India, EU to resume talks on FTA on 28 August3 min read . Updated: 21 Jul 2015, 12:20 AM IST
Lack of clarity on local laws regarding bilateral investment treaty and govt procurement law may delay the deal
New Delhi: India and European Union (EU) will resume talks at the chief trade negotiators’ level on 28 August to break the deadlock on the proposed free trade agreement (FTA). However, lack of clarity on domestic laws regarding bilateral investment treaty (BIT) and the government procurement law may delay the progress in negotiations.
The previous United Progressive Alliance (UPA) government had introduced a public procurement bill in the Lok Sabha in 2012, but it lapsed when the 15th Lok Sabha’s tenure ended in 2014.
The model BIT is under consultation, and no final decision has been made in this regard.
“We have agreed for the meeting between the chief trade negotiators on 28 August. The idea is that the chief negotiators should meet and gauge the level of interest between both sides and how to go about it," a government official said, requesting anonymity.
The negotiations on the FTA, called Broad Based Trade and Investment Agreement (BTIA), began in 2007, but the two sides have missed at least four deadlines to clinch a deal even after 15 rounds of talks.
A prolonged recession in the EU, and its focus on concluding Transatlantic Trade and Investment Partnership agreement with the US, also delayed the progress.
India now seems to be ready to accommodate demands to lower tariffs for wines and spirits, which has been a contentious issue due to domestic industry lobbies, but unlikely to yield on the demand for a stringent intellectual property rights regime, including a more stringent geographical indications regime.
India is also likely to insist on data security status from the US, which is expected to increase knowledge outsourcing jobs to India.
In services agreements, India specifically focuses on the clause that allows greater flexibility in the movement of skilled professionals without restrictions like those pertaining to their experience in the field. Since the EU does not have a common working visa, it restricts Indian professionals from moving freely across EU nations.
A problem arises when a person working in a company has to move from a branch in one country to a branch in another.
India is also unhappy as EU wants to put sectoral caps on visas for Indians.
But it is the lack of domestic regulatory clarity on the investment treaty and government procurement, which is likely to bind the hands of the Indian negotiators if both sides moderate their ambitions and wish to clinch a deal at the earliest.
EU is keen to have a substantive government procurement chapter and eyes India’s lucrative tenders by the government agencies. However, India is not keen to give greater market access to EU in this area beyond bringing in more transparency in its procurement practices.
The new draft BIT under discussion proposes to curb foreign investors’ right to take the Indian government for international arbitration by forcing them to first exhaust domestic legal remedies.
“Out of the 15 chapters in the proposed free trade agreement, we have an investment chapter. But our model BIT is not ready. Government procurement is another chapter, but we don’t have any clarity on government procurement yet. Without finalizing these, we cannot complete negotiations. Even if we don’t give away anything on government procurement, the policy needs to be clear through an act of Parliament," added the official quoted earlier.
Arpita Mukherjee, professor at the Indian Council for Research on International Economic Relations, said this is the right time to restart negotiations as both sides seem to have realized they need a trade deal after temporarily abandoning talks.
“But both sides need a deal with both old and new issues. The EU side is likely to raise its concern on food safety standards in India after the ban of Maggi noodles by the Indian authorities," she said.