India and EFTA: Pioneering Novel FDI Commitments

The recently concluded Trade and Economic Partnership Agreement (TEPA) between India and the European Free Trade Association (EFTA) marks a significant evolution in international investment agreements. Central to this agreement is a pioneering commitment by EFTA to aim to increase foreign direct investment (FDI) in India by US$100 billion over 15 years, with the goal of generating one million jobs. This novel approach departs from traditional investment protection norms by embedding binding investment-promotion and employment-generation targets within the agreement.
Unlike conventional agreements that focus on tariff liberalization and investor protections, TEPA’s Chapter 7 on Investment Promotion and Cooperation introduces a structured, consultative mechanism to monitor progress toward these targets. While the language includes hortatory elements, it also allows India to rebalance trade concessions if EFTA fails to meet its obligations after a 15-year period and a three-tier review process.
The agreement emphasizes mutual responsibility: EFTA is to promote investment, while India must maintain a conducive investment environment. Cooperative measures include identifying investment opportunities, addressing barriers, and leveraging mechanisms like Switzerland’s Economic Affairs Start-up Fund to support SMEs. TEPA thus sets a precedent for future agreements between developing and developed nations, offering a template for integrating investment promotion into trade frameworks.

Link: https://ccsi.columbia.edu/sites/ccsi.columbia.edu/files/content/docs/fd…