Commerce Ministry writes to EU seeking linkage between free trade and investment talks

The Commerce Ministry has shot-off a letter to the EU stressing that the negotiations for the proposed bilateral investment protection treaty and a free trade deal have to be necessarily linked, an official tracking the matter said. While the negotiations can take place on parallel tracks, they must conclude together, the letter stated.

The EU, which is not keen to link the two, is yet to respond, the official told BusinessLine .

“The EU had been pushing for an investment protection agreement separate from a trade deal for some time but India did not agree as it believed it could lead to a loss in bargaining power in the negotiations. However, in the joint communication following the India and EU leaders’ recent meeting, it was the EU’s wish for independent negotiations that got reflected. The Commerce Ministry letter to the EU is aimed at correcting it,” the official said.

In the high profile EU-India leaders meeting in May this year attended virtually by Prime Minister Narendra Modi and leaders of 27 EU member countries, the two sides decided to resume negotiations on the broad-based trade and investment agreement that were suspended in 2013 due to differences in market access issues for goods, such as auto and alcohol, and mobility for professionals.

Separate agreements

The portion in the joint statement that made India uncomfortable was that it mentioned a beneficial trade agreement and an investment protection agreement separately. “We also agreed to the launch of negotiations on a stand-alone investment protection agreement,” the statement said. Indian officials said that it was an “oversight”.

The Commerce Ministry tried to repair the situation by coming up with a press release that day emphasising that the trade agreement and the investment protection agreement need to conclude together. “Negotiations on both the trade and investment agreements will be pursued on parallel tracks with an intention to achieve early conclusion of both agreements together,” the release said.

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New Delhi believes that it makes sense to keep goods, services and investments all under one umbrella when a free trade agreement is being negotiated. It ensures that if one side is keen on wrapping-up one aspect of the talks fast, it would be forced to treat the other aspects of the agreement also seriously and make compromises to move ahead on all items in order to get the entire treaty in place.

“The EU is very interested in fast-tracking a bilateral investment protection agreement as India suspended all its Bilateral Investment Treaties (BIT) with partner countries, including EU members, in 2017. It then asked EU countries to get into negotiations for a fresh agreement individually with India based on the model BIT passed by its Union Cabinet, but the EU wanted a single agreement covering all its members. If India agrees to independent negotiations, there are apprehensions that the investment treaty will be given priority by the bloc,” the official said.

The EU is India's third largest trading partner, accounting for €62.8 billion worth of trade in goods in 2020 or 11.1 per cent of total Indian trade, after China (12 per cent) and the US (11.7 per cent), per figures shared by the EC.The EU is the second-largest destination for Indian exports (14 per cent of the total) after the USA.

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