Back to ResearchThe European Union is hoping that the long-awaited free trade agreement (FTA) with India is completed before New Delhi is consumed by the coming general elections. “A lot hinges on the FTA,” says the EU ambassador to India, Joao Cravinho. “We are coming to a moment of decision.”
Brussels sees a window of opportunity in the coming few months. Many are skeptical — the India-EU FTA has been in the works since 2007. Though by EU standards, the India FTA is narrower and shallower than is normal for Brussels, Cravinho says, the opposite is true for India — it is far more comprehensive a trade agreement than India is used to negotiating.
Over the past one and a half years, says the EU envoy, the two sides have reduced the gap considerably: “There is not much left to be negotiated.” The EU is pushing for lower tariffs for automobiles. India wants greater service trade access. That seems to be the crux of the difference; pharmaceuticals and other such issues are largely now resolved.
The EU is suitably appalled by its trade deficit in the automotive sector. India exported 240,000 cars last year to the EU. The return traffic was barely 6,000 to 7,000 vehicles. There are plenty of European cars on the roads here — mainly German — but they are manufactured or assembled in India. Cravinho blames tariffs and other cesses which double the price of European cars for the trade imbalance. Of course, the bulk of the cars India exports are actually Japanese and Korean brands.
In theory, the India-EU FTA makes perfect sense. Bilateral trade is about $100 billion and almost evenly split between the two. With the Doha round of the World Trade Organization in the doldrums, negotiating robust trading agreements with key trading partners is now a priority among the world’s big economies. So the EU has begun preliminary talks with Japan over an FTA. The biggest daddy would be a US-EU FTA.
Brussels is starting all of them. This may be another reason it would like to get India out of the way — with so many other large agreements to negotiate, there wouldn’t be much interest in a relatively smaller Indian agreement.
It is not clear that New Delhi gets any of this. India has signed over a dozen bilateral and regional FTAs in the past few years — so many and so quickly that it is now finding that their clauses amount to an incoherent patchwork of concessions and openings. A small cottage industry of trade lawyers who track down loopholes in India’s FTA maze to find means to export products to India via third countries has arisen.
But the other problem is that India continues to struggle to find a holistic relationship with the EU, the strategic partnership with the least amount of strategy in it.
Cravinho, however, believes this is no longer the case. “A burgeoning area of cooperation is security, especially in three specific areas: counterpiracy, counterterrorism and cybersecurity.” Civil society has expanded. The EU expects to bring 2,000 Indian students to study within its borders over the next two years under its Erasmus Mundi program, for example. But the political relationship continues to struggle. No one in India paid attention to the meeting of the new Indian foreign minister, Salman Khurshid and his EU counterpart, Baronness Cathy Ashton, was barely noticed in the Indian media, noted Cravinho.
I have long argued that India and the EU would continue to struggle to find a genuinely strategic basis for their partnership. India is in the midst of nation-building, is sovereignty-conscious and sees security in the way of a 19th century European state. The EU has created a security structure that is post-sovereign, based on merging nationalisms, the avoidance of conflict, and as much openness and transparency as possible.
The EU has in the past been critical of India’s human rights abuses, especially those that cropped up as a consequence of the Kashmir and Northeast secessionist movements. India finds the entire EU aversion to military action and stress on multilateral cooperation naïve and unrealistic — except if you live on the eastern tip of the Eurasian land mass.
These haven’t gone away. But India’s Kashmir state and the Northeast are experiencing an exceptional period of calm, a consequence of a certain set of circumstances that may not hold as the US withdraws from Afghanistan. There was, so to speak, less reason for the EU to lecture India on human rights. In addition, the Western experience with Islamicist terror since 2001 has made the Europeans accept that one cannot always spare the rod. So that past irritant is, well, in the past. The Indo-US nuclear deal has put the nuclear non-proliferation issue off the agenda. But it was noticeable how India responded so savagely to unilateral EU attempts to impose a carbon tax on international airline flights. The issue was not the cost to India of the tax but the principle of Europe imposing its own standard on the rest of the world.
It would be too much to say India and the EU have found a strategic bind. But there’s a lot more meat to the relationship than in the past. It is too much to say that the Indo-European is now something other than a linguistic grouping. However, New Delhi treats Brussels with a bit more respect than in the past. Which is why it would be nice to see the FTA done in a hurry and a nice touch on a year marking the 50th anniversary of India-EU relations.
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