Courtesy: European Union
Abstract:
The paper titled as “The relevance & future of broad-based trade & agreement between India & Europe”, analysis the relevance of the India-European Union free trade agreements in the recent times. The FTA’s have been signed by the government keeping in view of promoting free trade with respect to some sectors with the idea that free trade can bring out the best between the nations. The paper adopts a strategic, optimistic & pragmatic view for the analysis along with quoting multiple facets from the BTIA agreement between India-Europe, on which an in depth analysis has been conducted.
The paper concludes that India-EU BTIA has a questionable future along with being trivial if analyzed from the current perspective. The paper also suggests that India must adopt wait & watch approach towards the BTIA as it is not urgently required for India. The paper also suggests that, there are multi blocs agreements instead of individual nation with blocs which doesn’t provide a level playing field for negotiations.
Introduction:
The school before the Freidman’s monetarist ideas of macroeconomics was based on the free trade absolutists by economists like David Ricardo, who gave the much famed theory of competitive advantage which meant at promoting free trade. On the lines of the ideas of David Ricardo, India & Europe have been keen on developing a free trade partnership for years, given the mutual benefit that the businesses of both countries can enjoy, free trade agreement basically means that there would be trade without restrictions with respect to a few goods where there would be no protectionist policy that would be employed. The aim of free trade agreements is to basically boost competitiveness in the markets & give the consumers a choice.
This will be India’s first bilateral agreement in services with a large trading partner and EU’s first agreement with a large emerging market. Since both India and EU are members of the World Trade Organization (WTO), it is expected that the BTIA will be WTO plus. This will be India’s first agreement which will cover issues like government procurement in goods and services and labour standards. (Impact of special economic zones to fdi in india)
There is a decent reason why both the parties are interested in a BTIA, India has a market of 140 crore people who are heavily literate, cheap labour, strong geographic location, second largest producer of steel, rising per capita income whereas EU has a strong consumer run economy along with high per capita income which means that If there is a free trade between both the parties it will be of great benefit to both the sides. It forms 3% of the entire world.
In recent times, both the blocs have trade worth about 88 billion $, EU is also India’s fourth largest trading partner which is almost 11% of total Indian trade. The trade volume between the nations will rise significantly when the BTIA is signed, however the BTIA proposed between the 2 parties have hit several roadblocks which has delayed the signing of the important deal. The service sector has trade worth Rs. 15.12 crore in 2009 & Rs. 11 crore in India & EU respectively. The bilateral trade in services between India and the EU has grown substantially in the past few years.
In 2003, the bilateral services trade was only $6.7 billion but it increased to $22.7 billion in 2009. During the same period, exports and imports increased from $3.4 billion and $3.3 billion to $10.5 billion and $12.3 billion, respectively. (Impact ofspecial economic zones to fdi in india).
Both countries are keen on a FTA or BTIA for theabove mentioned reasons, however there are serious contentions on some points in the FTA negotiations, which has stalled the implementation. The countries have a decent future but without agreeing on a few fundamentals the negotiations cannot go ahead in the positive direction.
Draft Provisions of India- EU BTIA framework :
Recently it was said that India-EU were looking for a renewed progress in negotiations related to broad based trade & investment agreement during India-EU summit scheduled for 8 May 2021. The 7 th India-EU summit in 2006 in Helsinki paved the way for the BTIA which has been under several round of negotiations.
The talks in BTIA were started long back ago in 2007. The BTIA looks to encompass trade in goods & services along with investments. The EU was India’s largest partner where total trade is about 10.5 billion $, the talks about the free trade between the parties were stopped in 2013 over movements of a few key goods. Both the sides are looking to reduce the number of tariff & non-tariff barriers which would lead to trade multiplication in the future. However there have been multiple roadblocks since. The strategic partnership between India & EU lasted till 2013 after which the free trade was mutually decided upon but has hit roadblocks which are mainly on issues like: free movement of professionals, tariffs on dairy products & spirits on EU to data localisation to EU Regulatory frameworks. The negotiations covered, Trade in Goods, Trade in Services, Investment, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Trade Remedies, Rules of Origin, Customs and Trade acilitation, Competition, Trade Defence, Government Procurement, Dispute Settlement, Intellectual Property Rights & Geographical Indications, Sustainable Development. (Ministry of Commerce).
