India might offer concessions to EU

Govt discussing whether to cut duties on automobile, alcohol import

The government might offer concessions to the European Union (EU) in a bid to push forward the talks on a proposed trade pact, stuck for four years.

A broad-based Trade and Investment Agreement (BTIA) was first mooted in 2007. The 16th and previous formal round of discussion was in 2013. Hurdles remain on issues of tariff reduction and market access in the alcohol and automobiles, sectors, prime European exports to India. The prime minister’s office is nudging the commerce department to take forward stagnant trade discussion. So, tariff concessions in these areas have been discussed, a senior commerce and industry ministry official said, on condition of anonymity. Chief negotiators from both sides are to meet in mid-November. The stagnancy in talks was made evident during the visit earlier this month by European Commission president Jean-Claude Juncker; met the prime minister. Despite extensive talks during the 14th India-EU Summit in Delhi on October 6, during which European Council president Donald Tusk was also present, both sides failed to move forward.

On the contrary, Juncker said any discussion on trade would be held once the terms of engagement had changed. In contrast, the two sides held extensive deliberations on other bilateral, regional and international issues, including the Rohingya crisis and North Korea.

Investment positions

“Trade talks had hit a wall after India decided to terminate existing bilateral investment treaties (BITs) with 23 European countries in 2016,” a senior EU diplomat said. The EU had warned that the move would stop investments from its member countries and asked India to keep these individual agreements in force until a new pact was signed. However, the Indian government has maintained that all future investment pacts will be negotiated under the framework of the model BIT issued by the government in 2015. This was meant to form the basis for individual agreements to be negotiated with other nations. However, most of those negotiations are not time-bound, while the existing treaties would end over the coming year.

This was raised during the PM’s visit to Brussels for the 13th India-EU Summit. While the commerce department has pushed for exceptions to be made in investment treaties, the finance ministry has been against it. “The EU’s prime concern with the BIT is with the clause stipulating that if an investor-state dispute arises, a foreign investor can only seek the option of international arbitration when all domestic legal routes have been exhausted. While India feels this is required to keep control of litigation and reduce the chances of extremely high penalties from international tribunals, the EU calls the Indian legal system slow and corrupt,” a senior Delhi-based trade expert said.

Talking trade

Both sides had last year adopted an agenda in Brussels for a broad-based approach to “resolve trade irritants, in particular concerning goods, services and investments, and strengthen trade and investment relations”.

On this note, India has made clear its dissatisfaction on the slow progress on issues related to facilitation of greater movement of professionals from one country to another and on the services trade. This also involves India's demands to be classified a data-safe country, which will help Indian information technology and outsourcing companies gain a foothold.

Other than being India’s largest trading partner and its biggest export destination, the bloc has also been New Delhi’s ‘strategic’ partner’ since 2004. Total export to the 27 member nations of the EU reached $47.2 billion in 2016-17, from $44.5 bn a year before. Import dipped slightly to $42.4 bn from nearly $44 bn in 2015-16.

For India, this translates into 17 per cent of its total export and 11 per cent of aggregate import. The share of trade with the EU as compared to total bilateral trade has progressively shrunk in recent years. A little more than a decade before, when the strategic partnership was initiated, export to the bloc was 21.8 per cent of all export; import was 17.3 per cent of all inbound trade in 2004-05. The trade negotiations also cover issues such as sanitary and phyto-sanitary measures, technical barriers and intellectual property rights. These also need to be worked on before a deal is sealed.