Hindustan Times | 24 January 2023
Climate, labour remain knotty issues in EU FTA
By Rezaul H Laskar & Rajeev Jayaswal
Several knotty issues related to labour, environment and sustainability that have emerged in negotiations between India and the European Union (EU) on a free trade agreement (FTA) will require political guidance for further progress, people familiar with the matter said on Monday.
These issues expand the scope of the proposed trade deal beyond goods and services and require political guidance, even as India is firm in its position that it will not sacrifice the interests of its agriculture, human resources and manufacturing ecosystem, the people said following the conclusion of three rounds of discussions.
In the case of trade in goods, a report prepared by the EU side after the third round of negotiations, which went on till December 13, said the negotiators from both sides had obtained “clarity on the important sensitive issues where political guidance would be needed to make further progress”. The report also said there was no “significant progress” on technical barriers to trade because of “substantial differences” between the Indian and EU systems.
The EU is among four major countries and regional groupings — the others being the UK, Canada and the Gulf Cooperation Council (GCC) — with which India is currently negotiating FTAs. India and the EU relaunched negotiations on a trade deal and agreements on investment protection and geographical indications in June 2022 after a gap of almost a decade.
The people said the FTA with the EU — a 27-nation bloc — is unlike other trade deals that are confined to goods and services. The deal with EU is expected to be a Comprehensive Economic Partnership Agreement (CEPA), and New Delhi will proceed with extreme caution as it intends to protect national interests since India is still a developing country, at least two people with direct knowledge of the negotiations said.
“The current government is not in a hurry to sign trade deals. India is an economic power and is set to become a developed country in the next 25 years. Today, it negotiates from its strength,” one of them said.
A second person said any deal is possible between two potential partners if they respect each other’s sensitivities. FTAs are “give and take” but must be a win-win for both sides.
“We have concluded the third round of negotiations and the fourth round is expected soon. As issues pertain to several ministries and departments, wider consultations are required,” the second person said, adding the deal will take time as it will be negotiated “area-wise”.
The Indian side wants greater access to EU markets and better mobility and migration terms for professionals and students. The EU side has focused on removing barriers, opening up the services and public procurement markets and ensuring protection of geographical indications. Under new EU regulations, trade and sustainable development has become a new element in the negotiations, another area where there are significant divergences, the people said.
During the third round of talks, conducted in a hybrid mode, the negotiators identified additional points of convergence in trade in goods and obtained “clarity on the important sensitive issues where political guidance would be needed to make further progress”, according to the EU report.
The negotiators were unable to make significant progress on technical barriers to trade because of “substantial differences that exist between the EU and Indian systems”, particularly for the “Supplier Declaration of Conformity”, the report said.
These discussions focused on technical regulations, conformity assessment articles and standards. The Indian side also presented its proposal for a sectoral annex on pharmaceuticals and the EU presented its annex on motor vehicles.
There was, however, progress in discussions on customs and trade facilitation, with the two sides adding five fully agreed provisions to six provisions that were concluded in the second round of talks. There was progress on sanitary and phytosanitary measures, with the two sides working on the basis of a merged text that includes the EU text and Indian counterproposals, the EU report said.
The two sides also made progress on a system of “self-certification of origin”, though modalities for this are yet to be agreed.
The EU side’s draft proposal on digital trade states the two parties are committed to ensuring cross-border data flows by not requiring the use of computing facilities or network elements in one party’s territory for processing, or requiring the localisation of data in one party’s territory for storage or processing.
The people said discussions in this regard will also be shaped by the data protection bill the Indian government intends to bring to Parliament. The aim in digital trade, they added, will be to come to a midway point between the US system of laissez faire and the Chinese model of controlling everything so that there is free flow of data with trust and personal freedoms are respected.
EU officials have said in the past that the two sides are trying to conclude negotiations by 2023. However, this is considered ambitious since the EU’s other FTAs have usually taken several years. For instance, the EU-New Zealand FTA was concluded in June 2022 after 12 rounds of negotiations since June 2018.
India is the EU’s 10th largest trading partner, accounting for 2.1% of total trade in goods. The EU is India’s third largest trading partner, accounting for trade in goods worth €88 billion in 2021 or a little more than 10% of total Indian trade. Trade in services between the two sides touched €30.4 billion in 2020.