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India-EU Trade Pact - Taking its own time
Read more on - Polity | Economy | Schemes | S&T | Environment
- India's willingness: India indicated plans to restart negotiations on investment and trade agreements with the European Union (EU). Earlier discussions were held on a comprehensive free trade agreement in 2007. It was aborted in 2013 due to differences on movement of professionals, labour, human rights, environmental issues, India’s high tariffs, inconsistent tax regime and non-payment of arbitral awards. In January 2021, the EU signed a quick investment deal with China, before Joe Biden was sworn in as President of the USA!
- EU's own problems: Now EU finds itself in an unusual turbulent situation which makes the trade pact elusive. The EU nations are struggling with COVID-19, Brexit and international tensions caused by former U.S. President Trump that aggravated internal conflicts in EU. It faces obstacles from adherence to the rule of law to a strategy for dealing with China, Russia, Turkey and Iran.
- Covid package: After months of tortuous negotiation, member States finally agreed on a long-term budget and a COVID-19 recovery package of $2 trillion. Hungary and Poland opposed anti-COVID-19 support being linked to good governance, in particular, accusations of suppression of human rights and lack of independence in the judiciary.
- Euro scepticism: The EU’s attempt to condition its budget on the rule of law sharpened the emphasis on the veto power to which every Member State is entitled. It was not only Britain that started the populist movement of leaving EU but many Euro sceptic parties now focus on preventing closer unity. Euro zone crisis, migration crises, implementing COVID-19 lockdowns, & upcoming elections in many EU States which have strong Euro sceptic movements reflects lack of unity. This fear of Euroscepticm forces mainstream politicians to adopt populist rhetoric & many top leaders are criticising Islam and anti-secular immigrants which is repeated in other EU countries.
- EU unity: Common security and defence policy is causing division among the nations. France wants Europe to have greater control on its security, but Germany, Netherlands, Portugal and others are uncomfortable with this view. They are satisfied with security being supported by NATO and the U.S. & wants to engage in profitable business with China and Russia. The COVID-19 pandemic has led to riots in the Netherlands, resignation of Italian PM & introduced divisive vaccine nationalism in the Union. Initially some members closed their borders & restricted the exports of personal protective equipment.
- Vaccination programme: EU’s vaccine procurement programme is affected because the manufactures say that vaccines cannot be delivered as scheduled due to production problems despite advance payment. The German government which is a strong advocate of European solidarity negotiated a separate vaccine contract with Pfizer. Enormous political will and adroit skill is required to solve these issues & trade agreements with India will be the least priority for EU.
- Trade facts: The EU is India's largest trading partner, accounting for €80 billion worth of trade in goods in 2019 or 11.1% of total Indian trade, on par with the USA and ahead of China (10.7%). The EU is the second-largest destination for Indian exports (over 14% of the total) after the USA. India is the EU’s 10th largest trading partner, accounting for 1.9% of EU total trade in goods in 2019, well behind the USA (15.2%), China (13.8%) and the UK (12.6%). Trade in goods between the EU and India increased by 72% in the last decade. Trade in services between the EU and India increased rapidly from €22.3 billion in 2015 to €29.6 billion in 2018. EU foreign direct investment stocks in India amounted to €68 billion in 2018, which is significant but way below EU foreign investment stocks in China (€175 billion) or Brazil (€312 billion). Some 6,000 European companies are present in India, providing directly 1.7 million jobs and indirectly 5 million jobs in a broad range of sectors.
- What EU says: Currently, India’s trade regime and regulatory environment remains relatively restrictive. Technical barriers to trade (TBT), sanitary and phyto-sanitary (SPS) measures, deviation from international standards and agreements, as well as discrimination based on legislative or administrative measures by India, affect a wide range of sectors, including goods, services, investment and public procurement.
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