India EU free trade deal: Is it going to happen

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Bikky Khosla | 18 Apr, 2013
India and the 27-nation European Union, our largest merchandise trade partner as a single economy, are inching toward a Bilateral Trade and Investment Agreement -- we have heard this dime-a-dozen in recent years. Almost every time when the two sides meet, media starts showering the news, and we start building hope on this; but soon again, reality creeps in, dashing our hopes.

Since 2007, the two sides have been negotiating and they have met several times, but fortunately, there was never a total loss of hope. After every failed round of talks, every missed deadline, it was widely expected that progress toward a free trade pact would continue, albeit slowly. But that is until now. Some recent developments have raised concern that time is running out fast for the pact.

Two major reasons are pointed out for this: first, elections in India are on the horizon, and second, the recent initiative by the US to start talks with the EU for a landmark trans-Atlantic free trade pact by mid-June. Considering the significance of the US proposal, there are reasons enough to fear that EU may soon lose interest in the India-EU trade deal. A pause at this moment may result in disaster.

The two sides on Monday concluded another round of talks, which, according to the European Commission, "provided a renewed momentum to bring the negotiations forward". In a similar tone, New Delhi said that "a clear understanding was reached that a balance needs to be arrived at for meaningful expectations of market access on both the sides". However, such statements do not demonstrate any explicit position.

For coming up with a successful trade pact, I think the EU side needs to narrow its ambitions. Till now, it seems they are asking for more, but unwilling to give back. For example, while they are demanding India to raise the equity cap on FDI in insurance sector and reduce the tariffs on imports of automobiles, they are unwilling to grant India Data secure status and allow free movement of professionals. Moreover, another irritating demand is for TRIPS-plus measures, which if accepted by India, would have a negative impact on healthcare in India and other countries across the developing world.

Another concern is increasing protest being built up against the pact at home. Some trade lobbies and groups -- including dairy producers, automobile manufacturers, legal experts, healthcare activists, and even a Parliamentary standing committee on commerce -- are against the trade deal. Here, I think the Centre needs to be transparent. They need to argue with conviction what they are doing and why, and how they are planning to safeguard the interest of these domestic industries. In addition, they should bargain hard, without buckling under any undue pressure.

The purpose of a FTA should be to create a win-win situation. By bringing down tariff and non-tariff barriers, both sides involved create mutual opportunities -- one side gains in the areas where it gets more access while loses out where the other side gains more access. The balance is the key, and unfortunately we are lacking here. The next Ministerial meeting on India-EU BTIA is scheduled for June. I hope for a better solution by then, and before events make the efforts futile.