June 09: After dilly-dallying for almost 15 years, the EU- India FTA seems to have gained impetus with the announcement by India and EU agreeing to resume the negotiations a year ago, and the two are set to re-launch negotiations for a free trade agreement (FTA) on June 17, with duty concessions on imported wine and cars expected to figure predominantly, writes Subhash Arora who feels the Treaty has more chance of success with India buckling down a bit in return for other benefits
Indian Commerce and Industry minister, Piyush Goyal will formally launch the talks in Brussels next week on June 17. India and the EU have been talking about resuming the negotiations for some time. Goyal will reach Geneva for the WTO ministerial meeting and on the way back, will stop in Brussels to start the negotiations, according to a Report in TOI.
The Indo- EU FT negotiations started in 2007 and after accelerated speed till 2012 and 2013 when both sides claimed that they were at the final stage, had turned cold turkey because of the impending general elections in 2014 when the previous UPA government was defeated and the BJP took over the reins. The talks were not resumed for 8 years though there were occasional announcements on both sides claiming the talks would resume soon. Nothing concrete was organised but this time the Indian government seems to be in a mood to hasten the process and what seemed to be a matter of decades has been brought down to a few years-maybe just a couple of years or even one.
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Concession on taxes on automobile imports and reduction in duties on wines and spirits were the two sticky points which delayed the negotiations and were reportedly the deal breakers. On both these points the government seems to be willing to compromise more in return for better leverage, making it a distinct possibility to put the talks on a fast track.
The other positive factor is that India has signed treaties with UAE and recently with Australia, making it easier to use them as a benchmark. In fact, duties on wine are to be reduced every year in a 10-year time frame with the price threshold for reduction kept at two price points of $5 and $15 a bottle.
The EU has been India’s second-largest trading partner with exports and imports adding up to $116 billion, slightly ahead of a trade of $115 with China. The US has been India’s largest trading partner with the flow of goods between the two countries estimated at $119 billion during the last financial year 2021-22, according to the TOI Report.
Agreements with the UK, Canada are already considered high on the priority list after New Delhi signed treaties with the UAE and Australia earlier this year. But so far as wine is concerned, the US will not be far behind and Chile too on the wings with the last FTA over a decade not allowing the reduction on wines from the leading South American wine industry.
It would be easier to convince the Indian wine lobby to let the government reduce import taxes on wines on the same ground as with Australia- meaning the wines with above $5 CIF getting the duties gradually slashed in 10 years, starting with the reduction when the Treaty comes into force in July/August this year. A key bone of contention were duties on wines and spirits in the past but the Indian government is not averse to reducing them at this point. It could use the mechanism used for the Indo Australia Treaty while negotiating a trade agreement with the UK, which exited the EU a few years ago.
India and the 27-country bloc EU could not agree on a reduction of duties for European cars. But this is no longer a prohibited area as the government now believes not that it cannot indefinitely protect the domestic industry which has a large presence of foreign automakers. Of course, India hopes to get a bigger share for its textiles, leather and service products. The government is not keen to open up the farm sector for imports but there are a few specific areas of interest for imports that would also be negotiated.
The Indian wine industry also realizes it cannot resist the wine imports for long. In any case, the Australia FTA deal which was negotiated after the input from the industry opened the door for the industry to relax its stance. Rajeev Samant, the Founder CEO of the leading producer, Sula has always believed that the industry would never object to duty reduction on higher priced wines as it would not impact the sale of Indian wines. The Indo Australian FTA did consider the plight of the industry. He says, ‘We are ok with the threshold of $5 to lower the duties. The reduction is already on the table with the recent FTA and we presume the Indo EU FTA would be on similar grounds.’
Incidentally Sula has also been importing wines for almost 20 years- though in miniscule quantities as compared to their domestic production. Fratelli had made attempts too but they seem to have turned cold feet in recent years. Grover Zampa, the third wine entity in size of sales is reportedly contemplating imports in a much bigger way, though they have already been importing a couple of variants of La Reserve label from the Burgundy winery in which they hold a sizable share.
Also Read: Australian Wines to get Cheaper in India with FTA signed Today
One thing is for certain- the Indian government is more keen than ever to sign the Indo- EU FTA and hopefully, the Indian consumer who has always desired more choices (like everywhere else) and with the increased number of Indians drinking wine, the Foreign Trade Agreements like those with Australia and now EU and those to be followed by UK, Canada and possibly Chile and the US would bode well for them.
Subhash Arora
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