Breakthrough unlikely in stalled India-EU free trade agreement negotiations

Cautious statements issued by both India and the European Union ahead of the 13th India-EU Summit summit show varied expectations


Prime Minister Narendra Modi met European Commission chief Donald Tusk in November on the sidelines of the G-20 meet, where both sides agreed to hold a stock-taking meeting before resuming formal talks. Photo: PTI
Prime Minister Narendra Modi met European Commission chief Donald Tusk in November on the sidelines of the G-20 meet, where both sides agreed to hold a stock-taking meeting before resuming formal talks. Photo: PTI

New Delhi: India and the European Union (EU) are unlikely to make a breakthrough in stalled negotiations for a free trade agreement during Prime Minister Narendra Modi’s visit to Brussels on Wednesday to attend the 13th India-EU Summit.

Modi has stuck to his plan to attend the long-delayed summit on his way to Washington for the fourth Nuclear Security Summit on Thursday and Friday, despite the terror attack in Brussels on 22 March.

The India-EU Summit is being held after a gap of four years after the EU last year refused to confirm the dates of a proposed visit by Modi amid a diplomatic row over the slow progress in India of the trial of two Italian marines accused of killing two Indian fishermen in 2012.

The last India-EU Summit was held in New Delhi in February 2012 and Indian officials indicated that negotiations remain deadlocked over several key issues.

“Our brief to the Prime Minister is very clear. We should not give in unless the EU agrees to our demands. We are in the process of finalizing the joint declaration,” a senior government official involved in the process said speaking under condition of anonymity.

Cautious statements issued ahead of the summit by both sides also showed varied expectation. “The 13th India-EU Summit aims to deepen the India-EU Strategic Partnership and advance collaboration in priority areas for India’s growth and development,” a statement by the ministry of external affairs said.

“The summit in Brussels will be an opportunity to re-launch relations and make concrete progress on areas of mutual interest, including trade and investment, energy, climate, water and migration,” the EU said in its statement.

Talks on the Bilateral Trade and Investment Agreement—the official title of the free trade pact—started in 2007 but progress has been tardy and marked by flip-flops. India cancelled a meeting with the EU chief trade negotiator in August last year in protest against an import ban on 700 of its generic drugs clinically tested by GVK Biosciences for alleged manipulation of clinical trials.

Later, during a meeting between Prime Minister Modi and Donald Tusk, president of the European Council, in the Turkish city of Antalya in November on the margins of a G-20 meet, both sides agreed to hold a stocktaking meeting between the chief negotiators before resuming formal talks. However, the official said there is no consensus how to move forward on contentious issues even after the meeting between commerce secretary Rita Teaotia and the EU Trade Commissioner Cecilia Malmström in Brussels on 22 February.

Disputed issues include the so-called Mode 4, a provision of the 1995 General Agreement on Trade in Services that seeks to facilitate the movement of professionals from one country to another.

“The EU is not giving any assurance on Mode 4. While we could accommodate some of their demands in automobiles and liquor (the EU wants lower import duties), we cannot accept their demand for a more stringent geographical indications regime,” the official added.

The EU has sought assurances on the facilitation of the registration of Geographical Indicators, mostly relating to wines and spirits. India also wants the EU to declare the country data-safe, which will help Indian information technology and outsourcing companies. But Brussels insists the issue is not part of the FTA negotiations and should be dealt with separately.

The official said that as of now, only the textiles industry has shown any keenness on concluding a deal with the EU.

What has further complicated matters is the planned British referendum, to be held in June, on whether the country should remain in the EU. “If UK comes out of the EU, then there is no need for this trade deal. It will be a wasted energy. We are closely watching the situation,” the official said.

Growing discomfort among Indian firms about the existing FTAs, which have led to imports shooting up and Indian businesses becoming uncompetitive, is another reason the government is being cautious while negotiating new trade deals. The Economic Survey 2015-16 said the 42 FTAs signed by India so far have led to more imports than exports as the country has had to go for larger tariff reductions than its FTA partners because of relatively high tariffs.

Jayant Dasgupta, executive partner at Lakshmikumaran & Sridharan and former ambassador of India to the World Trade Organisation, said both India and the EU are in a similar position—each is seeking greater market access while remaining reluctant to further open up its markets, which makes it difficult to strike a deal.

“India has already announced it will review its existing and ongoing trade deals. I will not be surprised if India takes a tough stand as there is a feeling that India has not gained much from its existing bilateral trade agreements,” he added.

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