Webinar on Recharging India – EU strategic ties in a transforming world
Reimagining India – EU strategic ties in a transforming world – Summary
The Indian Institute of Public Policy (IIPP) and the EU-India Cooperation Forum (EICF) hosted a webinar on ‘Reimagining India – EU strategic ties in a transforming world’ on 3rd June 2021. The distinguished panel consisted of (i) H.E. Ugo Astuto, EU Ambassador to India and Bhutan, (ii) Ambassador Bhaswati Mukherjee, former Ambassador to the Netherlands, (iii) Dr.Arvind Panagariya, former Vice-Chairman of NITI Aayog, (iv) Ambassador Mohan Kumar, former Ambassador to France, (v) Dr.Siraj Hussain, former Agriculture Secretary, (vi) Ambassador Kanwal Sibal, former foreign Secretary, (vii) Mr.Anil Khaitan, former President of PHDCCI, (viii) Ambassador Krishna V. Rajan, former Secretary, MEA and (ix) Mr. K.C.Sundaram, Director of IIPP and EICF.
The EU – India leaders’ Summit held on 8th May in Portugal marked a significant milestone in trade and economic relationship. The political will to move closer to each other was clear on both sides. The time is now opportune to reimagine EU – India ties especially considering the rise of China and a changing global order. EU’s insistence on soft power and perceived absence of hard power which India deems essential could be the cause for India’s tilt towards the US. However this was a strategic error on India’s part and it shouldn’t ignore the many advantages that the EU offers. India may have seemed jittery after Brexit, but the European Commission and Portugal, the EU Council Presidency invited PM Modi to the Summit to reassure their strategic partnership.
The India – EU Broad Based Trade and Investment Agreement (BTIA) has been stalemated for so long. But BTIA is essential to India – EU partnership which is based on business, trade and commerce which cannot move forward without dealing with it head on. The stalemate could be attributed to the division between the Ministry of Commerce which is extremely protectionist and the Ministry of External affairs which has a kinder eye towards the FTA. However this time, the concessions made by the Ministry of Commerce has enabled the outcome of concrete deliverables. The partnership should also establish dialogues on Human Rights issues as equal partners and both parties shouldn’t shy away from asking questions on human rights track record. Another outcome of the Summit is the clean energy partnership and collaboration on climate change issues. Regarding the patent waiver on vaccines, India had expected a better reaction from the EU. The EU needs to cut India some slack with regards to IPR, but it should not be conflated with the FTA since IPR is a WTO issue.
The Summit took place in a positive political atmosphere sending out a message of solidarity with India during its Covid crisis. The European Civil Protection Mechanism was activated last month which supplied oxygen concentrators and other essential medical devices to India at its time of need. The leaders also agreed to set up 3 working groups on resilient supply chains, regulatory cooperation and WTO reforms. And considering the size of the economies of the EU and India, there is a huge scope to unleash more potential. The establishment of EU – India connectivity partnership is a significant outcome of the Summit. A few days before the Summit, the European Investment Bank (EIB) signed additional contracts for infrastructure development in India. The EIB is an important instrument in the toolkit for sustainable productivity. India and the EU are also working together on foriegn policy affairs in Indo-Pacific, Africa and in Afghanistan as seen by the joint statement released by the Indian External Affairs Minister Mr.Jaishankar and the EU High Representative for foreign affairs Mr.Borrell.
In the EU – India relationship, China is the elephant in the room. In order to hedge its risk with China, India needs to move closer towards its other trading partners through FTAs with the USA, UK and the EU. China continues to export footwear, furniture, kitchenware and products of daily use to the EU. As the EU is trying to diversify its supply chain from China, India needs to get a larger proportion of it.India needs to shed its inhibitions of negotiating FTAs and it need not worry about imports as they would also increase their exports. India should be ready to open its markets especially the automobile industry and liquor industry. Both India and EU are relying on China for import of Active Pharmaceutical Ingredients (API). With India’s new API and medical devices parks being set up and with the production linked incentive, India will soon be able to export API to the EU. The EU’s trade ties with China exceeds its ties with the US and this is mostly driven by Germany. However, the EU is becoming more restrictive of its relations with China.
While negotiating the FTA, India has in the past pushed hard on the issue of labor mobility and the EU prior to Brexit has pushed back on labor mobility. Now that the UK is out of the picture, there is a chance that the EU may be receptive to labor mobility. However, India should not make the FTA dependent on labor mobility. Regarding digital trade, India and EU positions are not far apart. But there is no regulatory law in India for digital trade. India needs Data secure status from the EU without which the bilateral relationship cannot move forward. There is a need for high-level dialogues on non-tariff barriers. India faces huge non-tariff measures and other obstacles in the EU market. Indian pharmaceutical products do not get approval in time. Indian MSMEs are also over-burdened with regulatory restrictions. There are also high non-tax barriers on agricultural products from India. An alliance of techno-democracies of the USA, EU, India and maybe Japan and South Korea is needed to prevent the misuse of technology by authoritarian regimes.
The success of the Summit can be attributed to the separation of negotiations on trade, investment and geographical indicators. In matters relating to investment, the EU expects India to agree to international arbitration. But India’s track record with international arbitrations is abysmal. Instead, India prefers investors to exhaust all domestic judicial remedies before proceeding to international arbitration. The EU wants India to sign the ICSID convention, but if India signs it with the EU, it has to do so with other BITs. Negotiating an FTA with the EU requires a lot of manpower, expertise and a dedicated team working full-time on the agreement. Instead of vesting this task with the Joint Secretary and Additional Secretary in the Commerce ministry, India should form a team of experts of trade, commerce and law also consisting of members from the Commerce ministry, MEA and PMO.
The EU has emphasized on the use of soft power as a powerful tool to supplement hard power. It has also been continuously urging the need for India to put its trade and business interests in order and be less protectionist and more ambitious in its scope to be a great emerging power. This requires economic strength and the need to know when to compromise and when to not. The road ahead for India – EU partnership is filled with opportunities, but they require the right attitude, approach and long term perspectives.