India, EU look to make a fresh start for a trade deal in Brussels

India and the European Union (EU) on Friday will kick start formal negotiations towards a free-trade agreement that has been stuck for close to nine years. Union Commerce and Industry Minister Piyush Goyal and senior government officials will reach Brussels for the talks, after the ongoing negotiations at the 12th ministerial conference of the World Trade Organization in Geneva are over.

The launch of fresh negotiations with the EU comes close on the heels of India signing two trade deals, with the United Arab Emirates (UAE) and Australia; the country is also set to ink a pact with the United Kingdom. As far as the 27-member trade bloc is concerned, experts believe the negotiations will be long-drawn as significant differences need to be bridged, even though both sides aim to conclude negotiations by early 2024.

“The resumption of negotiations with the EU after a hiatus of almost nine years, besides the recent launch of the EU-India Trade and Technology Council, is notable. However, these negotiations are expected to be protracted. There are significant differences that need to be bridged regarding all the three pillars -- goods, services, and intellectual property (IP),” Pradeep S Mehta, secretary-general, CUTS International said.

India and the EU agreed to resume negotiations for a balanced and comprehensive trade pact; this shall be split into three agreements on trade, geographical indications (GIs), and investment. A Broad-based Trade and Investment Agreement (BTIA) was first mooted in 2007 but didn’t move past the negotiating stage. The 16th and last formal round of discussion was held in 2013.
 

Thereafter, both sides tried to restart formal negotiations after the 2014 Lok Sabha elections in India but failed to make any headway, with some of the key reasons being disagreement over a bilateral investment pact, and tariff reduction for automobiles and alcoholic drinks.

Restarting stalled trade talks shall give fresh impetus to the relationship between India and the EU, amid the change in the geopolitial scenario -- exit of the United Kingdom from the trade bloc and diversification of the supply chain away from China.

“The trifurcation of talks into separate tracks of investment protection, geographical indications, and legacy trade issues is a pragmatic step. Both sides must channelise this positive momentum and invest political capital to conclude the negotiations,” Mehta said.

According to Mehta, the EU will desire enhanced market access in the sectors where India is unwilling to liberalise, seek enhanced IP protection, greater regulation of digital trade, and opening up of India's domestic services markets, all of which India is wary of. India will seek to enhance its services exports, particularly by seeking greater ease of movement for professionals, which the EU will resist. Sustainability issues, including labour and environment, will also be high on the EU's agenda, he said.

At $64.96 billion, the EU made for more than 15 per cent of India’s overall goods exports during the financial year 2021-22, while imports stood at $51.4 billion during the same time period. The EU is also India’s second-largest export destination and third-largest trading partner.

The share of trade with the EU as compared to total bilateral trade has progressively shrunk in recent years. When the strategic partnership was initiated in 2004, export to the bloc was 21.8 per cent of all exports; import was 17.3 per cent of all inbound trade.