations, introducing complexities that could affect India’s gains under the proposed trade agreement.
• Switzerland, as India’s top export destination in EFTA, eliminating import duties means increased competition for Indian products. This competitiveness challenges the effectiveness of the Free Trade Agreement (FTA) with EFTA.
• Further, exporting agricultural produce to Switzerland remains challenging due to existing tariffs, stringent quality standards, and complex approval requirements.
• EFTA, including Switzerland, shows reluctance in making agriculture tariffs zero, limiting India’s potential gains in this sector.
• In FY2023, India witnessed a substantial trade deficit with Switzerland, with imports amounting to $15.79 billion and exports at $1.34 billion. Switzerland’s tariff elimination is anticipated to widen this trade deficit further.

Conclusion

• The current trajectory of the trade agreement might not favour Indian exports, leading to an imbalance with higher imports and an expanded trade deficit.
• India is urged to navigate these negotiations carefully, emphasizing the need to balance trade, safeguard domestic interests, and secure a mutually beneficial agreement that takes into account the evolving dynamics prompted by Switzerland’s tariff policy change.