Vietnam signed a free trade agreement (FTA) with the European Free Trade Association (EFTA) on October 18. This move places Vietnam alongside India as an Asian economy with trade pacts involving EFTA, which consists of Switzerland, Norway, Iceland, and Liechtenstein. These countries are not members of the European Union (EU). Vietnam and India both also have separate trade arrangements with the EU.
Details of the Vietnam-EFTA Agreement
The agreement was signed in Hanoi by senior representatives of the four EFTA countries, including Swiss President Guy Parmelin, and Vietnam’s Minister of Industry and Trade, Le Manh Hung. According to the EFTA document, the deal has yet to come into effect. In 2025, bilateral trade between EFTA and Vietnam reached 4.8 billion euros, with Vietnam enjoying a surplus of 2.5 billion euros, a significant rise from 0.5 billion euros a decade ago. Major Vietnamese exports to EFTA include electrical machinery, footwear, clothing, and mechanical machinery.
India signed its ‘Trade and Economic Partnership Agreement’ (TEPA) with EFTA on March 10, 2024, which took effect on October 1, 2025. EFTA provided market access on 92.2% of tariff lines, covering 99.6% of India’s exports. India opened 82.7% of its tariff lines, including 95.3% of EFTA’s exports, according to the Press Information Bureau (PIB).
Impact on India’s Trade Prospects
Vietnam’s FTA with EFTA poses new competition for India in these European markets. While Vietnam’s agreement with the EU came into force on August 1, 2020, its pact with EFTA is not yet active. India’s EFTA agreement became effective from October 1, 2025, and its EU trade pact was completed on January 27, 2026.
Experts express differing views on how this will affect Indian exporters. Biswajit Dhar, a development economist and former professor at Jawaharlal Nehru University, advised that Indian businesses and the government must prepare to compete effectively in EFTA markets, especially post-Vietnam’s deal. Ajay Srivastava, founder of the Global Trade Research Initiative, said the new agreement would not impact Indian exports significantly since EFTA countries apply zero tariffs on industrial products, removing tariff-based advantages.
Srivastava emphasized that competition will depend on the quality, price, and reliability of products rather than tariff cuts. The EFTA free trade dashboard notes that most industrial tariffs were already eliminated by Iceland, Norway, Switzerland, and Liechtenstein before these deals came into effect. Importers must claim benefits under the ‘rules of origin,’ verifying that goods qualify for tariff exemptions, which is required for utilizing tariff preferences.
Biswajit Dhar highlighted challenges for Indian exporters following Vietnam’s preferential access to EFTA markets. Indian exports to EFTA declined about 11% in 2025-26 and decreased further by 9% between January and July 2026 compared to the previous year. Despite this, India’s largest EFTA export partner, Switzerland, received over $1.2 billion in Indian exports during 2025-26.
According to PIB, India’s exports to EFTA included $31.5 million worth of engineering goods in 2024-25—a rise of 18% over the previous year. Vietnam’s major exports to EFTA featured telephones, electronics, clothing, and garments—industries where India has competitive strength. The EU-Vietnam trade was valued at 76 billion euros in 2025, with EU running a 51.7 billion euro deficit; machinery and equipment were dominant imports.
The TEPA agreement includes a goal to boost foreign direct investment (FDI) from EFTA countries to India to $50 billion within 10 years of enforcement and an additional $50 billion in the following five years. The deal has binding commitments and progress reviews every five years. Industry data shows Switzerland remains the largest source of EFTA FDI in India with $11.32 billion in equity inflows between April 2000 and March 2026.
