India-EU FTA talks gather momentum
Business Standard | Brussels April 09, 2011
India-EU FTA talks gather momentum
Pallavi Aiyar
Free trade negotiations between India and the European Union (EU) gathered momentum this week with the chief negotiators of both sides meeting in New Delhi, followed immediately with two-day-long discussions in Brussels, between Indian Commerce Secretary Rahul Khullar and the Director-General for Trade for the European Commission (EC), Jean Luc de Marty.
The minutiae of the closed-door talks have not been disclosed, but sources close to the negotiations confirm that they are focusing on the remaining areas of contention which include the composition of India’s negative list on the trade in goods chapter. The Indian side, in the meantime, is awaiting the details of a firm offer from the EU on the services chapter of the agreement, in particular the details relating to the conditions for the entry of Indian professionals into Europe.
The spokesperson for the EC’s trade directorate, John Clancy, told Business Standard that “senior officials” meeting this week were taking “stock of the progress made so far” and tackling “the remaining obstacles”. “More work is required in tariffs, services and procurement,” he added.
On the goods side, cars and wines and spirits remain stumbling blocks to finalising negotiations. Access to the fast-growing Indian car market emerged as a deal breaker earlier this year, when New Delhi requested the exclusion of the automotive sector from the agreement.
India has been pushing for an agreement that would see tariffs scrapped only on car parts rather than complete units. This position is unacceptable for the European negotiators, who are under pressure from ACEA, the European Automobile Manufacturers’ Association. The ACEA is calling for the “full dismantling of automotive tariffs” as well as the “elimination of all non-tariff trade barriers within a reasonable time, and provision for a mechanism to prevent the introduction of new ones”.
It now looks as if India will agree to a compromise whereby it will offer to abolish tariffs on high-end luxury cars, while small and medium car makers retain a degree of protection. Whether or not this will be acceptable to Italy and France where companies like Fiat and Renault do not operate in the luxury car segment, remains questionable. The discussions around other contentious goods in sectors like agriculture and chemicals have reportedly made progress, with India agreeing to several of the EU’s demands.
Details of a compromise on wine and spirits still need to be worked out, but negotiators say they are hopeful of a mutually acceptable result.
What is worrying the India side is the absence of a firm offer from the Europeans on the services chapter, in particular on Mode 4 (as defined by the World Trade Organisation’s General Agreement on Trade in Services) issues, which relate to the temporary stay in the EU of highly skilled services providers from India.
The EU’s chief negotiator had told Business Standard last year that Brussels was willing to make a “strong offer” to India on Mode 4, but in fact no details of this offer have been forthcoming. For India, the Mode-4 issue is a make or break one. New Delhi is looking to ensure that special quotas for Indian intra-corporate transferees are locked in via the agreement. Quotas and liberal conditions for qualified Indian professionals seeking work within the EU are also being called for. Other services-related topics discussed in Brussels this week included the EU’s demand for greater opening up of India’s retail, insurance, legal and banking sectors.
The Indian position is that any clauses requiring a legislative change in India would be unacceptable. Thus, legal services and insurance remain off the cards, although retail and banking liberalisation might be agreed to.
The deadline for finalising the text of the FTA has been pushed back several times, with India now gunning for the year-end. The European side is, however, keen to conclude the matter sooner, if possible by this summer. The agreement, if pulled off, is widely seen as a way for the EU to steal a march over its transatlantic cousin, the United States.
The meetings this week have paved the way for a ministerial level round of discussions, which could see EU trade commissioner Karel de Gucht travel to India next month.
