EU expected to reach out to India to restart FTA talks

Brussels: Keen to clinch a free trade agreement with India, Asia’s third largest economy, the slow growing European Union (EU) is expected to reach out to trade minister Nirmala Sitharaman to restart free trade agreement talks, people close to the development on the European side have said.

add_main_imageBut both sides may have already lost an opportunity to give a political push to the talks with Prime Minister Narendra Modi dropping plans to visit Brussels during a visit to Europe next month.

EU policymakers were hoping that the push for a speedy resumption of talks, suspended since 2013, would come from Modi during an India-EU summit that sets the agenda for interaction between India and the 28-member European bloc. NextMAds

Modi was to have stopped off in Brussels for the summit on 14-15 April. But according to Indian diplomats, EU officials in Brussels failed to confirm the dates, which led to officials in New Delhi re-adjusting the Prime Minister’s schedule to stop off first in France during 10-11 April, then go on to Germany and later to Canada. A person familiar with Modi’s travel plans said that the Prime Minister had only a fixed number of days “given that Parliament is in session. So whatever dates are confirmed have been fit into the schedule.”

According to speculation in Brussels, one of the reasons for the EU dragging its feet over confirming dates for a Modi visit is that it is upset with India over the slow progress of the trial of two Italian marines accused of killing two Indian fisherman in 2012.

That the new EU foreign policy chief Federica Mogherini has been heavily focused on the crisis in Ukraine—stemming from alleged Russian support to anti-Ukraine separatists—since taking office in November hasn’t helped either.

However, European officials and parliamentarians assured a group of visiting Indian journalists that India was a high priority for the EU.

“I think Modi is a man who wants to get things done. I think it is the word from the top that works in India. I think the word needs to come from the top,” said Geoffrey Van Orden, chairman of the European parliament delegation for relations with India. Orden, expected in India as the head of a EU parliamentary delegation next week, said the EU was India’s largest trading partner, adding that both sides should try to finalise a “realistic and meaningful” trade pact by the next year which would be a real step forward in significantly expanding economic engagement.

Trade between India and the EU stood at $101.5 billion in 2013-14 and it was $57.25 billion during April-October 2015, according to Indian government figures.sixthMAds

One of the people cited above from the European side said the “EU was ready to look at all outstanding issues standing in the way of clinching the FTA”, talks for which started in 2007.

“I think perceptions are very important after you have a political transition,” said a second person in Brussels on the EU side familiar with India-EU trade relations, referring to the April-May elections that brought the Modi government to power as well as changes in the EU administration that saw former prime minister of Luxembourg Jean Claude Juncker take over as president of the European Commission in November. “The message that we are getting from you is that the EU is very ambitious but we need to sit down and address issues,” this person said.

According to the second person, the EU wants India to cut tariffs on cars, wines and spirits from Europe. India says it is ready to consider some reduction of taxes on car components. On wines and spirits, the taxes imposed by the centre are low but when tariffs levied by states are added on, the prices become unviable for the EU.

While the EU is keen on greater market access to India, including for agricultural products, India wants fewer restrictions on the temporary movement of its nationals working in Europe.

Another sticking point has been that the EU wants India to recognize 200 geographical indications—labels used on products that specify their geographical origins. The EU on its part had agreed not to oppose Indian generic drugs on the basis of patents.

The EU was also looking at a monitoring role for civil society in the implementation of the trade deal to ensure environmental and social standards—something India is unlikely to agree to.

The second person cited above said European and other investors would be closely watching the progress of key Indian legislation such as the amended land acquisition act, the insurance bill and the goods and services tax as a test of India’s commitment to improving the ease of doing business. Investors were also hoping for clarity in the government’s policy towards multi-brand retail.

According to India’s ambassador to the EU, Manjeev Singh Puri, the stalled FTA talks figured in talks between Modi and the former president of the European Council Herman Van Rompuy in Brisbane on the sidelines of the G-20 meeting. “The Prime Minister was very clear in telling him there are winds of change in India, we need to try and talk about it (FTA), we need to see what can be done about it.”

Puri underlined the fact that India was still a developing economy while Europe was a developed one. “This difference needs to be understood and taken into account. I would say that our friends in Europe who have the advantage of development on their side… need to look at it and ensure that the way of focusing on these discussions is one that takes care of the fact that India has relevant concerns.”

Kanwal Sibal, former foreign secretary, said Modi not visiting Brussels at this point would give negotiators on both sides “time to work on narrowing differences”.

The writer was in Brussels at the invitation of the EU.