EU-India investment agreement?
Euro Intelligence | 29 January 2021
EU-India investment agreement?
With trade protectionism remaining a sticking point for EU-India relations, the EU is now shifting its attention to a potential investment agreement.
In an interview with Politico yesterday, Augusto Santos Silva, Portugal’s foreign minister, said that while the EU will be able to strike an investment deal with India, a full-blown free trade agreement will be a much harder sell.
We agree. As we reported last year, relations with India are becoming a much higher priority for the EU as it seeks to reduce its dependence on trade with the US and China. But India is a problematic case. EU-India trade rose by more than 70% between 2009 and 2019 to hit €80bn, and the European parliamentary research service has reported that liberalising trade with India would increase EU exports to India by up to 56%. But negotiations for a free trade agreement have been stalled since 2013, and India’s trade protectionism is on the rise. Bloomberg reported yesterday that India is considering raising tariffs on imported goods. Products including refrigerators, washing machines, dryers, aluminium and electrical goods could see customs duties rise as the government intensifies its focus on self-reliance and domestic manufacturing.
The EU has said that any trade agreement would need to deliver real new market openings in all sectors to both sides. An investment agreement could provide an opportunity to do just that, as it would support India’s efforts to build up its domestic industry while avoiding confronting more sensitive trade issues.
Furthermore, the EU is already India’s top investor. Its share in foreign investment inflows more than doubled between 2008 and 2018 to hit 18%, according to the European Commission. EU FDI stocks in India stood at nearly €70bn in the same year, with 6000 European companies now present in the country.
Just one problem with a potential investment agreement – like China, India has also made headlines for an ongoing crackdown on its Muslim minority population. The EU-China comprehensive agreement on investment sparked a storm of controversy because of China’s oppression of Uighur Muslims in Xinjiang. We wonder if an EU-India investment agreement would run into the same problems.
