Europe beckons

India and the EU are considering the resumption of free trade agreement talks which began about nine years ago but were stalled in 2013. On the face of it, the trade ties are skewed in the EU’s favour: India accounts for just over 2 per cent of the EU’s exports and imports, respectively, while the EU accounts for over a fifth of India’s external trade and, as a bloc, is its largest trading partner. But this does not necessarily imply that the EU holds all the aces. It is battling economic stagnation, whereas India is the fastest growing economy with a large, dynamic market that beckons. This perhaps explains why the EU is sending out feelers, even if tentative, that it is willing to be a bit flexible in trade and investment talks. Both sides should reboot and adopt a formula of give and take.

The EU should understand that India cannot altogether depart from the Doha Round mandate on agriculture (protecting poor farmers) and intellectual property (access to cheap medicine). But India too can come up with an innovative, positive approach. It has already eased FDI caps in insurance, banking and telecom, sectors in which the EU has a strong global presence. More recently, it has ratified the trade facilitation pact, which will ease up its onerous import-export formalities and reduce costs. However, it cannot be expected to alter government procurement norms (a ‘WTO-plus’ item) overnight — a demand of the EU — and put small industry to disadvantage.

There are other areas where India can yield ground. Tariffs on EU wines and spirits are way too high. Legal and accountancy services can be thrown open to global competition. The shackles can be removed on e-commerce, multi-brand retail and higher education. It appears that India is using these as a bargaining chip to secure freer movement of IT professionals. However, the influx of largely literate migrants in the EU may have narrowed the window of opportunity for India. It is worth considering whether a more flexible approach in services helps India secure market access for its agriculture, fisheries, pharma and textiles. The livelihood implications of lowering tariffs in certain sectors such as auto components should be considered. At the heart of India’s trade negotiations lies a dilemma. With a GDP of over $2 trillion, it is unable to convincingly defend its livelihood concerns. One of the most challenging tasks before the Centre is to open up the economy and seek market access on its terms, in a world that is turning its back on the WTO.

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