Negotiating trade deals and concluding them with developed nations is challenging due to numerous complex clauses, conditions, and terms that need to be met and agreed upon. The government’s efforts in finalising these agreements are commendable.
It has been over five years since the agri export policy was introduced with the aim to diversify our export basket destinations, boost high value- and value-added agricultural exports, and to strive to double India’s share in the world’s agri exports by integrating with global value chains. Surely, the route of trade agreements specially with developed nations will espouse the intentions of policy makers.
India’s total merchandise exports to EFTA states for FY 2023 was $1.9 billion out of which 70 per cent is shipped to Switzerland, followed by 25 per cent to Norway. Over the decade, the growth rate was near about 4 per cent per year including the peak pandemic years.
Top products exported by India to EFTA includes organic chemicals, value added gems and jewellery, electrical related appliances, flour of dried leguminous vegetables, and medical instruments.
India’s agri exports in FY 23 stood at $0.13 billion, which is just less than 7 per cent of India’s total merchandise exports to EFTA. EFTA’s imports of agriculture products from world are also quite substantial.
To highlight, their agri imports are around $29 billion, growing by 10 per cent CAGR over last three years. EFTA’s top agriculture imports include spirited beverages (mainly wines), food residual for animal feed, coffee, fresh fruits and vegetables, edible oil and fats, and wafers, snacks, and biscuits. Indian agri products do not feature significantly, with only modest visibility for flour of dried leguminous vegetables.
With the trade agreement coming into existence, will the tariff reduction, if any, by EFTA provide hope for Indian agri exporters in the coming time frame? Interestingly, Switzerland allows tariff-free entry for all industrial goods including chemicals, consumer goods, vehicles, clothing coming from all countries. This policy came into effect from January 1, 2024 and will anyway make the utilisation of India-EFTA trade agreement insignificant.
For agricultural goods (AG), tariff commitments of EFTA nations are not that lenient. We can understand this better by creating three categories.
Three categories
One, for which no commitment have been made in the trade agreement and have been excluded (there are roughly 40 per cent of the tariff lines within agri chapters).
Second, these are a set of agri commodities with higher tariff rate commitments (from dairy, meat and vegetable chapters to list a few).
Third, with either zero or low import tariffs — these are the products for which the domestic production capacity in EFTA is not robust and demand has to be met by imports. For e.g. beer made from malt, sweet wine, miscellaneous edible preparations.
For first and second category, this FTA offers minuscule relief, if any, in making Indian agri products competitive in their market. For the third category, where there is some relief , complementarity between Indian agri products with competitiveness and imported agri products by EFTA is limited. In this set, products such as coffee, cereals, sweet biscuits, residual/waste grains do feature.
The congruency is not comprehensive, thus limiting the scope of leveraging the opportunity for Indian agricultural exporters. In previous years, the story of import tariffs was similar. The simple average most-favoured nation (MFN) rate was 5.6 per cent in 2022 applied by the regional bloc. While non-agricultural goods from MFN countries only faced a simple average tariff rate of 1.3 per cent, duties of 32.4 per cent were applied to agricultural goods on average, and these rose to 137.7 per cent for dairy products.
Furthermore, the determination of product’s competitiveness is not solely dependent on import tariff rates. Numerous non-tariff measures including sanitary and phytosanitary and technical barriers to trade, also influence exporters’ abilities and capacities. Fulfilling the requirements of these measures, which are often intricate and challenging, significantly impacts market participation.
While trade agreements typically include provisions addressing trade facilitation aimed at streamlining the implementation of non-tariff measures, it remains uncertain whether these measures have been beneficial for Indian exporters, particularly those in the agricultural sector.
