Delays in the India-EU Free Trade Agreement

Source: The post delays in the India-EU Free Trade Agreement has been created, based on the article “DIFFERING ASPIRATIONS” published in “Business Standard” on 18th January 2025

UPSC Syllabus Topic: GS Paper2- International Relations-Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Context: The article discusses delays in the India-EU Free Trade Agreement due to differing priorities on tariffs, sustainability, and intellectual property. It highlights past negotiation challenges, ongoing hurdles like EU regulations, and the need for balanced commitments to boost trade relations.

For detailed information on Rules of origin delay FTA tariff discussions with EU read this article here

What is the India-EU FTA and its current status?

1. The India-EU Free Trade Agreement aims to enhance trade between the two regions.
2. Negotiations resumed after an 18-year gap but remain delayed despite nine rounds of talks. The next round is scheduled for March 2025 in Brussels.
3. Differences persist on tariff elimination, sustainability, and intellectual property rights.
4. The EU demands tariff cuts on 95% of exports, while India agrees to only 90%.
5. In 2023-24, the EU accounted for 17.4% of India’s goods exports ($75.9 billion) and 9% of imports ($61.5 billion), making it India’s largest trading partner.

Why are negotiations delayed?

1. Differing Tariff Aspirations:

• The EU seeks tariff elimination on 95% of its exports, including agricultural products and automobiles.
• India is open to reducing tariffs on only 90% of its market and is hesitant on bulk agricultural products.

2. Sustainability and Labour Standards:

• The EU’s regulations like the Carbon Border Adjustment Mechanism (CBAM) and deforestation laws create barriers for Indian exports.
• India seeks a transition period, citing the UN principle of Common but Differentiated Responsibility (CBDR-RC).

3. Intellectual Property and Investor Disputes:

• The EU demands stronger intellectual property protections.
• India’s dispute settlement mechanism requires investors to exhaust local remedies before international arbitration, causing delays.

For detailed information on EFTA-India Relations read this article here

What Could Improve India-EU FTA Negotiations?

1. Balanced Commitments: Both sides need to recalibrate goals, addressing India’s concerns on tariffs and the EU’s demands for sustainability and labour standards.
2. Transition Period: India seeks time to adapt to EU regulations like the Carbon Border Adjustment Mechanism (CBAM), as per the UN’s Common but Differentiated Responsibility principle.
3. Focus on Market Access: Resolving differences on automobiles, wines, and sensitive agricultural products could ease tensions.
4. Enhanced Political Engagement: Ministerial-level discussions should prioritize bridging gaps, given the EU accounts for 17.4% of India’s exports ($75.9 billion).

Conclusion

Despite challenges, finalizing the India-EU FTA can boost trade relations significantly. However, differences in tariffs, sustainability, and intellectual property laws remain key hurdles.

Question for practice:

Examine the key factors delaying the finalization of the India-EU Free Trade Agreement and suggest measures to overcome them.