Almost a year after the India-EU Free Trade Agreement (FTA) talks were re-launched at the virtual Leaders Summit in May 2021, the two sides are now formally set to begin the negotiations. This follows hectic exchange of letters between the two sides to sort out initial differences, officials tracking the matter have said.

“Both sides have now appointed the chief negotiators. A team from India is expected to leave for Brussels soon, probably by the month-end, for the first round of negotiations,” an official told BusinessLine.

The EU wished for certain issues, such as sustainable development and labour, to be part of the FTA talks, the official said. These matters were among the areas of contention in the earlier phase of talks, between 2007 and 2013, which contributed to the suspension of the negotiations. The EU wanted resolution on some of these issues before re-starting talks.

“India does not have any problem in talking about issues like sustainable development anymore as the government has already undertaken ambitious commitments to address climate and environment challenges at international forums. Our labour laws, too, are fair and equitable. This was conveyed to the EU side,” the official said.

But whether non-trade issues such as labour, gender and sustainable development will be included on a best-endeavour basis (a desirable objective) or as negotiated mandates, may still need to be thrashed out.

Reducing China dependence

Another important issue that needs to be settled is whether to negotiate a bilateral investment treaty separate from the FTA, as the EU has demanded, or tie it to the successful conclusion of the FTA, as India wants.

The FTA talks are important for both India and the EU as both sides want to reduce their dependence on China as a trading partner and strengthen ties with democratic countries with large markets.

The EU’s interest in reviving the FTA talks with India can also be partly attributed to the ‘China-plus-one’ strategy that many developed nations are seeking to adopt following the Covid-19 pandemic. The pandemic demonstrated to the world the follies of being over-dependent on a single source of manufacturing and the need to move away from China-centric supply chains.

“An FTA with a developed member like the EU can be beneficial for India provided it gets to protect its interest in sensitive areas such as agriculture and labour-intensive sectors and is able to get a larger share of the EU market for goods and professional services,” the official said.

Ambitious target

According to Ireland’s Minister of State at the Department of Trade, Enterprise and Employment, Robert Troy, who was in India last week to promote bilateral relations, India is keen to wrap up the FTA talks in two years, which was an ambitious target but worth chasing. “India and the EU would like to see the trade negotiations complete before the next election, which we think is 2024. The Indian side has expressed their desire that the deal be completed before the next election. It is going to be challenging, you know, to very large economies. But we will pursue it,” Troy told BusinessLine.

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 the total Indian trade, according to figures shared by the EU.

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