India EU trade pact, After many years of being delayed and numerous disruption to global trade, the time for this long awaited agreement between the EU and India is rapidly approaching. Both side have finally gotten the motivation to start talking again about an agreement, after many years of being stalled in conversation.
The focus is now timeliness of the signing of an agreement, more than the economic strategic importance of the agreement. The urgency created by the disruption of global trade by the United States is adding additional pressure to both negotiators to reach an agreement.
At this time, the officials of both sides are talking about the transformative nature of the agreement, and the anticipation of making a historic announcement after reaching an agreement.
The scope of the agreement will cover areas that have not previously covered in any trade agreement.
COVID-19 pandemic and the geopolitical shift
Both sides are working to find the best place for both sides on issues that will included in the agreement. The EU and India have been discussing how to reach an agreement since 2007, but after years of stalled conversations and many years of interruption for the COVID-19 pandemic and the geopolitical shift, the two sides are back at the table discussing.
Both sides are planning to finish this negotiation by the end of January 2023. The Minister of Commerce of India has said, “This is going to be the biggest trade agreement in history”, which expresses the economic reach and importance of the agreement. The agreement will include provisions for the movement of goods and services between both countries, as well as regulatory issues.
India EU trade pact, The agreement’s provisions intended to facilitate access to the EU through twenty-seven member states. Therefore, by creating an agreement, there is going to be an unprecedented level of market integration between the two countries.
Market access defines the core economic bargain
The European Union wants to reduce tariffs significantly in almost all industries. India does not want to fully open its sensitive industries, like automobiles and steel. Agriculture and dairy products are politically sensitive for India because they protect their farmers based upon concerns related to their livelihoods.
However, there has been some limited exploration of allowing restricted agricultural products in the future. There are expectations of increasing jobs in India through additional exports of labour-intensive products and providing greater competitiveness for textiles, garments, leather, and machinery. Additionally, there are additional services access opportunities for Indian companies offering IT and skilled exports.
On the other hand, many European firms are looking to enter the Indian marketplace in several sectors such as automobiles, chemicals, aeroplanes, and financial services. Complicated by the European Union’s carbon border regulations regarding steel imports and exports, Non-Tariff Trade Barriers will also add to the complexity of these negotiations.
Strategic gains extend beyond tariffs and trade
India offers scale and sustained demand for Europe. The bloc is looking to diversify its imports from China and is therefore increasing its trade with India. With its diverse markets, growing and young populations, and increasing levels of foreign direct investment (FDI), India also offers significant trade and investment opportunities to the EU.
The signing of this free trade agreement (FTA) will support the development of a fully resilient, diversified and sustainable supply chain for companies in both Europe and India, while also reducing India’s reliance on the US market for its exports. Currently, bilateral trade exceeds €120 billion annually, which exceeds the amount of trade between China and India. Immediately following the signing of the agreement, the level of investment between the two regions will likely increase dramatically.
However, while discussions over long-term sustainable development will remain sensitive issues, it is clear that both parties are trying to balance their climate change goals with their respective development needs. According to the Secretary of Commerce, Rajesh Agrawal, the negotiations have progressed to a near conclusion, with the Secretary indicating that the negotiations have advanced to the point that a final agreement is close to being signed. An FTA between India and Europe will have the potential to significantly alter the global trading patterns for both regions, and as a result, the agreement will have a significant impact on both regions beyond their individual borders.
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