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Posted: Saturday, 30 April 2022 23:55

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European Union maybe over optimistic about FTA with India

April 30: Looking at the past track record, it did sound over-optimistic when the EU Ambassador to India, Ugo Astuto said on Friday that EU hoped for the Foreign Trade Agreement between India and the European Union to be inked before the commencement of the electoral cycles on both sides in 2024 and also resulting in lowering of customs duties on wine. Subhash Arora is not as optimistic as the EU but a change of heart in the PMO cannot be ruled out if the Indo-Australian Treaty on 2April is an indicator

H.E. Ugo Astuto, Ambassador of EU in IndiaHis comments have come a few weeks before the resumption of the stalled negotiations for the agreements by the two sides. Astuto seems to be very optimistic when he says that there was no plan to have an interim trade pact and claims that both sides are looking at concluding a full-fledged comprehensive and ambitious FTA, known formally as Comprehensive Trade and Investment Agreement (CTIA).

His optimism might also stem from the successful visit this week of Ursula von der Leyen, President of the European Commission, the executive arm of the European Union. who met PM Narendra Modi.  They both agreed to establish an EU-India Trade and Technology Council (TTC), which the EU has thus far established only with the US. She acknowledged India as a technologically powerhouse and hoped that in the trade sector the two sides could unleash an enormous amount of untapped potential. The proposed trade deal also figured in the meetings.

Also Read : Australia over-optimistic on duty Reduction on Aussie Wines in FTA

In yet another related instance, Christian Kettel Thomsen, visiting Vice President of the European Investment Bank (EIB) has said that the bank intends to double its annual investments in India from the current €500 million in the next two years.

Astuto said both sides are looking at concluding the negotiations before the start of the next parliamentary elections in India and the EU in 2024. These would be the first elections for the European Parliament following Britain’s exit from the EU (Brexit) in January, 2020.

Also Read : India and EU getting Ready for FTA Talks in May

In May last year, India and the European Union (EU) had announced to resume negotiations for a comprehensive FTA after a gap of over eight years (2013-2021). "The first round of talks will be held in June and we hope to have a couple of rounds before the end of the year," says Astuto. Both sides have reportedly set an ambitious target of concluding the talks by October, 2024.

Also Read : EU-India FTA Talks Restart on Optimistic Notes

Although the optimism stems from the unusual speed at which the final talks progressed with the Australians when almost in a matter of hours, the deal was concluded-at least the ‘early harvest’. But one ought not to lose sight of the fact that India and Australia are members of Quad and have special relationship and PM Morrison was very keen to have the Agreement signed, due to the elections in Australia next month, on 21 May.

India and the European Union (EU) have had several conversations on ways to enhance their trade and investment partnership, and recent discussions have been useful to clarify thorny issues, says Ugo Astuto. Ahead of the summit of India and EU leaders on 8 May, Astuto indicated that the meet could give the political push required to the two sides to restart their talks on their FTA.

Also Read : European Union keen on FTA with India despite Protectionist Policies

The first phase over in 2013

The talks have been going on since 2007. delWine had opined in the 548th issue in April 2013 when both sides were optimistic of soon signing the FTA, that the negotiations went up a notch at the ministerial-level but the body language indicated that they were not close to signing and any further delays might consign the issue to the back burner. This is precisely what happened.

Australia- India FTA might help speed up the process

Though the negotiations have seen 15 years through two government regimes, one can hope for optimism this time and that one of the stumbling blocks-  reduction of duties on premium and super premium wines will be on the cards, with the Australia India FTA signed earlier this month, even though partial, and it will become operational only in July-August this year.

Also Read : India- EU Foreign Trade Agreement Talks might restart soon

India has agreed to reduce duties on Premium and Super Premium Australian wines from 150% to 100% and 75% with a provision to reduce further to 50% and 25% resp. over 10 years. The agreed reduction might be more than expected for India but slightly disappointing to Australians, the Indian industry may still not feel secure with the duties reduced to 50% over 10 years on the $5-15 category. However, this will also pave the way for duty reduction on wines from the EU when the Agreement is signed.

Staying optimistic

One can only hope that the previous experience of 15 years (2007-2022) of no result, would not be repeated. But it would be a false hope to our friends from the EU to expect any duty relief to wines costing less than €4 though Europeans might like to push the figure to €3 as the threshold for duty reduction. Much of the debate would take place in this segment as a vast majority of wines imported from the EU are in the range of €2-4. It may be pertinent to point out that during the pandemic, a significant number of Indians improved their palate and would be willing to experiment with more and more expensive and better quality wines.

Also Read : EU-India FTA Talks Take Off in First Gear

Only time will tell if the greedy Indian States would sit on the sides like hawks, ready to increase excise duties to offset the decrease in customs duties. States are free to set their excise policies but of late they have become more pragmatic in their outlook, with the adjoining states influencing the policy of the State and this may have little impact on the feared increase.

Subhash Arora

 

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