India and the European Union (EU) recently concluded the first round of talks for their Trade and Investment Agreements in New Delhi. This round of negotiations incorporated 52 technical sessions spanning 18 policy areas of the free trade agreement, as well as seven sessions on Investment Protection and Geographical Indicators. The second round is slated for September 2022 in Brussels.
The Proposed India-EU Free Trade Agreement
Initiated in 2007, the discussions for a comprehensive Free Trade Agreement (FTA) between India and the EU have been long-standing. Called the broad-based Bilateral Trade and Investment Agreement (BTIA), it aims to cover trade in goods, services, and investments. Despite encountering a stalemate over market access and professional mobility in 2013, the negotiations have resumed.
The Current Economic Dynamics between India and EU
Over the fiscal year of 2021-22, bilateral trade between India and the EU exceeded 116 billion dollars. Amidst global disruptions, this relationship witnessed a growth of more than 43%. The EU is now the second-largest trading partner for India, following the US, and remains the prime destination for Indian exports. In the last decade, the EU’s share in foreign investment inflows to India has risen from 8% to 18%, thus establishing the EU as the leading foreign investor in India.
Potential Hurdles for India-EU Trade and Investment Agreements
Several obstacles may disrupt the smooth execution of the proposed agreements. For instance, the EU’s insistence on including the Most Favored Nation provision in its investment treaties, which India opposes. Additionally, Fair and Equitable Treatment, a provision often included in the EU’s investment treaties and absent in India’s Model Bilateral Investment Treaty, might pose another challenge. Furthermore, India’s stance on the EU-supported Multilateral Investment Court and the stringent non-tariff barriers imposed by the EU on Indian agricultural and pharmaceutical products could also become points of contention.
Understanding the European Union
The EU is a consortium of 27 nations, functioning as a unified economic and political entity. Nineteen member countries use EURO as their official currency, while the remaining eight (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden) do not. Established to prevent the recurrence of warfare among European countries, the EU has developed an internal single market through a harmonized system of laws effective across all member states.
The Significance of EU for India
Apart from bolstering peace, job creation, and economic growth, the EU aids sustainable development across India. Over time, the EU-India cooperation has evolved from mere financial assistance towards a partnership focused on shared objectives. This commitment was explicitly reiterated at the 2017 EU-India Summit, where the leaders agreed to fortify cooperation for the implementation of the 2030 Agenda for Sustainable Development.
The Path Forward: Geo-Economic Cooperation and BTIA Finalization
India can engage EU countries in the Indo-Pacific narrative to harness their extensive economic resources for the region’s sustainable development. Also, both India and the EU must strive towards finalizing the pending trade deal to strengthen their ties further. Collaborating with key players like France and the UK will be critical to this process. With France already a strong partner in the Indo-Pacific narrative and negotiations underway for a trade pact with the UK, India is well-positioned to cement these fruitful alliances.
