Working through ineffectiveness: Reviving the India-EU FTA

By Sujaya Sanjay & Arkoprabho Hazra

Developments in EU-India relations are being closely followed in India, following Prime Minister Modi’s recent visit to Europe. The visit was the Raisina Dialogue of April 2022, co-chaired by Prime Minister Narendra Modi and chaired by European Commission President Ursula von der Leyen. Talks between India and the EU on concluding a Free Trade Agreement (FTA) and a Bilateral Investment Treaty (BIT), which was revived after a hiatus in May 2021, seem to be moving in a positive direction. In the Raisina Dialogue, the EU underscored the common agenda among the participating countries – large-scale investments in sustainable modernization and development without compromising independence and sovereignty.

Readers will recall that India recently concluded FTAs ​​with Australia and the UAE, while an FTA with the United Kingdom is proposed to be terminated by Diwali this year, indicating India’s efficient bilateral trade talks in the short term.

On Friday, Union Commerce and Industry Minister Piyush Goyal noted that after sealing FTAs ​​with the UAE and Australia, India’s goal is to conclude FTA talks with the EU by the end of 2023. This article tries to understand the recent events and their main steps. FTA which is currently under discussion.

Geopolitics is important in the Indo-EU FTA

Although last year’s meeting of EU-India leaders signaled the resumption of FTA talks between New Delhi and Brussels, a definite decision to resume talks has recently emerged. Clearly, a change has taken place in the international geopolitical landscape.

Recent developments have been interpreted by some analysts as part of New Delhi’s stance on the Russia-Ukraine issue, as well as India’s efforts to underline India’s increased focus on Europe. The authors do not fully subscribe to this view, as India has made its position clear on the issue at UNSC, UNGA and other agencies. India’s involvement with European democracy goes beyond the binary worldview that seems to have arisen as a result of the ongoing conflict in Ukraine and must be seen.

In either case, the EU seeks to strengthen New Delhi’s efforts to achieve clean and renewable energy in an effort to reduce India’s energy dependence on Moscow, while at the same time seeking an alternative Asian partner for Brussels. With China now openly declaring a “no-border” friendship with Russia, the strategic importance of the Indo-EU FTA is greater than ever.

Sustainable, technology and Self-reliance: FTA driver

One of the main topics of discussion at recent meetings between Prime Minister Modi and his European counterparts was on green partnership and sustainable development. Since these talks took place against the backdrop of the conflict in Ukraine, both sides have acknowledged the need for economic independence, especially in the oil and gas sector. This is very much in line with the sustainable development goals envisioned by European leaders, especially the Nordic countries and Germany.

Considering the EU as a major source of technology transfer and development in India, there is no doubt that innovative technology and technology transfer will be one of the main pillars of an FTA between India and the EU. Thus, conversations with countries like Finland on technology, especially knowledge sharing and capacity building in the sector, can be considered important in advancing conversations about technology and innovation.

Moreover, India wants to expand its Make in India program and Self-reliant India is in the process of finalizing an FTA with the (self-reliant) European Union. The investments pledged by Germany and Denmark last week are a clear example of India’s efforts to increase foreign investment in clean energy to enable both sustainable development and energy independence.

Concerns and opportunities: FTA’s focus area

It is expected that this FTA will be a difficult task. To reach an agreement, the two sides need to reconsider why talks were abandoned in 2013, such as agriculture and dairy, liberalization of key products and services, and data protection. The dairy industry in particular is a major obstacle for India, which has opted to withdraw from the Regional Comprehensive Economic Partnership (RCEP) to the extent that it is exposing market competition to domestic dairy products in foreign competition.

Data protection is another problematic issue. Currently, India has a draft Data Protection Bill, 2021 – the third draft bill published which incorporates the recommendations of the Joint Parliamentary Committee on Data Protection and is based primarily on the EU’s General Data Protection Regulations (GDPR). However, issues such as broad exemptions for government agencies, data localization and control of private and non-private data under a single law are bound to concern vulnerable sectors that process confidential information and rely on strong IP protection. A strong legislation is needed that focuses on data privacy, to enable free cross-border flow of data.

In terms of investment, it is expected that both sides will come out of the opposite negotiating position, the EU can push for greater protection of investors and their investments, and India is likely to be in favor of conditions that better protect its regulatory power and waters. Opportunity for investment claims down. This difference is historical – Europe has traditionally favored treaty protection on the internal security of the state, while India is wary of perceived intrusion on its sovereignty due to its colonial past.

However, it is the opinion of the authors that the parties may be able to find common ground, especially in the context of the introduction of sustainability and climate awareness as well as the obligation of investors to preserve state regulatory autonomy. India’s Parliamentary Committee on Foreign Affairs has recommended that the Ministry of External Affairs play a more proactive role in facilitating the BIT negotiation process so that more BITs can be signed “in the shortest possible time” keeping in mind the need to maintain a balance of security. Foreign investment in India (as well as Indian investment abroad) without compromising with India’s sovereign power to control in the national interest.

Both sides want to sign a new agreement for the Geographical Indices (GIs) – another important milestone from an Indian perspective. India currently recognizes about eight GIs from the EU, while China recognizes more than a hundred.

Wait for it, and see

With a focus on economic maintenance in the contemporary global system and in the context of “being right”, India is engaged in negotiations for a free trade agreement with a number of countries (RCEP) and significant successes (UAE, Australia). The EU will be a big incentive for New Delhi to accept more foreign investment, achieve climate action goals and technical cooperation.

The FTA has set the tone for talks to resume the Prime Minister’s visit to Europe and the resumption of EU participation in the Raisina Dialogue in June. This time, the talks will be led by a staunch supporter of strong ties between Brussels and New Delhi, as evidenced by the continuing engagement between India and its European counterparts. It is the opinion of the authors that the geopolitical situation favors a formal engagement between the two parties. It is up to India and the European Union to work through thorny issues such as agriculture and data security while taking advantage of the current geopolitical situation to make the ambitious 2023 deadline a reality.

(The authors are known as India’s policy advisors, experts on FTAs, investment agreements and international relations. The views expressed in this article are not personal and are not reflectedThe official position or policy of Financial Express Online. Reproduction of this content without permission is prohibited).

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