By Alexandra Brzozowski and János Ammann
(EurActiv) — After more than eight years of stalled negotiations on a comprehensive EU-India trade agreement, the two are set to formally restart talks from mid-June, with the aim to strike an agreement before both head to the polls in 2024.
Technical negotiations on 18 chapters of a future free trade agreement, one text regarding investment issues, and one concerning geographical indications are set to begin on 17 June in Brussels, India’s commerce ministry said in a statement.
“Both sides hoped to conclude the agreement before 2024. The pact will pave the way for India to give a boost to trade with the 27-member nation EU bloc, subject to ratification by both sides including the European Parliament,” the statement said.
The renewed talks are expected to focus on industrial goods, agricultural tariffs and services, access to each other’s markets for goods and services, and to public procurement contracts, rules on intellectual property as well as commitments on sustainable development issues such as environmental, social, and labour rights.
Although India’s population of nearly 1.4 billion makes for an attractive potential market, trade between the EU and India has historically been low, with trade in goods reaching a total of €88 billion in 2021, and trade in services totalling €30.4 billion in 2020.
Tariffs, the main obstacle?
The EU is India’s third-largest trading partner, after the US and China, while Delhi is only number ten on the list of the bloc’s most important trade partners, measured by the value of traded goods and services.
But expectations on both sides diverge on issues such as tariffs on cars, wines, and dairy products imported from the EU, as well as on visa liberalisation for Indian professionals entering the EU.
“There are sectors with very, very high tariffs, especially automotive and spirits,” deputy director-general of BusinessEurope, Luisa Santos, told EURACTIV, referring to Indian import tariffs for cars that currently exceed 100%.
In other sectors, tariffs might not be very high, but there are other taxes that make it hard for European companies to compete in India, she said.
But according to her, the juxtaposition of the free-trading EU and protectionist India made it difficult to find common ground between 2007 and 2013 when trade talks started, and ambitions were deemed to lay too far apart.
“Due to the variety of interests of EU member states, only a very comprehensive deal removing a large part of the tariffs and other trade barriers and covering services and digital trade as well as other areas such as sustainable development and SMEs is likely to find agreement among member states,” an EU official told EURACTIV.
According to BusinessEurope, the reduction of tariffs but also regulatory cooperation is essential for the deal to work, for example regarding data protection, sanitary and phytosanitary standards, as well as mutual recognition of standards.
Moreover, European businesses want to have access to public procurement in India.
For India, meanwhile, the ability to export IT services, and agricultural goods, but also secure access for its industrial products are important, some of them having been affected by EU regulations and standards.
But for Delhi, it is also about technological cooperation and being recognised as a data-secure country, something that so far has not been the case under EU legislation and has prevented Indian firms gaining market access in the EU.
“Overall, it will be a question of balance,” Santos told EURACTIV, stressing this balance would have to be found fast.
After 2024, the short window of opportunity might close since both India and the EU will hold elections.
Partners in a changing world
With geopolitical circumstances changing and the multilateral global trade order withering, however, interests seem more aligned than ever.
In early 2021, the EU and India started a high-level dialogue on trade and investment between the European Commission Executive Vice-President Valdis Dombrovskis and the Indian Minister for Commerce and Industry Shri Piyush Goyal.
In April, Commission President Ursula von der Leyen paid a visit to Delhi, where she announced the establishment of a joint “Trade and Technology Council” and the resumption of free trade talks.
“We are taking steps to deepen our strategic ties with India – on trade, trusted technology and security, notably in respect of challenges posed by rival governance models,” von der Leyen said back then, adding that this would help the EU economy diversify and secure its supply chains.
The pandemic and the war in Ukraine have exposed the vulnerability of European supply chains, be it Russian energy or Chinese technology products.
While the EU’s dependence on Russia is limited to the energy sector, the connections with China are much deeper, raising the question of what would happen if tensions with China escalated.
From Delhi’s perspective, a trade deal with Europe will boost Prime Minister Narendra Modi’s “Make in India” campaign and his ambition to establish India as a regional leader and global manufacturing centre.
Sharing values, at least a bit
MEP Søren Gade, head of the European Parliament’s India delegation and chair of the Europe India Business Council, told EURACTIV that the EU has “nothing in common with China whatsoever, not a single value”
In 2021, the ratification of an investment agreement between China and the EU was blocked by the European Parliament since some of its members had been sanctioned by China after they criticised Bejing’s oppression of the Uyghur minority.
An eventual trade deal with India would also have to be ratified by the European Parliament, which might bring the behaviour of the Hindu-nationalist Indian government under scrutiny.
But Gade was confident a deal would be possible.
“India might not be a perfect democracy, but it is a democracy,” he said, arguing that India could help the EU diversify its risks away from China to a partner that shared more of its values.
Another reason for the EU to seek renewed cooperation with India is its rather muted reaction to the Russian invasion of Ukraine. The Indian army is known to rely heavily on Russian supplies and weapons systems, which the EU would like to counteract through closer economic cooperation.