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India, EU ‘far apart’ on trade deal, but to revive talks today at first summit in 2 years

EU & India have been planning a free trade deal since 2007. Now, as PM Modi virtually meets EU leaders, high-level trade dialogue expected to be announced.

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New Delhi: India and the 27-member European Union (EU) will hold their “annual” summit after a gap of more than two years Tuesday. The practice was put off due to disagreements over trade and investment that define their bilateral ties. The EU is India’s largest trading partner.

Trade and investment issues will be the main focus of the 15th India-EU summit, which will be held virtually. India will be represented by Prime Minister Narendra Modi and the EU by Charles Michel — president of the European Council, which defines the EU’s overall political direction and priorities — and Ursula von der Leyen, president of the European Commission, which is EU’s executive branch.

ThePrint has learnt that both sides remain “far apart” on the issue of a free trade agreement (FTA). India was one of the primary countries with which the EU had launched talks for having a wide-ranging FTA, officially called broad-based Bilateral Trade and Investment Agreement (BTIA), as long ago as 2007, after being agreed on at the 7th India-EU summit in Helsinki in 2006.

The BTIA was proposed to encompass trade in goods, services and investments. However, talks got suspended in May 2013 as the two sides could not agree on some critical issues such as slashing of tariffs on automobiles, wines and spirits, and free movement of professionals.

Also read: EU, India tiff over tariffs heats up at WTO

Stalled FTA talks

Formal trade negotiations have been suspended since 2013, though there was resumption of talks at the technical level in 2017. But these also reached an impasse. During the last summit, in New Delhi in October 2017, the wide gaps on the FTA could not be closed.

According to official sources, while the Modi government has made all possible efforts to push the talks at the highest level, the EU has not shown any interest in continuing.

This, the sources said, is because India has insisted on a smaller trade deal first, followed by a bigger trade agreement. But the EU is not open to the idea, and wants a “full-fledged trade agreement” with greater market access “having broader convergence” that will seek to slash tariffs on 90 per cent of goods being traded.

However, at Tuesday’s summit, both sides are expected to launch a ‘high-level trade dialogue’ to give a political push to sticky issues.

India being more ‘protectionist’

According to an EU official, some of the programmes rolled out by India, such as ‘Make in India’ and ‘Aatmanirbhar Bharat’ have given rise to protectionist tendencies.

“Bilateral trade is far below than what we expect from such a relationship. Unfortunately, conditions are not there to engage in formal negotiations. We’ve witnessed a trend in India which goes more towards the protectionist side,” the official told ThePrint.

“The Make in India initiative and then the announcement that post the Covid crisis, India wants to pursue a self-reliant economy didn’t help,” said the official, adding that the EU wants to discuss an “ambitious” and “comprehensive” agreement.

“Comprehensive means removing barriers for trade in goods, trade in services, for investments, opening up of markets and to negotiate trade and sustainable development. Unfortunately, since the suspension of talks in 2017, we are not close,” the official said. “India maintains a quiet protectionist stance when it comes to offering us tariff relaxations.”

Also read: European Union is ‘keener’ to seal trade pacts with India than discuss Kashmir & CAA

Agreement on investment in doldrums

New Delhi and Brussels have also not been able to find common ground on the issue of investment.

The EU remains firm on completing these talks even if talks for the larger trade pact continue. However, according to official sources, India has made it clear to the European Union that it will not negotiate the pact on investment “separately” from trade.

This became a sore point between the two when in 2016 India cancelled all investment treaties with EU member countries as New Delhi came out with a new model Bilateral Investment Treaty (BIT) text in April 2016.

“That was most unfortunate… We do not expect such behaviour from future FTA partners. It was not the right thing to do. It created uncertainty for us,” the EU official said.

In 2017, EU even offered to sign a comprehensive investment pact separately, but India is still opposed to it, a source said.

India is also opposed to negotiating sustainable development issues such as labour laws and climate changes issues under the FTA, sources said. This has also a been a point of contention for the past 13 years.

Strategic relationship to be enhanced

At Tuesday’s 15th summit, the two sides are expected to officially adopt the ‘EU-India Strategic Partnership: A Roadmap to 2025’, which will seek to enhance strategic and security ties between both sides.

On tensions between India and China over the ongoing border stand-off at the Ladakh sector of the Line of Actual Control (LAC), the EU said it is hopeful that military and diplomatic level talks will bring down the temperatures.

“As EU, we would like to see good neighbourly relations between India and China…We know India has a very intensive relationship with China, we also have very intensive relationship with China. On the clashes at the border, it is important that both sides are talking to each other,” a second EU official said.

The EU is also expected to raise the issue of human rights with India during the summit.

Last year, the EU had also expressed concerns over India’s move to scrap Article 370, which took away the special status of Jammu and Kashmir, and the Citizenship Amendment Act, which led to widespread protests and counter-protests across the country.

In January this year, the Strasbourg-based European Parliament, the EU’s legislative branch, debated a joint resolution on Kashmir as well as the CAA, which stands deferred as of now.

In May, India also joined an international investigation on the origins of the novel coronavirus, an initiative led by the EU and Australia.

Also read: Critical drugs supply must not be disrupted, EU envoy says as India bans & resumes exports


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