New Delhi: The European Union ambassador to India Joao Cravinho Thursday said both sides had narrowed differences while negotiating a free trade agreement (FTA) but warned of “a closing window” of opportunity given that India’s national election is scheduled for next year.
Cravinho said a lot of progress had been made in the past 18 months but differences on the auto, wine and spirits, and services sectors remain to be resolved. Commerce minister Anand Sharma presented a seemingly more optimistic view last month, telling an Indian industry meeting that the accord was “on the verge of completion”.
The EU as an economic bloc is India’s largest trade partner. In 2011, trade amounted to €79.8 billion, up 17% from 2010. An FTA would see this rising, Cravinho said, adding that India and the EU shared balanced trade.
Cravinho said differences over services—the mobility of professionals without restrictions such as experience conditions that India has been pitching for—were more serious than those over reducing tariffs in the auto and wine and spirits sectors.
“These are issues that are still open,” Cravinho said, adding that in the case of the auto sector, the EU objective was to completely eliminate tariffs “in both directions”.
But “it seems that objective is not going to be achievable. So we will work towards something as close as possible... At the moment, trade is grossly imbalanced. You have 240,000 vehicles going from India to Europe in a year and 6,000-7,000 coming in the opposite direction,” the EU ambassador said. European car exports to India attracted taxes as high as 60% without “add-ons” such as the cost of spare parts, he said.
There were many European automobile brands on Indian roads but most of these were cars made in India itself, Cravinho said.
“On the other hand, India is very competitive in small and medium-sized cars. Not only is it very competitive, it (India) has an edge or will have an important edge over Japanese cars at least till we sign an (FTA) agreement with Japan in terms of exporting to Europe,” he said.
The EU has had one round of informal talks with the Japanese on a trade pact, he said.
Cravinho acknowledged that most of the cars exported from the country to Europe were South Korean or Japanese brands made at Indian manufacturing hubs, although Indian companies such as Mahindra and Mahindra Ltd were also increasingly exporting cars to Europe.
Talks on the ambitious trade pact started in 2007 but have stalled over contentious issues such as tariffs and government procurement. Indian automobile and wine associations are opposed to significant concessions to European multinational firms, fearing loss of market share.
While the EU is keen to have greater market access in India, including for a large number of agricultural products, India is keen on fewer restrictions on the temporary movement of its nationals working in Europe. There are differences over intellectual property rights as well.
A separate sticking point is India seeking data secure status from the EU that will help Indian firms get data processing contracts from firms on the continent. This issue, Cravinho said, was not part of the FTA negotiations.
“There is no data authority in India which we have in European countries. This is an important aspect for us because in Europe, this (secrecy related to personal data on the Internet) is enshrined as a fundamental right—the right to data privacy,” Cravinho said.
“We will certainly be very supportive of India getting data adequacy status... It’s in India’s interest because there are billions of dollars of business involved, but it’s also in our interest because European companies will gain by using Indian companies to do their data processing. It will reduce our costs,” he said.
But he ruled out linking FTA negotiations with this as they are “independent processes”.
Arpita Mukherjee, a professor at the New Delhi-based Indian Council for Research on International Economic Relations or ICRIER, said, “Auto, wines and spirits, and services are areas of concern and till the gaps in these areas are not closed the negotiations cannot be completed.”