INDIA-EU Bilateral Trade and Investment Agreement

Context: Bilateral Trade Investment Agreement (BTIA) to be discussed amongst others during the bilateral meeting with Swedish Prime Minister and while co-hosting the first India-Nordic Summit.

Background:India and the EU have failed to pick up negotiations on the BTIA since they broke down in 2013.

What is BTIA?
Bilateral Trade and Investment Agreement is a Free Trade Agreement between India and EU, which was initiated in 2007. Even after a decade of negotiations, India and EU have failed to resolve certain issues which have led to a deadlock.

Points of contention between India and EU:

1)India has not been granted “data secure” status by EU.

2)U.K. visa rules discriminate against Indian technical professionals including because they have hiked visa fees and have numerical caps on visas.

3)EU imposed a ban on sale of 700 pharmaceutical products even though they were clinically tested by GVK Biosciences.

4)India cancelled most bilateral investment agreements with EU member states in 2016 on grounds that they were outdated.

5)Presence of non-tariff barriers on Indian agricultural products in the form of sanitary and phytosanitary measures which are too stringent and enable the EU to bar many Indian agricultural products from entering its markets.

What EU wants?

1. Reduce taxes on liquor (which would benefit France)
2. Reduce taxes on automobiles (which would benefit Germany)
3. More market access with less duty interference.
4. Multilateral pact on investments at the World Trade Organisations that will have an Investor-State Dispute Settlement (ISDS) mechanism which will allow corporations to take sovereign governments to international arbitration.
5. To negotiate the Bilateral Investment Treaty before it starts negotiating the EU-India BTIA
6. Wants India to liberalise accountancy and legal services.

Why India does not want to give in to EU’s demands?

1)India is presently trying to set up its own automobile industry which would not be able to match the competition from EU automobiles.

2)India does not provide similar privileges to any other country. Subsequently, demands for the same would be raised by others.

3)Tax reduction on wines and spirits is not acceptable as these are regarded as ‘sin goods’ and the states which derive huge revenue from liquor sales would be reluctant to cut taxes.

4)Indians do not want foreign lawyers and accountants to practice in India. There is already a shortage of jobs.

What India wants?

1)Being considered ‘data secure’ is crucial for a number of services especially in the IT and ITES sectors.

2)Free access to European Markets for the textile industry

3)Bilateral Investment Settlement Dispute Mechanism in which only after all options for settling disputed between a sovereign government and a corporate in domestic courts have been exhausted do we want to allow the issue to be taken up in international courts.

4)Liberalisation of services in Mode 1 (cross-border trade) and  Mode 4 (presence and movement of natural persons)

Advantages of BTIA, if concluded:

1)Greater market access to Indian Goods and Services abroad.

2)Investment by EU countries in India.

3)Liberalisation of Mode 4 would reduce discrimination against Indians with respect to visa fees.

4)Greater export earnings and hence Forex reserves

5)Improve GDP

6)Exposure to international markets.

7)Access to technology

8)Better quality products.

Way forward:

1)After Brexit, it could be easier for India to negotiate the terms of FTA with EU.

2)Negotiations with individual countries.

3)The Global GDP and the GDP of several European countries are recovering, this would be the right time to move the negotiations forward.