By Mirjan Schulz*
On 30 March 2016, India and the European Union (EU) will meet for a 13th summit. The negotiations about a Free Trade Agreement (FTA) will presumably be on top of the agenda. It will be the first summit since 2012, which was previously on an annual basis and was established in 2000. What can be the opportunities and challenges of a strengthened EU-India partnership in light of the upcoming Summit?
Election season in both India and the EU put the Summit on the backburner. Moreover, in the meantime, certain complications in EU-India relations arose after the EU prohibited the import of 700 medicines from India in 2015, and the diplomatic fallout after the death of two Indian fishermen shot by Italian marines in 2012.
In 1963, India was one of the first countries to establish diplomatic relations with the European Economic Community (EEC), the predecessor of the EU. There were several efforts to expand these relations, for example, with the common Joint Action Plan in 2005 and 2008 which covers domains of trade, law enforcement and security as well as education and cultural exchanges. Since the EU identified India as one of its ten strategic partners in 2004, 30 different annual dialogues were implemented. Despite this, EU-India relations are still underperforming compared to other foreign relations of the two unions.
EU and India: Still Seeking Common Ground
India and the EU have several similarities: diversity in terms of languages, cultures, and ethnicities. India is often cited as the world’s largest democracy and the EU as the biggest union of democracies. In both, bureaucracy is a huge obstacle for policy implementation.
Although EU-India relations are stable, both partners have yet to address the challenges and opportunities to expand and intensify bilateral cooperation. There continue to be sticking points. For example, India would like the EU to address visa regulation challenges for Indians who seek access to the European labour market. The EU has urged India to reduce the taxes on car imports as well as a liberalisation of the hurdles for Foreign Direct Investment (FDI).
India has been upset in the past with Europe’s insistence on human rights and sees it as interference in its internal affairs. However, giving up the human rights clauses in FTAs with other countries would betray the European idea of a peace project. With regard to the next Summit, the EU can signal its willingness to also encourage new Indian initiatives such as the Make in India campaign and the Smart Cities project. India, on its part, can support the EU in terms of maritime security, counter-piracy and counter-terrorism.
Besides the EU as a whole, India has strong relations with the UK, Germany, France and the Netherlands. This raises the question if some EU member states are more strategically important to India than the EU as an entity. Bilateral negotiations seem easier than consultation with the whole union.
Free Trade Agreement: Next Step?
Trade and commerce remain on top of the agenda for EU-India relations. With growing wealth and around a seven per cent growth of its economy, India is an important trading partner and market for the EU. Likewise, after the Gulf Cooperation Council (GCC), the EU is the second largest union India trades with. The trade in goods between India and the EU increased to US$ 95.0 billion in 2013 and the trade in commercial services rose to US$ 31.0 billion in the same year.
FDIs from the EU to India accounted for US$ 45.3 billion in 2013. However, the European Commission still sees India as a “comparatively restricted” trade partner. The disputed Ease of Doing Business Index from the World Bank supports this view, and ranked India at 130 of 189 countries in its 2016 index.
Since 2007, the EU and India have been negotiating for a common Free Trade Agreement (FTA) called Broadbased Trade and Investment Agreement (BTIA). The suspension of the summit in the past few years also stopped the negotiations of the BTIA. Both sides can benefit from a reopening of the negotiations during the upcoming Summit. Otherwise, the EU runs the risk of falling into oblivion in India and missing the chance to cooperate with a future global player. India, too, can benefit from the EU’s know-how with regard to joint-research technologies and sciences. The question here is not whether an FTA between the EU and India will be arrived at – this will definitely come about – but when this will happen.
* Mirjan Schulz
Research Intern, IPCS
E-mail: [email protected]