EU and India re-open talks over strategic partnership while prepare for a Free Trade Agreement

Handshake between Narendra Modi, Donald Tusk and Jean-Claude Juncker (from left to right) Date: 30/03/2016 / Source: EC – Audiovisual Service / Location: Brussels – Council / Photo: Justus Lipsius

Last Wednesday, on the 30th of March, the European Union and India officially resumed a long-standing conversation over their strategic partnership, holding the 13th EU-India Summit in Brussels. After four years of stagnation, the Asian giant and the 28-member bloc met to set out concrete priority actions for the strategic partnership in areas like trade and investment, climate, energy, water and migration in the next five years.

Last week’s summit indeed produced a list of key-points and commitments that took the usual EU-India partnership far beyond its traditional core on trade and politics. The leaders have expressed their commitment to further strengthen the EU-India economic partnership, and listed a series of initiatives to create new opportunities “for mutually beneficial cooperation between people and businesses on both sides”, as declared in a joint statement.

Efforts on climate change

As an element of innovation, leaders of the EU and India wanted to put an extra focus on climate change and environmental issues in general. During the Brussels meeting, EU and India decided to step up their cooperation to fight climate change and adopted the “Joint Declaration between the EU and India on a Clean Energy and Climate Partnership”. The climate dialogue with India intends to reinforce energy cooperation, “mainly on renewable energy sources, promote clean energy generation and increased energy efficiency”, as declared by EU’s spokesperson at the morrow of the meeting.

The EU and India agreed to address environmental challenges and work together towards sustainable development through practical schemes and projects. The “Joint Declaration by the European Union and the Republic of India on Indo-European Water Partnership”, which was adopted at the Summit, set a new approach on strengthening technological, scientific and management capabilities in the field of water management and supports the Indian ‘Clean Ganga’ and ‘Clean India’ flagship projects.

Business side up

Obviously, business represented the lion’s share in the Brussels summit, and both delegations pushed to make the most of it. As a first result, the European Investment Bank signed an agreement with India to support long-term investment in infrastructure towards the construction of the Lucknow Metro’s first line, and released the first tranche of €200 million of its total €450 million. The bank also announced upcoming establishment in New Delhi of the Bank’s regional representation for South Asia amid the greetings of Jean-Claude Juncker, President of the European Commission, Donald Tusk, President of the European Council, and Narendra Modi, Prime Minister of India, who participated in the Summit.

A doorway to a free trade pact

The two parts also endorsed the “EU-India Agenda for Action-2020” setting out a concrete road-map for the EU-India Strategic Partnership for the next five years, which is something that represents a pillar of the EU-India cooperation. The 2020 framework indeed seems to be the doorway for a much more comprehensive EU-India free trade agreement, which has been pending since 2007.

Although concrete steps towards the free trade pact between the two economic powers are still missing, it seems like the summit managed to somehow revive the interest in a concrete discussion and to relaunch the long-standing strategic partnership. The size of the opportunity speaks for itself: the total value of EU-India trade stood at €77.5 billion in 2015. The EU is currently India’s largest trading partner, accounting for 13% of India’s overall trade, ahead of China (9.6%) and the United States (8.5%). India is the EU’s 9th largest partner, with the value of EU exports to India amounting to €38.1 billion in 2015.

“The leaders welcomed that both sides have re-engaged in discussions with a view to considering how to further the EU-India Broad-based Trade and Investment Agreement (BTIA) negotiations”, the EU-India official statement briefly said, without mentioning any possible completion date. “[The] EU and India will continue discussions on a possible FTA at a high-level”, Indian press quotes Tomasz Kozlowski, EU Ambassador to India, as saying.

Stalling negotiations

The BTIA negotiations, after having remained in standstill for years, represent indeed the biggest knot for future EU-India developments. Growing differences regarding greater market access, much higher import duties and a complex tariff system have created a sort of dead-end through the years for the realization of a trade pact between the two blocs. The EU has repeatedly demanded for India to lower its tariffs on automobiles and wine products as a condition for resuming FTA negotiations. India, for its part, has been demanding from the EU for a long time now to lower import duties on a range of commodities, on top of a request classified a data-safe country, which will help Indian information technology Industry.

Despite trade in commercial services between the EU and India has quadrupled in the past decade, increasing from €5.2 billion in 2002 to €24.4 billion in 2014, many reports would show a slight decrease in the last two years.

Hot open questions

Among the reasons for stalled talks between the EU and India, the EU’s concern over human right violations in India have played an important role. Sensitive issues, like the trial of two Italian marines accused of killing Indian fishermen in 2012, are also worth mentioning.

In 2012, India arrested two Italian marines, Massimiliano Latorre and Salvatore Girone, who were escorting an oil tanker on suspicion of shooting dead two fishermen they mistook for pirates. Though they were not charged, the two were barred from leaving India. A long controversy between Italy and India started ever since, with the Southern European country asking for the pair to be processed in Italy, and India determined to manage the trial. Last week’s summit didn’t see any substantial progress on that matter though.

The new agenda

EU-India relations could be on the edge of a real change nonetheless. Considering that just a year ago, while on a visit to the Old Continent, the Indian Prime Minister Modi dropped Brussels from his itinerary and planned to see leaders of countries like Germany and the UK separately, this year the meeting has an enormous importance already.

The new EU-India Agenda for Action-2020, published right after the end of the summit, indeed openly pushes for radical changes, with a new approach to “Make full use of the existing institutional mechanisms to resolve trade irritants in particular concerning goods, services and investments, and strengthen trade and investment relations”, as written in one of the 11 trade points. The agenda also treated the “creation of favourable circumstances for investment” and a plan to “strengthen exchange of experience and deepen cooperation on public procurement, customs and competition policy”.

The joint statement the two super-powers issued last week spoke about two “global partners and the world’s largest democracies” that are committed to strengthen a strategic partnership “based on shared values and principles”.

After four years of silence, that surely sounds like a big step forward.