Switzerland’s recent policy decision, effective from January 1, 2024, to eliminate tariffs on all industrial goods from all nations poses a significant challenge to India’s potential benefits from the ongoing free trade agreement (FTA) negotiations between India and the European Free Trade Association (EFTA), as highlighted in a report by the Global Trade Research Initiative (GTRI).
This move by Switzerland, a key destination for Indian exports within EFTA, includes the abolition of tariffs on various products, such as chemicals, consumer goods, vehicles, and clothing. Despite the FTA with EFTA, this tariff removal exposes Indian products to heightened competition in Switzerland.
It’s important to note that EFTA comprises Iceland, Liechtenstein, Norway, and Switzerland, operating as an intergovernmental organization promoting and enhancing free trade. In the fiscal year 2022-23, India’s exports to EFTA countries reached $1.92 billion, while imports totaled $16.74 billion.
The report emphasizes the direct impact on India’s merchandise exports to Switzerland, particularly in the industrial goods sector, which constitutes 98% of the $13 billion exported in FY2023. Furthermore, challenges persist in exporting agricultural produce to Switzerland due to complex tariff structures, quality standards, and approval requirements. EFTA, including Switzerland, has not shown a willingness to eliminate agriculture tariffs on basic produce.
The trade imbalance between India and Switzerland adds complexity to the situation, with India experiencing a substantial trade deficit of $14.45 billion in FY2023. Despite India’s imports from Switzerland reaching $15.79 billion, its exports stood at $1.34 billion.
In essence, the combination of zero industrial tariffs and obstacles in exporting agricultural goods to Switzerland diminishes India’s potential gains in merchandise exports, as outlined by the GTRI report.