India – Europe: Trade and Ties

Context:

• Prime Minister Narendra Modi was in Europe last week to galvanise India’s ties with key European powers as well as to keep the momentum of his past visit to Europe 23

Background

• The Republic of India maintains an ongoing dialogue with the supranational Institutions of the European Union which is separate from the bilateral relations with sovereign member States of the European Union.
• India, the world’s most populous democracy, has strategic partnerships with France, the United Kingdom and Germany
• Prime Minister Narendra Modi’s visit to Germany, Spain, Russia and France brings into sharp focus the shared dilemma India and Europe face with America’s shifting policies, and the resultant flux on the world stage
• Europe has been hit by a spate of terror attacks over the last two years, and the attacks in Britain have further underscored the enormity of the challenge facing the continent

Current Issue

• Prime Minister touched upon key aspects of Indian foreign policy interests pertaining to each of the four nations — Germany, Russia, Spain and France.
• Enhancing trade relations, combating terrorism and developing India-EU Partnership in the field of defense industry, global cross-border relations and environment were the prime aspect of the tour.

Strong Points in relations

Trade

• Despite Europe’s inward-looking foreign policy orientation at the moment, several aspects of Mr. Modi’s visit stand out which will help India over the long term
• The focus of the visit was clearly on boosting trade and economic ties with Europe
• Mr. Modi’s unabashed selling of India as an investment destination is the most striking aspect of his outreach to the West.
• Pledging a stable and transparent tax regime, he has been busy wooing global investors, arguing that development is “not a mere political agenda” but an “article of faith” for his government.
• In Germany, he addressed the Indo-German Business Forum while in Spain, he exhorted CEOs of leading Spanish companies to participate in initiatives like ‘Make in India’.
• To the Russian defense industry he sold the government’s new policy of allowing Indian companies to manufacture defense equipment with foreign players.

Terrorism

• In Russia, PM Modi urged the global community to block funding, weapons and communication modes of terrorists and to rise above the ‘good terrorism/bad terrorism’ binary.
• Russian President Vladimir Putin admitted that India is facing a serious problem due to the threat of terrorism and that the situation is not an “imaginary thing”.
• Terrorism was also a common theme in Mr. Modi’s discussions with the German, Spanish and French leaderships.
• Unlike in the past when Europe used to look at India’s terror problem primarily through the lens of Kashmir, there is now a greater understanding of the changing nature of the terror threat and how certain states abet the process of radicalization.
• This has provided Mr. Modi with an opportunity to develop greater synergies with Europe in tackling this problem

Problem Areas

• Mr. Modi’s first stop in Germany came a day after Chancellor Angela Merkel’s strong comments aimed at President Donald Trump, that Europe could no longer ‘depend’ on traditional partners.
• Europe’s disappointment with Mr. Trump at the G-7 and NATO summits was three-fold:

• his refusal to reaffirm NATO’s Article 5 on ‘collective defense,
• his warning on the trade deficit with Europe and
• his expected decision to pull America out of commitments in the Paris Agreement on climate change.

• For the past few months India has faced a similar disappointment as the U.S. has forged closer ties with China
• Modi called the inclination of US towards China as loosening of the world order, while the U.S. has targeted Indian professionals and businesses to protect American jobs.
• Another blow came from Mr. Trump’s comments on the Paris Accord when he blamed India and China for what he called an unfair deal.
• Mr. Modi’s attendance at the St. Petersburg International Economic Forum to unveil a new India-Russia vision statement for the 21st century along with President Vladimir Putin could cause similar discomfort in European capitals.
• Europe perceives its single largest threat to be from Moscow, not Beijing.

Future Prospects

• European powers now want to hunker down and are looking for new partners.
• China is well-positioned to take advantage of this shift, given its economic heft. But European liberal values sit uneasily with Chinese authoritarian capitalism.
• India as a democratic rising power presented a subtle counter-narrative to China’s rise.
• India under Mr. Modi presented itself as a defender of the global order: an order that has benefited India but is now under threat from Mr. Trump’s isolationist tendencies and China’s growing assertiveness.
• With regard to Paris Agreement Modi said “The protection of the environment and the mother planet is an article of faith” and project India as a responsible global power interested in preserving the extant order.

Way Forward

• Mr. Modi’s meetings with Ms. Merkel and subsequently Spanish Prime Minister Mariano Rajoy and French President Emmanuel Macron saw exploring new ways to cooperate on multilateral issues, including terror, trade and climate change.
• Mr. Modi’s assurance in Berlin that the suspended India-EU free trade talks for the Broadbased Trade and Investment Agreement would resume soon has raised the hope that progress will be made before the EU-India summit in Delhi this year.
• The Centre must undertake a full review of India’s priorities and interests before Mr. Modi heads to Washington for a meeting with Mr. Trump at the end of June.

Conclusion

• While the EU and India have a clear convergence in many areas, a dependable alliance can only come from a concurrent worldview.
• It cannot be ignored, for example, that Chinese Premier Li Keqiang’s visit to Berlin and Brussels, saw the EU repose much more faith in Beijing than New Delhi would be comfortable with, given the current Sino-Indian tensions.
• Divergent worldview may be further highlighted as Mr. Modi travels to Kazakhstan to formalize India’s membership of the Shanghai Cooperation Organization, seen as a counter-NATO coalition of Russia, China and Central Asian states

India will have to consider its options carefully as it decides which coalitions to forge as the U.S. overturns traditional ties in favor of transactionalism