The Indian administration recently announced that negotiations for a Bilateral Trade and Investment Agreement (BTIA) between India and the European Union (EU) are set to recommence. These discussions, which have been on hold since 2013, were agreed upon for reintroduction during the India-EU Leaders’ conference earlier this year. Alongside this, a Connectivity Partnership was also accepted by both countries.
BTIA: An Overview
BTIA talks were first launched in 2007, with India and EU seeking to establish a comprehensive Free Trade Agreement (FTA). The proposal was to include trade in goods, services and investments. However, disputes on market access and movement of professionals brought these conversations to a standstill in 2013.
The Role of EU in India’s Foreign Trade
In the financial year 2019-20, the EU emerged as India’s largest trade ally in goods, surpassing both China and the US. The total trade between both regions reached close to USD 90 billion. With the finalization of the BTIA, it is expected that barriers to trade in goods and services and investment across various economic sectors will be removed, encouraging bilateral trade growth.
Challenges Ahead
India’s pursuit of self-reliance has been quickened due to the Covid-19 pandemic under the Atmanirbhar Bharat Mission. This initiative is viewed by the EU as a “protectionist stance”, posing a potential obstacle to the negotiations. Furthermore, meeting the stringent standards of labour and environment emphasized by the EU might prove challenging for India.
Significance of the BTIA
By actively engaging in BTIA talks, India aims to assert its openness to entering trade agreements, a noteworthy move considering its withdrawal from the Regional Comprehensive Economic Partnership (RCEP) at the last moment. Simultaneously, the EU is keen on diversifying its value chain from China to India, indicating its interest in establishing a trade agreement with India.
Expanding Beyond Physical Connectivity
The newly adopted India-EU connectivity roadmap is an ambitious strategy emphasizing not just physical infrastructure but also the enhancement of digital, energy, transportation and people-to-people connectivity. This comprehensive initiative primarily focuses on fostering trade and investment, science and technology, and Sustainable Development Goals (SDGs).
A Detailed Approach
The connectivity roadmap spotlights domestic connectivity as well as developing connections with Europe. In the process, it aims to interact constructively with other South Asian and Indo-Pacific countries. An important aspect of this strategy is to catalyse private and public funding for connectivity projects.
Counteracting China’s Belt and Road Initiative (BRI)
The report titled ‘India-EU Connectivity: Partnership for Development, Demand and Democracy’ emphasizes that the connectivity roadmap indirectly challenges China’s BRI by prioritizing democracy, rule of law, inclusiveness and transparency, and avoiding debt traps.
The Way Forward
India could persuade EU countries to get involved in the Indo-Pacific narrative, either geo-economically or from a security perspective. This would allow India to mobilize substantial economic resources required for regional infrastructure development, exert political influence and use its considerable soft power to shape the Indo-Pacific discourse.
Pertaining to the Indo-EU BTIA Treaty, which has been pending since 2007 despite negotiations, there is a pressing need for both India and the EU to expedite its finalization.
Collaboration with influential entities is also crucial. A strategic partnership framework was unveiled during French President Emmanuel Macron’s visit to India in early 2018, providing a robust regional anchor in the Indo-Pacific narrative. Additionally, India is also in the process of negotiating a trade pact with the UK.
