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.