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Posted: Wed, 01 January 2020 10:06

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Sliver of Hope for Lower Import Duties on EU Wines

Jan 01: With the current government taking a cautious stand that a section of Indian consumers is interested in higher quality wines, there is a ray of hope that when the FTA talks that began in 2007 and suspended in 2013-14 before the last elections, are restarted there is a good chance that the Agreement may result in lower import duties during the next few years, with the GOI agreeing to stick to only commercial issues

The government appears to be more flexible than the previous government in reducing import duties on wines & spirits and automobiles as part of the long-pending free trade agreement (FTA) with the European Union (EU) which now stand suspended since 2013 after starting in 2007. These two products were among several contentious issues. Indian side was unwilling to lower import duties, resulting in a deadlock and finally calling off the negotiation.

Efforts have reportedly begun to resume dialogue on the FTA between EU and India. Recently Prime Minister Narendra Modi had even raised the issue with German chancellor Angela Merkel. This was followed by commerce and industry minister Piyush Goyal also following it up with her and also connecting with Phil Hogan, the new EU trade commissioner. He has also talked about India’s willingness to engage with the EU and even the US for a bilateral trade agreement. India also proposes to push for a trade deal with the UK after it leaves EU for better access.

The changed thinking in the government about duties on wine is apparently acknowledging that a section of Indian consumers is desirous of quality products such as wine and that a trade deal would make them cheaper without impacting domestic wine industry. Similarly, in case of automobiles, the government is open to allowing a certain number of vehicles at lower duties, something that was discussed before talks collapsed.

The government is unwilling to engage in non-trade issues like labour and environmental standards or significant dilution of the intellectual property rights regime. These areas had proved to be a major sticking point in the past and EU is keen to negotiate, according to the Report in TOI.

The FTA talks had been started in 2007 and despite several meetings in Delhi and Brussels, they failed primarily over duties on wines and spirits and cars. India was not willing to budge from their stated strategy. The more significant factor was that the government became busy with the impending elections in 2014. In fact, delWine had warned a senior bureaucrat of EU at a wine symposium that unless the FTA was finalised before mid-2013, the government would lose interest in the Treaty and focus on the general elections.  

During several meetings, the earlier government gave the impression that it had softened its stand and was perhaps ready to reduce duties on high end wines, spirits and cars shipped from countries in the European Union, as reported in delWine.  

Even after the negotiations begin now the government is unlikely to disclose its cards.  Even their spokesmen are known to change their stand often. A few years ago the issue of FDI in retail had been hanging for 4 years. The government had been vacillating in its decision to allow the foreign retail chains like Wal-Mart and Carrefour though the concerned ministries had often announced supported the idea. After indicating their willingness, the cabinet committee abruptly made a U-turn and yet the chapter was opened up again a few days later and eventually the sector was opened up in India, as we all know.

There is many a slip between the cup and the lip. Similar sentiments were expressed by the then Commerce and industry minister, Suresh Prabhu who had hinted in March 2018 at an early resumption of negotiations over the long-stalled free trade agreement (FTA). Despite various reports in the media, the talks have not even commenced yet. Only when they start again, will the sliver of hope turn into a ray.

Let us hope this government is serious about going ahead with the FTA and with its excellent track record of negotiations and signing Agreements the wine importers, EU producers and the consumers  could hope for duties to come down.

Subhash Arora

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