India-EU BTIA negotiations: What is India asking for?

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Amit Guin | 25 Sep, 2012
At a time when the bilateral trade in goods between India and the European Union was € 40 billion, when India exported € 3.8 billion worth of services to EU, and when EU was India’s largest source of foreign direct investment; or in short when there were healthy trends in bilateral trade and investment between the two, the seeds of a High Level Trade Group (HLTG) were sown during the 2005 India-EU Summit to explore ways to give further boost to trade and investment between the duo. Different platforms were thought over during the brainstorming discussions by the HLTG. It was commonly agreed upon during the discussions that only after the removal of non-tariff obstacles to trade could the dream of strong trade ties be built. It was finally recommended that a broader platform for expanded trade ties be inculcated through the negotiations of a broad-based Bilateral Trade and Investment Agreement (BTIA). The India-EU BTIA talks have since then discussed issues related to trade in goods and services, sanitary & phyto-sanitary measures, intellectual property rights, technical barriers to trade, dispute settlement, customs and trade facilitation and procurement among others.

But from the period when the negotiations for BTIA started in June 2007 till today, the economic scenario has worsened and become gloomier for both India and the European Union. With the Eurozone economy forecast to shrink by 0.3 per cent in 2012, and with the European Commission crystal gazing zero growth for the current year for all the 27 Member States and 1.3 per cent growth for the coming year, the picture is all dispirited for the European Union. On the other hand, India’s economy is projected to grow by 6-7 per cent, much below the norm of 9 per cent. Hence, in this scenario when the global economy is on a boil, the BTIA could make them strengthen their positions and help regain the confidence lost both domestically and internationally.

It is to be noted that the bilateral trade between India and EU in 2011-12 stood at USD 109.87 billion which increased from USD 90.62 billion during 2010-11. The India-EU BTIA is paramount owing to the fact that it will give a projected leapfrog of € 150 billion to the bilateral trade by the year 2015. Added to this is that the fructification of the trade agreement would slash duties on over 90 per cent of the bilateral trade. Along with helping in more job creation, the trade agreement would also let EU to have a greater say in the Asia’s commercial sphere.

But the road ahead is not so flowery as it seems to be. There are enough hurdles for the negotiators to cross so that the agreement sees the light of the day. A major issue which is of concern to India is related to the safeguard clause introduced for the Mode 4 (the supply of a service by nationals of one Member, through the presence of natural persons of the Member in the territory of any other Member) quota which would substantially puncture the expected gains from this. Hence, India seeks that for the movement of natural persons for providing services under Mode 4 to happen, the safeguard clause should be removed to 20 per cent threshold beyond which the clause could operate. At the same time, in Mode 1 (cross-border trade), India needs to be declared as data secure in order to provide access. According to a study done by Boston Consulting Group, it is expected that because of Mode 1, there would be over six million jobs and a generation of revenue worth USD 170 billion by 2020 in India.

Another roadblock is the reduction of duties on automobiles, wines and spirits. In the automobile sector, EU has sought for tariff cuts from the existing 60 per cent. In the case of wines and spirits, EU is looking for further reduction in duties from the existing 150 per cent. A middle road could be arrived through a mutually acceptable duty cut.

India has also conveyed her concerns regarding Sanitary and Phyto-sanitary (SPS), Technical Barriers to Trade (TBT) and Non-Tariff barriers (NTBs). Keeping in mind the levels of economic development, India has asked EU to eliminate tariffs on at least 5 per cent more tariff lines and 5 per cent more trade volume than what India does. This will help India take deeper revenue cuts on account of duty elimination/reduction. But EU has flagged difficulties in achieving asymmetry of more than 4 per cent. India has sought the elimination of NTBs as it is of the opinion that mere reduction in tariffs will not pave the way for increased trade. At the same time, India has stated that its exports to EU have been hampered by EU’s SPS measures, which had its impact on the exports of agricultural and food products, and also by TBT, which had grossly affected the exports of industrial products. India is of the opinion that strong SPS and TBT measures will also help in developing a framework for looking into the causes of NTBs faced by Indian exporters, while at the same time duly respecting each other’s legitimate public policy objectives.

The India-EU FTA has also impacted the Indian pharmaceutical industry. It is well-known that Indian pharmaceutical industry obliges to World Trade Organisation’s (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS). But, now EU is asking India to adopt intellectual property protection standards more than what is under TRIPS. India has clearly conveyed to the EU that India will limit any agreement to its existing laws and to obligations under TRIPS. India has clearly stated that it cannot go beyond the same.

Negotiations, which commenced on June 28, 2007 at Brussels, and carried out as per the mandate received from the Trade & Economic Relations Committee, have been held fourteen times in all. Apart from these deliberations, officials from both the ends have continuously engaged in sector-specific inter-sessionals, digital video conferences to iron out the issues. Along with these interactions, India and EU have engaged each other through India-EU Joint Commission and its Sub-Commissions (on trade, economic cooperation and development cooperation) to mull over contemporary issues relevant to trade and commerce. (PIB Features.)

* The author is a freelance writer.
* The views expressed by the author in this article are his own and do not necessarily reflect the views of PIB or SME Times.