Russia, FTA, Civil Nuclear Legislation – India-EU relations in doldrums?

| Charushi Chakole
  • India-EU relations have been on the wane but India’s relations with constituents like Germany and France are at a historical high.
  • India doesn’t take kindly to being lectured on issues, like Human Rights and domestic issues, which she considers herself competent of handling.
  • China’s increasing presence in Eurasia and South Asia is creating similar security, political and economic concerns for Europe and India.
  • China has been trying to sow dissension within the EU by promoting the 17+1 initiative, focusing on the central and eastern European countries.
  • The EU has next to nothing to contribute to its energy demand or other principal security interests.
  • EU still largely perceives India as a huge market rather than a partner.
  • India-EU FTA has a lot of roadblocks but benefits each other and hence both need to be pragmatic in approach while working on it in future.

India and the EU have several avenues of collaboration. For example, the ‘green strategic partnership’ between India and Denmark aims to address climate change, biodiversity loss and pollution. The India-Nordic Summit in May 2022 focused on green technologies and industry transformation that are vital for sustainable and inclusive growth. All this will act as a catalyst for enhanced cooperation between the two regions. Another rapidly growing area of engagement is the start-up and innovation ecosystem across India and Europe. The Science and Technology Joint Steering Committee between the two focus on areas such as healthcare, Artificial Intelligence, and earth sciences. In 2020, there was an agreement for research and development cooperation in the peaceful uses of nuclear energy between the European Atomic Energy Community and the Government of India.

Significance of the India-European Union Trade Agreement

India’s bilateral trade with the EU amounted to USD 116.36 billion in 2021-22. Despite the global disruptions, bilateral trade achieved impressive annual growth of 43.5% in 2021-22. Currently, the EU is India’s second-largest trading partner after the US and the second-largest destination for Indian exports. The trade agreement with the EU would help India further expand and diversify its exports of goods and services, including securing the value chains. Both sides aim for the trade negotiations to be broad-based, balanced, and comprehensive, based on the principles of fairness and reciprocity. India and the EU expect to promote bilateral trade by removing barriers to trade in goods and services and investment across all sectors of the economy. Both parties believe that a comprehensive and ambitious agreement that is consistent with WTO rules and principles would open new markets and would expand opportunities for Indian and EU businesses.

FTA issue

The India-EU relationship dates back to the 1960s when India was the first country to establish a relationship with the European economic union which later evolved into the common market -European union. Currently, the EU is its largest trading partner of India and accounts for 20% of India’s trade and is a major source of FDI whereas India is the 9th largest trading partner. However multiple negotiating rounds, EU- India summits have not been able to iron out differences on the BTIA for the following reasons

EU’s concerns

  • India’s protectionism in the automobile sector
  • India’s Intellectual property regime with the provision of compulsory licensing and manufacture of generic medicine
  • Domestic source obligation in the multi-brand retail
  • Duty and tariff protection in areas of wine, spirits and dairy products
  • Civil nuclear energy generation legislation

Data Security: Based on the current standard of protection for data in India the EU refused to grant the status of Data Secure Nation. Data secure nation needs to protect the important data related to innovation, research, individual details, IP etc. to be safeguarded. This affects High-end business products specifically. European companies outsourcing business with countries not certified as data secure have to follow stringent contractual obligations that increase operating costs and affect competitiveness.

Taxation: The Vodafone case has threatened EU investors from entering India due to retrospective taxation measures. Such taxation is also acting as a roadblock.

Further, EU allegations of Human Rights violations concealed funding to NGOs in India and recent legal proceedings regarding Italian marines have brought ties to a standstill.

India’s Concerns

European Union’s heavily subsidised agro-industry. This could hurt Indian farmers and EU Import restrictions, like the ban on the import of mangoes from India also work visa restrictions and movement of skilled professionals and Technology transfer issues

Chinese Aggression: China’s increasing presence in Eurasia and South Asia is creating similar security, political and economic concerns for Europe and India. It is disquieting that China has been trying to sow dissension within the EU by promoting the 17+1 initiative, focusing on the central and eastern European countries. The conclusion of the Comprehensive Agreement on Investment on the last day of the German Presidency on December 30, 2020, has sent confusing signals to the world about the EU’s interest and commitment to push back against Chinese authoritarian policies. This is seen by several analysts as an attempt by China to create fissures in the transatlantic partnership. Chinese belligerence in its neighbourhood and beyond has clearly brought out that it will not hesitate to employ military means to achieve its political, strategic and economic objectives. It becomes imperative, therefore, that like-minded entities like India and the EU, along with others like the US, Japan, Australia, France and the UK, act in concert to protect their core interests as well as promote common objectives.

