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Cross the Rubicon of This FTA | Current Affairs | Vision IAS

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Cross the Rubicon of This FTA

2 min read

EU-India Trade Agenda

The visit of EC President Ursula von der Leyen and her commissioners to India underscores the significance of trade in the EU-India agenda, influenced by recent geopolitical developments.

Strategic Context

  • Recent geopolitical shifts, such as the Russia-Ukraine conflict affecting European energy, and China's supply chain maneuvers, highlight the need to reduce dependency.
  • The EU aims to strengthen economic ties with democratic partners amidst a volatile global landscape.

FTA Negotiations

  • EU-India FTA talks recommenced in 2022 after a 9-year gap, driven by geopolitical needs, with the 10th negotiation round set for March.
  • Recent EU FTAs with Mercosur and Mexico, and resumed talks with Malaysia, reflect a pragmatic approach to trade deals.
  • Critics question FTAs as the sole solution, citing China's status as the EU's top trading partner without an FTA.

Challenges in Negotiations

  • Contentious issues include the EU's Carbon Border Adjustment Mechanism, agriculture sector concerns, and new deforestation-free products regulation impacting Indian exports.
  • The need for economic diversification and deeper linkages is emphasized, given neither India nor the EU's membership in major trade agreements like RCEP or CPTPP.

Economic Implications

  • The EU, with a 28% share of global imports, remains a crucial market for India, which accounted for only 2.2% of the EU's trade in goods in 2023.
  • An EU-India FTA could potentially double bilateral trade by removing barriers and easing market access.

Investment Dynamics

  • India's need for increased FDI, especially in strategic sectors, is crucial for benefiting from the 'China+1' strategy.
  • Parallel to FTA talks, an EU-India investment treaty is crucial, amidst differing views on the integration of investment protection agreements.

Strategic Cooperation

  • The EU-India Trade and Technology Council (TTC) is expected to support FTA negotiations through its focus on supply chains, trade, and investment.
  • A new strategic agenda, as proposed by von der Leyen, could propel the FTA forward with decisive language.
  • Tags :
  • FTA
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