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Posted: Thursday, 16 July 2020 10:50

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European Union keen on FTA with India despite Protectionist Policies

July 16: The 15th edition of the India-EU Summit, scheduled for Brussels on March 13 but postponed due to Covid-19, was held yesterday through a virtual meeting with PM Modi also addressing the meeting and despite EU pointing out India’s protectionist trade policies, the Free Trade Agreement (FTA) could have a far-reaching impact, writes Subhash Arora who feels with little progress since 2013, it is improbable for an Agreement before the next General Elections in 2024, with lower duties on foreign wines and cars being a big obstacle

The virtual Summit being held after October 2017 when the Technical discussions were held, PM Narendra Modi addressed the meeting headed by Charles Michel, President of the European Council, which defines the EU’s overall political direction, and Ursula von der Leyen, President of the European Commission-the executive branch of the EU.

EU and India are two of the world’s largest economies and markets with a balanced and complementary trade. In fact, EU is India’s largest trading partner and one of the largest investors in India with $73 billion of cumulative FDI inflows, says Josep Borrell, Vice-President of the European Commission. There is still a lot of untapped trade potential with less than 3% of the EU's external trade with India. “We both follow the same political systems and values including rules- based international order,’ says Borrell, according to Economic Times.

With no significant progress the negotiations stalled in 2013, a year before the elections with our new government taking over and continuing to be in power in 2019. EU officials say, “We want to have a far-reaching FTA which should be win-win for both; the focus should not be only on ‘low hanging fruits’ but bring our relationship to a new overall level.”

The EU has proposed one ‘low hanging fruit’ in the form of a standalone investment protection agreement but claims it has not received a positive reaction from India. Both sides are working on high-level trade dialogue to allow presumably the EU trade commissioner Phil Hogan and Trade minister Piyush Goyal to engage in talks.

The EU has drawn attention to what it feels is the increased protectionist policies of the Indian government and says, "We have witnessed a trend in India which goes more towards protectionism" and recent announcements that India wants to pursue a self-reliant economy does not help". Indian PM Modi has made an impassioned appeal for Atmanirbhar Bharat or a self-reliant India, in view of the increasing aggression shown by China on Indian borders. 

Six years after the talks were initiated in 2007, the India- EU FTA talks broke down in 2013 after reaching the ‘final rounds’ but Technical talks have been going sporadically to bridge the gap; the last one was over 2 years ago. Key issues why talks failed were the customs duty on wine, auto manufacturing and labour issues. While India did not want an FTA without investments as a part, the EU wanted an FTA on products only. On European cars, the EU wanted to export full manufactured cars to India at lower duties while India stressed on its policy of local manufacturing.

High customs duty on wines in India was another thorny issue while the EU also brought out the issue of labour and human rights issues. The EU also wanted to be part of the government Procurement about which India is not keen.

DelWine had opined in 2012 that if the Agreement was not reached soon, the then ruling UPA government would lose interest because of its focus on the elections which they lost and the new NDA government has taken its own time and tried to find a fit between its objectives and those of the EU. Though there was resumption of talks at the technical level in 2017, they also reached an impasse. During the last summit, in New Delhi in October 2017, the wide gaps on the FTA could not be closed. According to official sources, while the Modi government has made all possible efforts to push the talks at the highest level, the EU has not shown any interest in continuing.

 If the things go at the same pace-and assuming the work starts with equal enthusiasm on both sides, it would be at least 2023 by the time an Agreement is reached. Both sides need to keep in mind that there are Elections again in 2024 and they get top-most priority; higher than the economic long term impact of treaties like EU-India FTA. Besides, with Britain being out of the EU, there would be a new variable to ponder for both sides.

When the Treaty is signed, it has to be ratified by all member states of the EU- a 1-year process. Therefore, the earliest the wine producers in the EU may see a fall in duty on higher value wines would be in 2024. DelWine recommends a 3-tier duty system with no reduction in duty @150% for wines costing under €3-€3.50 to protect the domestic industry and only 30-50% duty on wines costing over €15 since these wines will not compete with domestic wines; the BIGGEST rider being that the States are not allowed to increase the excise duties and neutralise the gains that need to be passed to the consumers.

For a few of the earlier related Articles, please visit:

Sliver of Hope for Lower Import Duties on EU Wines

India- EU Foreign Trade Agreement Talks might restart soon

Indo-EU FTA Talks may start after Decade of non-conclusive Efforts

EU-India FTA: And the Beat Goes On

EU-India FTA may soon be on Back Burner

Duty Reduction on EU Wines Distant Dream

Fine Wines from EU may get Cheaper Next Year

EU to Hold Talks with Indian Government

Subhash Arora

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