Conformity over Indo-Pacific: The Indo-Pacific is the main conduit for global trade and energy flows. Rule-based Indo-pacific is of everyone’s interest with the EU no exception. The Indo-Pacific has gained global salience, with the US, India, Japan, Australia, ASEAN, and several EU countries, including France, Germany and the Netherlands, sharing their vision for this dynamic region. There is increasing convergence on the need to maintain a free, open and inclusive Indo-Pacific based on a rules-based international order with the peaceful resolution of disputes according to the tenets of international law, particularly the UN Convention on the Law of the Sea (UNCLOS).

The EU could consider creating an EU-wide Indo-Pacific approach, which is progressive and forward-looking. If it is not possible, countries that have significant interests in peace and security in the region could get actively associated with the deliberations to enhance cooperation on common objectives. Countries like France (and even the UK, although it is not formally part of the EU), for instance, could get associated with Quad activities in a formal or ad-hoc manner. This would provide greater substance to the desire and aspiration of the EU to become a geo-political entity of standing.

Challenges In Relationship

Deadlock over BTIA: The negotiations for a Broad-based Bilateral Trade and Investment Agreement (BTIA) were held between 2007 to 2013 but have remained dormant/suspended since then.

Export hurdles: Indian demands for ‘Data secure’ status (important for India’s IT sector) to ease norms on temporary movement of skilled workers, relaxation of Sanitary and Phytosanitary (SPS), etc. stand largely ignored.

Trade imbalance: This heavily leans towards China. India accounts for only 1.9% of EU total trade in goods in 2019, well behind China (13.8%).

Brexit altercations: In the longer term of balancing global powers, a smaller Europe without the key military and economic force UK, is much weaker in the wake of an ambitious China and an increasingly protectionist US.

EU primarily remains a trade bloc: EU remains a trade bloc as this has resulted in a lack of substantive agreements on matters such as regional security and connectivity.

Undue references to sovereign concerns: The European Parliament was critical of both the Indian government’s decision to scrap Jammu and Kashmir’s special status in 2019 and the Citizenship (Amendment) Act.

China’s influence: EU’s affinity lies with China. This is because of its high dependence on the Chinese market. It is a major partner in China’s Belt and Road Initiative (BRI).

Ukrainian war: EAM S. Jaishankar’s witty reply about the EU’s oil import from Russia has not been welcomed across the EU. It still expects India to criticize Russia.

EU’s interests in India

Reducing dependence on China: It is necessary for both sides as it is making them highly vulnerable to Chinese aggression and the Western lobby, where the EU acknowledges its supply chain’s vulnerability, the risk posed by overdependence on China, and the need to strengthen the global community of democracies. also in healthcare, where the ongoing pandemic has shown the need for cooperation in global health. India and the EU have called for a reform of the World Health Organisation (WHO).

EU’s perception of India as a market: EU still largely perceives India as a huge market rather than a partner, and both the EU and India also call for the promotion of multilateralism. Both sides are facing issues related to the US-China trade war and the uncertainty of US policies. They have a common interest in avoiding a bipolar world and developing a rules-based order.

Is India’s EU relations in doldrums?

India-EU relations have been on the wane for some time. However, at the same time, India’s relations with the constituent units of the Union including Germany and France are at historical highs. This dichotomy may be explained on account of the following factors:

India doesn’t take kindly to being lectured on issues which she considers herself competent of handling. For example, India considers human rights violations as a domestic issue and would wish to handle it within India’s political space. EU’s insistence on including HR provisions in Free Trade Agreement has hampered trade between the two. Given the lack of cohesion among the EU constituents on strategic issues, India prefers establishing bilateral relations rather than dealing with the EU as a whole.

The case of the two Italian marines being tried in India was manslaughter has become a festering wound. The EU’s stand on the issue is seen by many in India as a challenge to her sovereignty.EU’s reluctance to provide India with strategic dual-use technology has pushed India into a closer huddle with the US and other European countries like France. India, therefore, doesn’t see the EU as a reliable partner. The EU is characterised by over-institutionalized and over-bureaucratized, which makes it far less attractive as a bilateral partner as compared to less institutionalised regimes such as the ASEAN and SAARC.

The EU has next to nothing to contribute to its energy demand or other principal security interests. When it comes to India’s desire to find a permanent place on the UNSC, it is not the EU but the existing European permanent members, the UK and France, who bring more value to the table for India. Finally, the ongoing Eurozone crisis has greatly undermined India’s confidence in the EU.

Hence, India-EU FTA has a lot of roadblocks but benefits each other. The EU will gain a market of 1.2 billion whereas India will gain in terms of Technology, Investments from the EU. Both are needed to be pragmatic in approach while working on it in future. India’s share in services trade with the EU can grow manifold. Cheaper imports of European luxury items like cars, and wine. European expertise in agriculture, infrastructure and urban management can augment the Indian drive in make in India, Swachh Bharat Abhiyan & agricultural research.

(The author is a Post Graduate student in International Relations at Amity University, Raipur. She writes articles and research papers regularly on international affairs and geopolitics)

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