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Eighth round of free trade talks between India and the EU to start on 23 June

Live Mint - 6 June 2024

Eighth round of free trade talks between India and the EU to start on 23 June
By Dhirendra Kumar , Rhik Kundu

India and the European Union (EU) will resume talks for a free trade agreement (FTA) with the eighth round slated to start on 23 June, two people aware of the matter said.

The two sides will likely take up sticky issues like the carbon tax, services, and India’s demand for the EU to relax its rules on the maximum level of pesticide residues allowed in agricultural commodities, one of those mentioned above said requesting anonymity.

"India intends to take a firm stand on persistent challenges such as non-tariff barriers. To that extent, Indian negotiators have prepared an elaborate list of roadblocks and challenges in key sectors," the person added.

Non-tariff barriers hinder trade in sectors like agricultural commodities, pharmaceutical items, engineering goods, and electrical items.

However, defining non-tariff barriers can be tricky. Some rules enforced by the EU to protect the health and safety of its citizens, such as those over pesticide levels, are described as non-tariff barriers by India.

The matter centres around the EU’s maximum residue level (MRL) rule. MRL is the highest level of a pesticide residue that is legally tolerated in food or feed when pesticides are applied correctly.

Sticky issues on table
The negotiators will also discuss sticky issues such as stringent EU safety standards for agricultural commodities and drugs, and high tariffs, the second person added.

As things stand, a phytosanitary certificate is necessary for exporting agricultural products to the EU, which comprises 27 countries.

This certificate confirms that the produce is free from pests and diseases and complies with health standards, including traceability to the farm.

Geographical indications (GIs) will also be on the agenda, with both sides aiming to advance discussions in this area, the second person mentioned above said, requesting anonymity.

The previous round of talks, held for about a week in New Delhi from 19 February, discussed services and investments, building on earlier talks that covered goods and public procurement.

Interestingly, the government has restructured its negotiating team to expedite the deal, assigning senior bureaucrat Darpan Jain to lead the negotiations.

Other key issues likely to be discussed include India’s trade disputes with the World Trade Organization regarding products like mobile phones and components, as well as integrated circuits and optical instruments.

Push for relaxation
India is also pushing for its labour-intensive textiles and apparel products to be exempt from duty.

EU nations impose higher import duties, at about 10-12%, on textile products, placing India at a disadvantage compared to China, the EU’s leading supplier of apparel and textiles.

Meanwhile, the EU is aiming to bargain hard to gain access to India’s services and public procurement markets, ensure the protection of geographical indications, and uphold its ambitious commitments on trade and sustainable development. These commitments include imposing maximum residue level (MRL) limits on agricultural products.

The EU’s proposed Carbon Border Adjustment Mechanism (CBAM) and Deforestation-free Regulation (EUDR), a key topic of discussion between both sides, are expected to impact around 8-10% of Indian agricultural, steel, and aluminium exports to the bloc.

"There is a concern that Indian products entering the EU and UK might face additional tariffs, potentially ranging from 20 to 35%, under the CBAM charges. A suitable text may be inserted in the FTA chapters dealing with this possibility," economy think tank Global Trade Research Initiative (GTRI) said in a recent report on India’s trade.

More regulations
"Other regulations that are expected to increase the cost of imports include the Deforestation Regulation, the Foreign Subsidies Regulation, and the Supply Chain Due Diligence Act.The path to a successful FTA requires a delicate balance of economic interests, political sensitivities, and a commitment to improving the quality of Indian goods," it added.

Queries emailed to the spokespersons of the commerce ministry and the EU remained unanswered till press time.

India’s exports to Europe have been steadily rising since FY21, in tandem with the global economy emerging from the pandemic.

India’s exports to Europe, in value terms, stood at $98.88 billion in FY24, while imports stood at $93.67 billion during the same period.

 source: Live Mint