How does a trade deal with the EU shape up?

What is the News?

After signing comprehensive economic and trade agreements with the United Arab Emirates (UAE) and Australia, India has stepped up efforts to negotiate a free trade agreement (FTA) with the European Union(EU).

How is the trade relationship between India and the EU currently?

The EU is India’s third-largest trading partner accounting for 11.8% of India’s total trade in 2020-21 after the US(12.61%) and China(12.59%). EU is also India’s second-largest export destination after the US.

India is the EU’s tenth-largest trading partner accounting for 1.8% of the EU’s total trade in goods in 2020.

The EU is also a major source of foreign direct investment (FDI) in India. Between April 2000-March 2021, FDI flows from the EU to India totalled $88.32 billion.

How will the FTA with the EU help India?

It will help Indian exporters gain a competitive advantage in the EU markets while helping domestic manufacturers get cheaper access to imports from the EU. 

Why is the FTA with India important for the EU?

Firstly, after Brexit, the EU is trying to clinch trade deals to diversify supply chains and find profitable exporting destinations for European companies. 

Secondly, the FTA with India will also help the EU reduce trade ties with Russia.

What are the stumbling blocks in India-EU FTA?

A major point of contention has been the EU’s demand for  a reduction in India’s tariff rate.

The earlier talks also did not resolve issues involving trade in agriculture and services, digital trade, intellectual property rights, and commitments on sustainable development issues such as environmental, social, and labour rights.

Visa requirements and work permits for Indian workers to the EU have also been a major bone of contention.

Further, restrictions on the transfer of personal data from the EU to other countries is also a major barrier to trade in digital services.

Source: The post is based on the article “How does a trade deal with the EU shape up?” published in Livemint on 4th May 2022.