Business Standard | March 02, 2011
India, EU kick off fresh talks on free trade agreement
Pallavi Aiyar / Brussels
India and the European Union moved closer to sealing an ambitious free trade agreement, with talks between the chief negotiators of the accord kicking off in Brussels, headquarters of the European Union. Sources say after years of discussion (the negotiations were launched in 2007), the broad parameters are finally in sight.
John Clancy, spokesperson for the European Commission’s trade directorate, told Business Standard this week’s talks would focus on “tariffs and services”. India and the EU have already agreed to eliminate tariffs on 90 per cent of all tradable goods and the current talks involve a proposal to raise this figure. India has asked the EU to abolish tariffs on 95 per cent of its goods, while the EU wants New Delhi to slash tariffs on 98 per cent of its goods.
India has argued that as its current tariff levels are far higher than those of the EU, it will feel a greater pinch on goods and is, therefore, asking Brussels to accept an asymmetry in the level of reduction. A senior EU official told Business Standard this was acceptable as long as the composition of the list of items on which tariffs were scrapped was “satisfactory.”
The auto industry will be in the spotlight this week, since a reduction of tariffs on European cars (which currently face import duties of 110 per cent) is a key demand of the EU. Indian auto makers are opposing the move, claiming it would hurt the domestic industry. However, Clancy made it clear Brussels was going to stand firm on the matter. “We are aware of the position of the Indian car industry with respect to the negotiations,” he said, “But it is clear that in order for the EU to support this agreement, access to India’s car market must be improved significantly.” A middle ground on the issue of cars is reportedly being worked out, with the most likely solution being the abolition of tariffs on high-end, luxury cars, while small and medium car makers retain a degree of protection.
The EU is also pushing for India to slash tariffs on wine and spirits and dairy products.
On services, India has asked for facilitation of visas for Indians with job offers in the EU. Brussels has said visas are a member-state issue, rather than one concerning the EU at large. However, recent media reports in the UK suggested New Delhi was trying to secure a guaranteed 50,000 extra visas for the EU under the accord.
Clancy clarified that although Mode 4 (as defined by the World Trade Organisation’s General Agreement on Trade in Services) issues relating to the temporary stay on the number of highly skilled Indian services providers in the EU were being discussed, Brussels had no ability to negotiate on visas or immigration.
However, there are a couple of immigration-related directives being pushed by the European Commission, independent of the FTA, that might address some Indian requirements. One deal with a so-called ‘blue card directive’, the European equivalent of the American green card, to come into effect later this year. It grants a blue card holder the same access to pensions, housing and healthcare as given to an EU citizen and also opens the possibility of job mobility between EU member-states
Another proposal is related to intra-corporate transferees (ICTs), aimed at making it easier for non-European employees of multinational companies to be temporarily transferred to that MNC’s subsidiaries in EU countries. Caps like the UK’s recent limitation on visas for non-EU immigrants will not apply to ICTs. Other services-related topics to be discussed in Brussels this week include the EU’s demand for a greater opening of India’s retail, insurance, legal and banking sectors.
The chapter on intellectual property rights (IPR) has generated some controversy, with civil society groups claiming a deal that would bind India to TRIPS-plus commitments would be detrimental to developing countries and their access to life-saving drugs. EU officials told Business Standard a new joint position on the IPR chapter had been worked out, and this would merely entail a reiteration of the existing IPR-related legislation in both the countries, which in some cases, goes beyond what was agreed to in TRIPS. However, the chapter would, in no way, necessitate a change in either side’s IPR legislation.
Public procurement is another grey area. For long, India had refused to discuss the topic at all. Though, talks on the matter are finally underway, no resolution is in sight. In recent months, European businesses have lobbied hard to ensure the profitable public procurement market in emerging markets like China and India are open to them.
At the India-EU summit in December, 2010, the two sides had committed to finalising a draft of the FTA by ‘spring’ Clancy said while this deadline may not be met, “intensive work would be on over the next few months to deliver on the joint commitment to take the negotiations towards a conclusion”. This would, first of all, entail a “political-level agreement that the elements are delivering on the interests of both the sides.” A final text would be ready after several months of extensive legal vetting.
The EU is India’s largest trading partner. In 2009, bilateral trade in goods and services was worth just under ¤69 billion, according to EC figures.