India and the EU are Now Pursuing a Comprehensive Free Trade Agreement
India and EU Pursue Comprehensive Free Trade Agreement by Year-End
India and the European Union (EU) are striving to finalize a broad Free Trade Agreement (FTA) by the end of the year, with a strong emphasis on key matters such as tariff regulations, service access, and regulatory frameworks including the Carbon Border Adjustment Mechanism (CBAM). The discussions also encompass investment frameworks and agreements on Geographical Indications (GI), while sensitive industries like dairy and automotive are currently under negotiation.
Shift from Interim to Full-Scale Agreement
Rather than pursuing a partial agreement, India and the EU are now focused on establishing a full-scale FTA, working diligently against a pressing timeline to wrap up negotiations. An official asserted that significant progress has been made, with only a few details remaining to be finalized. “The situation remains dynamic,” he noted. On Tuesday, French Foreign Trade Minister Laurent Saint-Martin expressed optimism about reaching an agreement in the near future, stating, “We can have an agreement in the coming weeks or months.”
Showcasing Commitment to Trade
He emphasized that this agreement is essential to demonstrate a commitment to global trade and free trade principles, countering the trend of trade wars. “This is our consensus,” stated the French Minister after a meeting with India’s Commerce and Industry Minister, Piyush Goyal. Both India and the EU had previously set a deadline for the end of this year to conclude negotiations and establish the deal’s framework.
Negotiation Breakdown
The FTA negotiations, which commenced in 2022, encompass 23 chapters, with all but one or two peripheral trade issues potentially excluded. Important EU regulations, specifically concerning carbon emissions—like the CBAM and Deforestation Regulation—are also on the negotiation table. The core chapters that address fundamental trade concerns include topics on goods and services, rules of origin, customs procedures, technical trade barriers, trade remedies, and dispute resolution mechanisms.
Further Agreements Under Discussion
In addition to the FTA, discussions for a Bilateral Investment Treaty (BIT) and an agreement on Geographical Indications (GI) are simultaneously taking place. The official indicated that the completion of the FTA will precede these two additional agreements. Minister Saint-Martin reiterated that France aims to reduce both tariff and non-tariff barriers while remaining sensitive to agricultural, environmental, and sanitary regulations. “In the end, every trade agreement is based on consensus; each party must acknowledge the others’ concerns,” he stated.
Expanding India-France Trade Relations
The Minister also pointed out that the current trade volume between India and France, amounting to $15 billion, falls short of potential and called for greater business collaborations and investments between the nations. He underscored that, “We can achieve more in exports, as well as in cross and co-investments. I truly believe in the potential of Joint Ventures in either country that need to be advanced.”
India’s Key Demands and EU Proposals
India’s primary demands in negotiations with the EU include the abolition of tariffs on labor-intensive exports and enhanced access to the services market within the 27-member bloc. Conversely, the EU is urging India to lower tariffs on cheese and skimmed milk powder, which India currently protects with high tariffs to safeguard its domestic dairy sector. Indian authorities have indicated a reluctance to concede any pricing reductions in dairy products within the FTA context; dairy products were also excluded from the UK FTA negotiations.
Market Access for European Goods
European winemakers are advocating for improved access to the Indian market, as imported wines are subjected to a staggering 150% duty. The EU seeks to have these tariffs lowered to between 30-40%. India might consider aligning its tariff concessions with those offered to Australia under the ECTA, where duties on Australian wines were reduced to 50% over ten years. Additionally, EU car manufacturers are pressing India to decrease import duties on completely built-up (CBU) vehicles from the current 70% to a range of 10-20%. The EU currently exports over $2 billion in automobiles and auto parts to India each year, primarily in completely knocked-down (CKD) format, which incurs a 15% tax upon local assembly.
