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India-EU free trade talks hit slow lane over labour, environment, investment issues

The Hindu BusinessLine | 9 December 2021

India-EU free trade talks hit slow lane over labour, environment, investment issues

by Amiti Sen

India’s plans of distancing itself from China by forging free trade agreements (FTAs) with developed countries is proving to be a difficult path to pursue. Preparatory talks with the EU for resuming bilateral free trade negotiations by the year-end have moved into the slow lane over contentious issues such as labour, environment, investments and unresolved past differences, sources following the matter told BusinessLine.

There is no clarity now over when formal negotiations on the proposed India-EU trade pact would begin.

“The two sides were initially hoping to start the formal free trade negotiations by 2021-end, but this does not seem to be happening. There are way too many loose ends that need to be tied up before talks can start. The EU has been in touch with the Commerce & Industry Ministry, but the gaps seem wide,” a source said.

The slow-down in the pace of talks is a disappointment for India, which has also not been able to make any headway on a proposed FTA with the US, but officials say that India prefers it this way rather than getting into a deal that is not suitable for its farmers, industry and consumers.

“It has been the government’s stated policy to move away from China as much as possible. That is why it has been pursuing FTAs with the EU, the US, the UK and Canada. But the trade pacts have to bring substantial gains to India and there are certain issues where we can’t compromise,” the source added.

Prime Minister Narendra Modi and leaders from the EU and the EC decided to resume the India-EU trade negotiations (earlier knows as the Broad-based Trade and Investment Agreement) in May this year at the India-EU Leaders’ meet. The free trade talks, that started in 2007, were suspended in 2013 due to differences in issues such as digital trade, duty reduction on automobiles and wines and easier visa norms for professionals.

Big roadblock

A big roadblock is the EU’s insistence on a separate investments pact rather than keeping it within the purview of the FTA. India is concerned that the EU may not have any incentive to negotiate a trade deal if it gets a deal in investments.

In fact, EU has not made a secret of its interests in fast-tracking talks on investment. A recent analysis of the EU-India trade relations carried out by the EU’s Directorate General for External Policies, points out that given the “undeniable difficulties’’ of such comprehensive negotiations, a way to continue to build momentum without the risk of an abrupt end to the negotiations would be to start with a more limited proposal focused on reducing barriers to investment in manufacturing. “This would have to cover investment protection at the EU level but, possibly, also improve the level playing field,” it suggested.

The EU is also insistent on inclusion of labour and environment issues in the free trade talks that India is not in a mood to accept. The bloc also wants unresolved past differences over issues such as digital trade, market access for automobiles and wines, and work visas to be ironed out before resuming negotiations, the official said.

The EU is India’s third largest trading partner, accounting for €62.8 billion worth of trade in goods in 2020 or 11.1 per cent of total Indian trade, after China and the US, per EU figures.

 source: BusinessLine