EUROSCOPE. Business as usual with Europe

Next week, Prime Minister Narendra Modi is set to visit France and Germany, alongside Canada, in his first visit to Europe since taking office (aside from a brief stopover in Berlin en route to Brazil last year) — a visit he has said is pegged on economic opportunities and jobs for young people.

India has had a long and solid relationship with the EU dating back to the 1990s and cemented in 2004, when the two sides agreed to be ‘strategic partners’ with a commitment to regular political and economic dialogue. As a bloc, the 28-member EU area is India’s largest trading partner with two-way trade in goods and services standing at just over $100 billion in the year to 2014.

Over the years, regular summits have taken place, while numerous EU-India panels have been set up, tackling issues ranging from climate change to education and science and technology, but have done little to bring the two sides closer to a Free Trade Agreement.

While the EU has agreed FTAs with South Korea, Canada, Mexico and China, and is in negotiations with Japan and the US, the prospect of an FTA with India remains dim. Logistical and technical reasons were cited as the reason for cancelling an EU-India summit in Brussels, meant to take place during Modi’s visit, but it would hard to not see the cancellation of a trip as a sign of where priorities lie.

Europe for now is focused on sealing the transatlantic trade and investment partnership (TTIP) with the US (the lead negotiator for the TTIP is also the lead negotiator of the Indian FTA) while India is yet to announce its policy on Free Trade Agreements following the new government’s decision to conduct a broad ranging review of free trade agreements and their impact.

Rhetoric about the eagerness of both sides to reach a conclusion is yet to be matched by concrete action, and deep differences remain on crucial issues — such as market access for skilled professionals and services (from the Indian perspective) and the further opening up of sectors and cuts in export tariffs for the automotive sector from the EU perspective (the impact of the raising of the insurance sector FDI cap remains to be seen though on its own its unlikely to be game changer).

“I see a very slim prospect of the FTA,” says Anand Menon, professor of European politics and foreign affairs at King’s College London, which recently hosted a symposium on India and EU relations. “There are real constraints on both sides, and for the EU side there are other priorities, notably the US.”

The visits to France and Germany are likely to be very bilaterally focused — cementing strong ties with long-standing partners. Germany is, of course, India’s largest trading partner in the EU. Aside from strong economic ties, the two have shared political goals such as eagerness to reform the permanent membership of the UN Security Council.

Former Prime Minister Manmohan Singh visited Germany four times during his premiership, while Chancellor Angela Merkel has visited India on two occasions. On the forthcoming visit at least, economic and business considerations are likely to dominate, with the emphasis on pushing the Make in India drive.

Merkel and Modi are set to inaugurate the Hannover Messe, a massive industrial fair in the heart of Germany. It is an event traditionally dominated by small family run German businesses — where there is likely to be much enthusiasm for opportunities in India, says Dr Clemens Spiess of Heidelberg University.

“One of the themes of this year is high technology industry — the digital economy, smart grids, energy, renewables, hydropower,” says Spiess. He argues that small and medium-sized businesses are where the greatest opportunities for growth lie rather than large-scale infrastructure projects where caution remains.

He also notes the strong presence of Indian states at the fair, emphasising the eagerness of both to engage at a state-to-state level (earlier this year, for example, Maharashtra struck an agreement with Baden Wurttemberg, home to the city of Stuttgart).

With youth employment a priority for the government, skills development is likely to be another focus area (as it has been with previous bilateral visits) as is climate change — the push for renewables is a major priority for the Merkel government.

Language is also likely to be a subject of discussions (the decision to remove German as a second language in state school syllabi has not gone down well with Germany). “I don’t think the visit will involve dramatic turn; there will be a slow and gradual intensification of bilateral relations. That is the German way,” says Spiess.

More significant could be the visit to France — traditionally a strong partner of India, cemented by its support of India through the 1998 nuclear tests, and cooperation in areas such as defence and civil nuclear power, and its willingness to participate in high levels of technology transfer, particularly compared to other western nations. With the medium multi-role combat aircraft deal, won by Rafale against stiff competition from the rest of Europe, still to be finalised, Modi’s visit could be an important moment in pushing this relationship further.

In addition, the pressure on President Francoise Hollande to strike economically beneficial deals during the visit is likely to be higher than in Germany, with lacklustre economic growth and the government under pressure following heavy losses in local elections earlier this month.

It’s unlikely, however, to be a visit that pushes forward India’s relationship with the EU as a whole, bringing it closer to the elusive Free Trade Agreement.

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