India-EU Trade and Investment Agreements

• 05 Jul 2022

For Prelims: Free Trade Agreement, Data Secure, Non-tariff barriers, India-EU Summit, European Union, Most Favored Nation

For Mains: India-EU Trade and Investment Agreements, Issues leading to Deadlock

Why in News?

Recently, India and the European Union concluded the first round of negotiations for India-EU Trade and Investment Agreements in New Delhi.

• 52 technical sessions covering 18 policy areas of the free trade agreement and 7 sessions on Investment Protection and Geographical Indicators were held.
• The second round of negotiations is scheduled to take place in September 2022 in Brussels.

What is India-EU Trade and Investment Agreements?

• About:
  • India and EU had launched talks for having a wide-ranging Free Trade Agreement (FTA), officially called broad-based BTIA, long ago in 2007.
  • The BTIA was proposed to encompass trade in goods, services and investments.
    • However, the talks stalled in 2013 over differences on market access and movement of professionals.
• Scope:
  • India’s bilateral trade with the European Union amounted to over 116 billion dollars in 2021-22.
  • Despite the global disruptions, bilateral trade achieved impressive annual growth of more than 43% in 2021-22.
  • Currently, the European Union is India’s second-largest trading partner after the US, and the second-largest destination for Indian exports.
  • The EU's share in foreign investment inflows to India has more than doubled from 8% to 18% in the last decade, making the EU the first foreign investor in India.

What are the Related Challenges?

• Most Favoured Nation:
  • EU investment treaty practice illustrates its keenness to include the Most Favored Nation (MFN) provision in its investment treaties.
    • India is averse to including the MFN provision in investment treaties.
• Fair and Equitable Treatment:
  • EU’s practice is to include in its investment treaties the Fair and Equitable Treatment (FET) provision.
    • FET is an important substantive protection feature that enables foreign investors to hold States accountable for arbitrary behavior.
    • The FET provision is missing in India’s Model Bilateral Investment Treaty and the recent investment treaties that India has signed.
• Multilateral Investment Court:
  • EU has been batting for a Multilateral Investment Court (MIC) to reform the existing arbitration-based Investor-State Dispute Settlement (ISDS) system.
    • Yet, India’s official position on MIC is unknown. India hasn’t contributed to the ongoing negotiations towards establishing a MIC, which is perplexing for a country that champions a rules-based global order.
• Non-Tariff Barriers:
  • Presence of non-tariff barriers on Indian agricultural products in the form of sanitary and phyto-sanitary(SPS) measures which are too stringent and enable the EU to bar many Indian agricultural products from entering its markets.
  • The non-tariff barriers in pharmaceuticals that the EU has imposed include requirements of World Trade Organisation- Good Manufacturing Practice certification, import bans, antidumping measures and pre-shipment inspection among others.

What is European Union?

• About:
  • The European Union is a group of 27 countries that operate as a cohesive economic and political block.
  • 19 of these countries use EURO as their official currency.
    • 8 EU members (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania and Sweden) do not use the euro.
  • The EU grew out of a desire to form a single European political entity to end centuries of warfare among European countries that culminated with World War II and decimated much of the continent.
  • The EU has developed an internal single market through a standardised system of laws that apply in all member states in matters, where members have agreed to act as one.
• Significance of EU for India:
  • The EU works closely with India to promote peace, create jobs, boost economic growth and enhance sustainable development across the country.
  • As India graduated from low to medium income country (OECD 2014), the EU-India cooperation also evolved from a traditional financial assistance type towards a partnership with a focus on common priorities.
  • At the 2017 EU-India Summit, leaders reiterated their intention to strengthen cooperation on the implementation of the 2030 Agenda for Sustainable Development and agreed to explore the continuation of the EU-India Development Dialogue.

Way Forward

• Geo-Economic Cooperation: India can pursue EU countries to engage in Indo-pacific narrative, geo-economically if not from security prism.
  • It can mobilise massive economic resources for sustainable development of regional infrastructure, wield political influence and leverage its significant soft power to shape the Indo-Pacific discourse.
• Finalisation of Indo-EU BTIA Treaty: India and the European Union have been negotiating a free trade deal, but it is pending since 2007.
  • Therefore, for closer convergence between India and the EU, both should engage in finalisation of the trade deal as soon as possible.
• Collaborating With Important Players:
  • India’s partnership with France now has a strong regional anchor in the Indo-Pacific narrative.
  • India is also engaged in negotiations for a trade pact with the UK.

Source: PIB