India–EU FTA To Provide Five-Year MFN Safeguard In Services Trade
India and the European Union have agreed to extend Most-Favoured-Nation (MFN) treatment to each other for an initial period of five years following the entry into force of their proposed Free Trade Agreement (FTA). The provision is designed to ensure fair and non-discriminatory treatment in bilateral trade in services.
Under the MFN clause, service sectors and service providers from India and the EU will receive treatment no less favourable than that accorded to any third country. In effect, neither side will be able to grant better market access or regulatory advantages to another trading partner without extending similar benefits to the other party, subject to specified conditions and limitations.
The MFN commitment, however, excludes certain areas. It will not apply to taxation agreements, mutual recognition of standards and authorisations or dispute settlement mechanisms. Additionally, both sides retain the flexibility to grant special advantages in border regions for services that are produced and consumed locally.
The provision forms part of the Trade in Services chapter of the FTA text released on January 27. As part of the institutional framework, a Joint Committee will undertake a formal review in the fourth year after the agreement takes effect. The review will assess issues including the entry and stay of Indian students in the European Union, their employment rights, and rules governing the temporary movement of service providers.
Based on the findings, the Joint Committee will determine whether to extend the MFN arrangement beyond the initial five-year term. The agreement also allows either side to request an earlier review if circumstances arise that materially affect their interests. Should the Committee decide against continuation, the MFN obligation will lapse, although benefits already granted during the period will remain valid.
India and the European Union concluded negotiations on the long-pending FTA last month. The agreement seeks to lower tariffs, expand market access and strengthen trade and investment flows between the two economies, marking a significant step in deepening their economic partnership.
