MFN Treatment Extended: India-EU Trade Agreement Details

India, European Union Agree on Five Year MFN Treatment in Trade in Services Under FTA​

India EU FTA to Ensure Equal Treatment for Service Providers​

Mumbai, February 28: India and the European Union have agreed to grant each other Most Favoured Nation treatment for five years after their proposed free trade agreement comes into force, strengthening cooperation in trade in services.

The provision is aimed at ensuring fair and equal treatment between service sectors and service providers on both sides. Under the Most Favoured Nation framework, each side will treat the other at least as favourably as it treats any third country, subject to specified conditions and limitations.

This means that if either India or the European Union extends better treatment to another country in services, the same benefit must be offered to the other party within the agreed scope of the arrangement.

Scope and Exceptions Under MFN Provision​

The MFN treatment will not apply to certain areas. These include matters related to tax treaties, mutual recognition of standards or authorizations, and dispute settlement procedures.

The agreement also permits both sides to provide special advantages in border areas for services that are produced and consumed locally. This allows flexibility in specific regional contexts while maintaining the broader commitment to equal treatment.

The MFN clause forms part of the Trade in Services chapter of the FTA text, which was made public on January 27.

Joint Committee to Review Arrangement in Fourth Year​

As part of the agreement, a Joint Committee will conduct a review in the fourth year after the FTA comes into effect. The review will examine key issues, including the entry and stay of Indian students in the European Union, their rights to work, and the regulatory framework governing the temporary movement of service providers.

Following the review, the Joint Committee will decide whether the MFN treatment should continue beyond the initial five year period.

Either side may also seek a review if circumstances arise that adversely affect its interests. If the Committee chooses not to extend the arrangement, the obligation to grant MFN treatment will cease. However, any benefits already extended during the five year period will remain valid.

India EU Free Trade Agreement to Boost Trade and Investment​

India and the European Union reached the long pending free trade agreement last month. The pact is designed to lower tariffs, enhance market access, and strengthen overall trade and investment ties between the two economies.

The inclusion of the MFN provision in trade in services underscores the commitment of both sides to deepen economic integration and provide greater certainty for businesses and service providers operating across markets.