New Delhi: Negotiations between India and the European Union (EU) over a free trade agreement enter a crucial stage with both sides set to discuss legal texts and tariff liberalization in the eighth round of talks to be held on 25-29 January in the Capital. They will take place as differences persist over non-trade issues raised by the EU such as child labour and human rights.

Trade avenues: A tug boat tows an AP Moeller-Maersk container vessel at the Algeciras port in Spain. The value of India’s trade with the EU is larger than its trade with either China or the US. Kabier Mikel Laburu | Bloomberg

“We would like to make quick progress on text-based negotiations in this round. Tariff-line-wise discussions will start now, including in sectors where additional requests from both sides are there," commerce ministry additional secretary P.K. Chaudhery, who heads the Indian negotiating team, told Mint.

“Our overall objective is to have an ambitious and balanced outcome. Both sides have sensitivities and we will try to protect ours," he said.

He recently met the EU’s chief negotiator, Ignacio Garcia Bercero, in Brussels and both sides had tentatively developed a road map as to how talks should proceed, Chaudhery said.

“Small groups have already met on sanitary and phyto-sanitary measures, investment and intellectual property rights (IPR)," he said. Sanitary and phyto-sanitary measures deal with food safety and animal and plant health.

“It has tentatively been decided to hold the next round of negotiations at Brussels in March. Efforts will be made to lay sufficient ground for negotiations in Brussels during the upcoming Delhi negotiations," he added. Both sides resolved to conclude the negotiations by end-2010 during the India-EU summit in New Delhi in November.

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India will need to tread carefully to ensure it gets a good deal, said Abhijit Das, deputy project coordinator and officer in charge, Unctad India Programme.

“EU is a huge market for India. There is considerable complementarity on both sides. However, modulation of high expectations on both sides would be crucial so that negotiations do not face any roadblock," Das said. “The inclusion of any non-trade issues could be a sticking point. It could be a good deal for India provided it is well negotiated."

The proposed bilateral deal between the EU and India has so far been a contentious one, with non-government organizations opposing any such deal. ActionAid, an agency that works among the poor, believes India and the EU are unequal partners in trade and “any agreement would massively increase the extent of liberalization in the country".

In a report released in June 2008, ActionAid said issues that developing countries rejected at the World Trade Organization (WTO) for being anti-development, such as investment, competition and government procurement, are being forced back on to the agenda by the EU.

Chaudhery does not foresee any need for a full round of discussions after March.

“We will undertake intense discussions in the January and March rounds, given there is a political mandate to conclude negotiations in 2010," he said. “I do not think we will need any full round of discussions after the March round. Pointed discussion may be needed on specific sectors through small groups of negotiators."

Both sides have offered to eliminate tariff lines in 90% of traded goods. “How we tackle the rest 10% of sensitive items is a matter of negotiations. As our tariffs are higher, we will take more time to adjust our duty structure, which EU does not have any objections to," Chaudhery said.

India and the EU commenced negotiations in June 2007 in Brussels for an ambitious bilateral trade agreement and so far, seven rounds of talks have been held. This will be the most ambitious trade agreement for India as EU is India’s largest trade partner with annual bilateral trade totalling around €77 billion (Rs5.34 trillion). India also ranks ninth on the EU’s list of major trading partners.

Minister of state for commerce and industry Jyotiraditya Scindia had told Parliament on 2 December: “Legal texts of the proposed agreement have been exchanged and are being discussed. Tariff liberalization offers have also been exchanged on trade in goods."

The negotiations cover areas such as trade in goods, trade in services, investment, sanitary and phyto-sanitary measures, technical barriers to trade, trade remedies, customs cooperation and trade facilitation, dispute settlement, competition and intellectual property rights.

Scindia said India is committed to an early conclusion to the talks. “EU has 27 member countries having varying trade interests and has to consult all member countries before moving ahead on different issues. India also undertakes consultations with the stakeholders to assess the impact of various offers and requests made by the EU for the FTA negotiations to protect the interests of India’s agricultural, industrial and other sectors."

Among the hurdles faced by the two sides are IPR disputes, high Indian taxes on wines and spirits from Europe, and EU concerns over social issues such as human rights and child labour in India.

On the contentious non-trade issues, Chaudhery said these are not so far on the negotiating table. “Each side has the right to raise their concerns. We have also raised concerns over non-trade barriers in the EU. It is up to us what we accept to negotiate," he said. “We have to listen to what their concerns are. It depends on our social and political situation, what we would like to negotiate," he added.

Earlier this year, the European Parliament said human rights and democracy constitute an essential element of the free trade agreement. It raised its concern regarding the “continuing persecution of religious minorities and human rights defenders in India" and the current human rights and security situation in “Indian-administered Kashmir".

It had also called on India to sign the nuclear non-proliferation treaty, even though the Nuclear Suppliers Group has lifted its embargo on India’s nuclear trade.

Chaudhery said government procurement, a key demand from the EU, is not part of the negotiations. “Both sides are only trying to understand systems of the other party. No formal negotiation on this front is expected."

On IPR, Chaudhery said India is keen on including traditional knowledge and biodiversity in the agreement. On SPS, he said: “We have made very good progress to our satisfaction and are close to resolving all outstanding issues." As far as negotiations on investment are concerned, Chaudhery does not see much problem as foreign investment in most of the sectors in India are open through the automatic route. “We have sensitivity in some sectors like retail and defence, which is well known."

Chaudhery said the EU not being a single customs union is of concern to India when it comes to trade in services. “We have to tackle this issue. We need to see what commitments they are offering. That stage will come when we exchange offers with them which will take place simultaneously. Though we are ready with our offer, EU is yet to be ready with their list."

India also opposed the EU’s offer to follow a non-GATT (General Agreement on Tariffs and Trade, which preceded the WTO) style of negotiations by clubbing services and investment negotiations together. “It is only during the seventh round they agreed to follow the GATT style of negotiation which we are familiar with. Now both services and investment will be negotiated differently," he said.

Asked whether India’s concern over drugs seized in transit in Europe and the EU’s concern over high local taxes on European alcohol have the potential to derail the talks, Chaudhery said: “It is up to our negotiating skills to find resolution of such issues without hitting any roadblock. We have got great assurance from EU that they will resolve the drugs seizure issue to our satisfaction. We have also assured that we are in discussion with state governments to resolve their concern on the alcohol front."

A draft version of the bilateral negotiations, which was apparently leaked and posted on the Internet earlier this year, indicated that the EU is pressing for a greater level of commitment on IPR protection from India under the free trade agreement.

The EU expects the bilateral agreement to specify the rights and obligations between the two parties beyond those agreed under the Trade Related Intellectual Property Rights (TRIPS) agreement, also known as the TRIPS-plus standards of protection. This had raised concerns in India over access to cheap medicines and agricultural inputs.