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EU, India to meet on resuming FTA negotiations

Why in news?

Seven years after talks on a free trade agreement were suspended, India and the European Union (EU) are set to agree on a “high­ level dialogue on trade and investment

India EU relations

  • India-EU relations date to the early 1960s, with India being amongst the first countries to establish diplomatic relations with the European Economic Community.
  • A cooperation agreement signed in 1994 took the bilateral relationship beyond trade and economic cooperation.
  • At the 5th India-EU Summit held at The Hague in 2004, the relationship was upgraded to a ‘Strategic Partnership’.
  • The two sides adopted a Joint Action Plan in 2005 (which was reviewed in 2008) that provided for strengthening dialogue and consultation mechanisms in the political and economic spheres, enhancing trade and investment, and bringing peoples and cultures together.
  • At the 2017 EU-India Summit, leaders reiterated their intention to strengthen cooperation on the implementation of the 2030 Agenda for Sustainable Development and agreed to explore the continuation of the EU-India Development Dialogue.
  • The EU is India’s largest trading partner, accounting for €85 billion (95 billion USD) worth of trade in goods in 2017 or 13.1% of total India trade, ahead of China (11.4%) and the USA (9.5%).
  • The EU’s share in foreign investment inflows to India has more than doubled from 8% to 18% in the last decade, making the EU the first foreign investor in India.
  • EU foreign direct investment stocks in India amounted to €73 billion in 2016, which is significant but way below EU foreign investment stocks in China (€178 billion).
  • INDIA-EU Bilateral Trade and Investment Agreement (BTIA): It is a Free Trade Agreement between India and EU, which was initiated in 2007. Even after a decade of negotiations, India and EU have failed to resolve certain issues which have led to a deadlock.
  • “Data Secure” status not granted by EU affecting prospects of India’s IT-enabled exports.
  • Presence of non-tariff barriers on Indian agricultural products in the form of sanitary and phytosanitary(SPS) measures which are too stringent and enable the EU to bar many Indian agricultural products from entering its markets.
  • EU wants India to liberalise accountancy and legal services. India denies on the ground of already shortage of jobs.
  • EU demands tax reduction on wines and spirits but in India these are regarded as ‘sin goods’ and the states which derive huge revenue from liquor sales would be reluctant to cut taxes.
  • Reduction of taxes on automobiles not acceptable to India as its own automobile industry would not be able to match the competition from EU automobiles.
  • India has rejected an informal attempt by the European Union (EU) to work towards Investor-State Dispute Settlement (ISDS) mechanism which will allow corporations to take sovereign governments to international arbitration.
  • The ISDS mechanism permits companies to drag governments to international arbitration without exhausting the local remedies and claim huge amounts as compensation citing losses they suffered due to reasons, including policy changes.
  • The non-tariff barriers in pharmaceuticals that EU has imposed include requirement of WTO Good Manufacturing Practice certification, import bans, antidumping measures and pre-shipment inspection among others.
  • India has cancelled most individual bilateral investment agreements with EU member states on grounds that they were outdated. By doing this India is putting pressure on EU to sign BTIA on favouring terms.
February 2024