Foreign Policy Watch: India – EU

[op-ed snap] Talking trade with the EU

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : India-EU FTA

CONTEXT

As the economy begins to suffer from the U.S.-China trade war, it is imperative for India to pursue a free trade agreement with the European Union (EU). 

Why EU

  1. Moving beyond the U.S. and China, this is the right time for India to engage the EU.
  2. It as an indispensable democratic partner to craft a favourable geo-economic order. 
  3. India risks being left behind amidst a collapsing global trade architecture, rising protectionism and a new emphasis on bilateral FTAs
  4. India is the only major power lacking an FTA with any of its top trade partners, including the EU, the U.S., China, and Gulf economies. This is a problem as most trade is now driven either by FTAs or global value chains.
  5. EU’s revived focus on FTAs could exacerbate this risk for India. EU concluded a trade deal with Vietnam and an FTA with the Mercorsur countries in South America. India is hanging on to its Most Favoured Nation (MFN) status.
  6. India’s status under the EU’s Generalised Scheme of Preferences (GSP) will face rising competition from Pakistan or Sri Lanka, who enjoy GSP+ benefits.
  7. India will struggle to keep exports competitive for Europe, which is its largest trade partner and where 20% of its exports land up.
  8. Concerns about the Regional Comprehensive Economic Partnership are not resolved yet.
  9. The collapse of the Transatlantic Trade and Investment Partnership and concerns about excessive economic reliance on China have propelled the EU to become a little more pragmatic.
  10. EU India a unique regulatory model that balances growth, privacy, and standards. 

Progress in talks

  1. From agriculture to intellectual property, the EU and India have been exchanging and aligning views on many issues. 
  2. New areas like e-commerce have seen convergence because India’s position on data privacy is not that different from the EU’s. 
  3. India can delay discussions about the free flow of data and freeze differences on the tax moratorium issue or data localisation while committing to liberalise in other areas.

Way ahead

  1. Beyond mere economic cost-benefit analysis, India must approach EU FTA from a geostrategic perspective.
  2. EU negotiators are now more willing to make concessions on labour or environmental regulations.
  3.  India’s governance framework shares the European norms of democratic transparency and multi-stakeholder participation in a variety of new technological domains.

CONCLUSION

When New Delhi speaks of Europe as a strategic partner to uphold a multipolar order, it must go beyond security and begin with the business of trade and technology.

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