India and the European Union (EU) will launch the tenth series of negotiations for their free trade agreement (ALE) from March 10 to 14 in Brussels, while the two parties work to solve problems pending to finalize the agreement by the end of this year, in accordance with a PTI report.
Negotiations follow recent discussions between the EU Commissioner for Trade and Economic Safety Maroš Šefčovič and Indian officials, who have explored means to accelerate the progress of a balanced and mutually beneficial commercial pact.
The urgency renewed in the finalization of the agreement is involved in the midst of concerns concerning the potential tariff increases of a possible administration of Trump in the second term in the United States, which could have an impact on the dynamics of global trade.
During a recent meeting, Prime Minister Narendra Modi and the president of the European Commission Ursula von der Leyen reaffirmed their commitment to conclude the FTA in 2024, signaling high priority to strengthen economic ties between India and the EU block in 27 countries.
India and the EU resumed the ALE negotiations in June 2022 after a gap of eight years, following a break in talks in 2013 on disagreements on market access. Negotiations now also include discussions on an investment protection agreement and a pact on geographic indications (GIS).
Despite significant progress, several key problems remain, in particular prices on agricultural products, cars and regulatory obstacles affecting the trade of goods with high intensity of labor. India is particularly cautious about the reduction of import duties on European cars and to commit to EU demands linked to sustainability and labor standards.
Agriculture remains one of the most controversial areas of negotiations, the EU growing at lower prices on cheese and skimmed milk powder, which India is currently protecting by high tasks to protect its national dairy industry. In addition, the EU’s complex tariff structures and strict health and technical trade barriers create challenges for Indian agricultural exports. European winegrowers also argue for a reduction in rights, arguing that the rate of 150% of India on imported wines limits their market access. India can consider aligning its position on the tariff reductions it has offered to Australia under their economic and trade cooperation agreement (ECTA), which included reductions in progressive rights to wine imports.
The textile sector could however see a breakthrough, as the two parties would be willing to eliminate prices on all textiles and clothes from the first day of implementing the agreement. This decision could improve India’s competitiveness on the EU market, where its textile exports are currently facing prices between 12% and 16%, giving competitors such as Bangladesh and Vietnam who benefit from preferential trade agreements, the report mentioned.
Automotive prices remain a major bonding point, European manufacturers urging India to reduce import duties on fully accumulated vehicles (CBU) from 100 to 125% current to 10-20%. The lower prices would make luxury brands like BMW, Mercedes-Benz and Volkswagen more accessible to Indian consumers. However, the national automotive industry of India, which contributes significantly to the economy and employs more than 40 million people, is opposed to such reductions. India has resisted the reduction of automotive prices in previous trade agreements with Japan and South Korea, fearing to discourage local manufacturing and move production abroad.
A potential compromise could involve a quota -based approach, allowing a limited number of European cars to enter India at reduced prices. However, any major concession to the EU could encourage other business partners, such as Japan and South Korea, to demand similar advantages, potentially modifying India’s trade strategy.
Despite these challenges, the successful conclusion of the Indian-EU Ale could considerably increase bilateral trade, which exceeded USD 190 billion during the year 2023-24. India exports to the EU, including goods worth $ 76 billion and services worth $ 30 billion, highlight the economic importance of the agreement. The EU, in turn, exported $ 61.5 billion to goods and $ 23 billion in India.
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