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FTA with European Union on PM’s agenda, insurance cap a sticker

Economic Times, India

FTA with European Union on PM’s agenda, insurance cap a sticker

5 April 2013

PTI/NEW DELHI: Increasing the insurance cap by India is virtually a "must" for inking of the long-pending India-European Union FTA, which has seen 15 rounds of negotiations since its launch in 2007.

Germany, a key EU-member, has also made it clear that a only a "comprehensive" broad-based Indian-EU Trade and Investment Agreement (BTIA) was acceptable and not a "partial" one. India has recently inked a selective FTA with ASEAN which excludes two countries—Philippines and Indonesia— in services sector.

The India-EU FTA will be on the agenda during the talks between German Chancellor Angela Merkel and Prime Minister Manmohan Singh, who is travelling to Berlin on April 10 on a bilateral visit, German Ambassador Michael Steiner told reporters while asserting that both countries were in favour of early inking of the pact.

However, the pact is stuck with many EU countries insisting that India should raise the insurance cap from 26 percent to 49 per cent. These countries are also hoping that Indian Parliament during the second part of the Budget Session will look into the issue given the "small" window for inking FTA before India gets into election mode.

While the issues like duty concessions in automobile and wine and spirit sectors are on the way to be resolved with India agreeing to relax duties in these areas, the increase in the insurance cap is big "decisive" factor as the pact will not find support in the EU Parliament which has to rectify it.

Last month chief negotiators from India and EU met in Brussels and once again highlighted these issues. Ahead of a meeting between Anand Sharma and EU trade commissioner Karl De Gucht in Brussels on April 15, both sides are trying to iron out the differences.

Significantly, one of the biggest Asian economies Japan has initiated the FTA with the EU recently and the US will start negotiations with the 27-nation European block in next few months which is also expected to impact India-EU FTA negotiations.

The EU is India’s largest trading partner with bilateral trade in 2009-10 aggregated to USD 75 billion. India and the EU are negotiating the pact since June 2007 and have missed several deadlines to conclude the talks due to various differences. While, EU wants FDI relaxation in sectors like banking and insurance besides significant duty cuts in automobile and wines and spirits, India has asked for greater access in services sector.

India has also also emphasising on the need for declaration of Data Adequacy Status from the 27-nation bloc to enable EU commitments in cross-border supply to be commercially meaningful to India.

However, the domestic automobile industry, under the aegis of Society of Indian Automobile Manufacturers (SIAM), has been opposing giving out any relaxations on import of vehicles from Europe stating that any such move will be detrimental to the growth of investments here that may affect job creations too.

The EU has also asked India to provide stable business climate in order to attract more investments from Europe. It had said that the European Union’s investments in countries like the US, China, Russia and Brazil are huge as compared to India. The BTIA seeks to sharply reduce tariffs on goods and liberalise services and investments provisions.