The European Union and India recently concluded the ninth round of talks on a proposed free trade agreement (ALE). Although progress has been slow due to differences on key issues, an ALE remains in the interest of both parties.
“Trade is one of the fundamental elements of our relationships. It is not by chance that we are the strongest trade partner in India ”, the European Commissioner for the Budget and the Johannes Hahn Administration said The media during his recent visit to India.
“This is why the next step should be carried out, and it should be a complete ALE, which will be in the interest of India and Europe,” added the commissioner, “there is always room for improvement.”
Negotiations on an Indian-EU Ale were officially relaunched in June 2022, and the rapprochement mainly focused on speaking. Last year, the EU exceeds The United States, becoming the largest trading partner in India.
These discussions took place in the context of the EU-India (TTC) commerce council, spear In February 2023, aimed at increasing bilateral cooperation and stimulating trade and investments to ensure the technological and industrial leadership of the parties.
In a recent interview With Euractiv, the Indian Ambassador to the EU, Sarabh Kumar, described the TTC as an important partnership mechanism, the two parties working in fields such as digital transformation, green technologies and trade.
According to the Kumar ambassador, the ALE negotiations are never easy and the India-EU negotiations were not an exception, but he said that there was a strong political commitment on both sides to conclude a complete agreement.
“The Ele is not only to extend trade. It has a strategic and political dimension. India and the EU realize it and have committed to working at its conclusion,” said the ambassador.
Earlier this year, India has signed a free trade agreement with the European Free Trade Association (EFT), which will see investments worth $ 100 billion in the country. The EFT is made up of Norway, Switzerland, Iceland and Liechtenstein.
“The times to come will bring more prosperity and mutual growth when we strengthen our obligations with the nations of the EFTA,” said Prime Minister Narendra Modi in a statementemphasizing the creation of opportunities for young people.
The agreement follows almost 16 years of negotiations. Under the agreement, India will eliminate most of the import prices on industrial goods from the four countries in exchange for investments over the next 15 years.
Ale, the final goal or the starting point?
Despite the strategic partnership which is gaining momentum and which the two parties move towards stronger economic links, driven by their common interest (reduction of dependence on China), significant challenges remain to be met.
A analysis Published by the Center for Research on Strategic and Security Issues (Natstrat) identifies the following differences: the relatively low share of India in global manufacturing and trade with the EU, high prices in India, European environmental regulations such as the adjustment mechanism of carbon borders (CBAM).
These basic business issues, associated with concerns about sustainability measures, were on the negotiation table between the parties, the Indian part raising concerns about the EU decision to impose inequitable sustainability regulations, labor standards, deforestation rules and carbon tax.
In this regard, Natstrat analysis highlights the importance of clarifying whether the conclusion of a free trade agreement would be the final objective or the starting point for the new geo-economic relationship between the EU and India.
Although a full-fledged agreement is eccentric, the analysis concludes that India and Europe must focus on small sectoral agreements before continuing a complete free trade agreement.
He also suggests more open diplomatic channels, understanding the political landscapes of the other and the fight against differences, such as the links of India with Russia, as crucial stages to consolidate the partnership.
What does the EU and India want?
A report of the reflection group on the Research Initiative on World Trade (GTRI) before the ninth cycle of talks recommends a political push and a pragmatic approach to fill the gaps and ensure that an ALE becomes an cornerstone of the strategic economic partnership.
According to the report, a successful ALE would stimulate trade and investment, would create new opportunities for businesses and contribute to the economic growth of both parties, in particular thanks to a reduction in prices and increased commitments in the services.
This would also stimulate exports on both sides. The main Indian products exported to the EU, such as ready -to -use clothing, steel, petroleum products, electric machines and pharmaceutical products, would become more competitive. Exports of services such as telecommunications, commercial and transport services would also see substantial growth.
For its part, the EU would benefit from the increased export of essential products from India, such as planes and parts, electric machines, chemicals and diamonds. The service sector would also benefit from this, with improved trade in other commercial services, intellectual property and telecommunications and IT services services.
The EU seeks to eliminate prices on more than 95% of its exports, including sensitive agricultural and automotive products. India only wants to open 90% of its market, hesitating to reduce prices on bulk agricultural products.
Although India is involved in sustainability and environmental protection, it is against Instruments such as deforestation regulations (EUDR) and CBAM are part of commercial commitments. These are perceived as instruments of protectionism and act as non-pricing barriers.
(Edited by Brian Maguire | Euractiv’s prenocacy lab)
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