There are various mandates of BTIA such as connectivity, components, involvement of regional and multi-stakeholders, countering the BRI initiative of China and so on. From the connectivity perspective, it has more than physical connectivity which includes digital connectivity, energy connectivity, transport and most importantly people-to-people connectivity. The mandate of the component has three major aspects such as trade and investment, SDGs and science and technology. Exchange of scientific knowledge, new technologies from the European Union and supplying scientifically empowered and skilled manpower to the EU by India has twin utilities for the overall betterment of both parties.
This will help in achieving the Sustainable Development Goals of both parties. Mandates of engaging multi or regional stakeholders have focused on connectivity within the country, Europe and other south Asian countries.. (Unacademy)
So far, 15 rounds of negotiations have been held alternately at Brussels and New Delhi. The last meeting was held in the week of 13th May, 2013 in New Delhi.
Benefits & opportunities for the parties if BTIA is signed:
The first benefit & opportunity would be for the manufacturers of both the European union & India, as, it would open new venues of opportunities, Indian manufacturers will get access to European markets which have a very high per capita income & European markets will get to sell their products in a large market like India which is almost 1/5 th of the world population, along with India, European manufacturers will also get an opportunity to sell their products in China which is also as big as a market like India.
The connectivity issue discussed above is also a benefit & opportunity for both the blocs to create an alternative against China’s BRI which will improve security apparatus in the EU & India at a whole.
Since, Europe will get a lot of professionals it will aid them with economic recovery given how the European economies have taken a hit since the coronavirus crisis, with multiple European economies going into series of hyperinflation for which imports as well as expertise from India is required. As imports negatively impact the aggregate demand which will bring down the inflation rate, along with rebuilding the economy.
Can be integration of democracies.
Will bring in necessary foreign aid which will boost the economic
development between the nations.
Consumer democracy will thrive properly, as, consumers have an option to
buy goods accordingly.
Increased competition that will lead to quality triumphing over quantitative
economics.
Challenges & conflict areas:
TRIPS plus agreements and provisions of health aspects: It is an international legal agreement between all the member states in the WTO. TRIPS was argued at the roundtable of Uruguay association at the GATT between 1989 & 1990, it is administered at WTO. Its possible that BTIA will be extended to the WTO countries as well in the future.
A. Patent of Protection & GI Issues:
The core issue involved in the BTIA concerns the protection of patents. The right claimed by the inventor are granted for a definite period of time after it stands on basic requirement of novelty, non obviousness & industrial use of application. The grant of patent and its protection is not uniform across the globe. It varies from one nation to another. (BTIA; Study of TRIPS Plus Pro Visions,International journal of law management & humanities.)
The Copyright Act, 1970 provides a strong protection to copyright, though India never ratified the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome Convention), WIPO Copyrights Treaty and the WIPO Performances and Phonograms Treaty. Further, the TRIPS Agreement does not obligate all WTO members to comply with the Rome Convention. On the other hand, the EU-India draft FTA requires accession by India to such treaties.
Also, the EU has proposed a provision obligating the Parties to recognize a ‘resale right’ for original works of art, which has not yet been agreed by India. Section 53A of the Copyright Act, 1957 recognizes this right in India but subject to certain limitations. The EU has proposed to establish a mechanism for the addition of new GIs, particularly for use of GIs in Internet and organizational matters, which is poised to be a significant achievement for European countries, who have always spearheaded the agenda of expansion of the international protection of GIs. (BTIA; Study of TRIPS Plus Pro Visions,International journal of law management & humanities.)
B. Policy issues & unrealistic demands:
There are core policy issues for which they are disagreements. The Atmanirbhar Bharat scheme which was launched during the covid by the government of India was viewed by the European Union as a protectionist scheme, since the Atmanirbhar Bharat Yojana, gave a lot of subsidies to the infrastructure firms, agriculture sector, textile sector to name a few, this will lead to the reduction of the production cost which will lead to the Indian products getting more exports which would directly translate into a loss for the European manufacturers, this has been proved to be true because the share of Indian manufacturers in certain products like textiles has gone up by 120% in the last 4 years whereas European manufacturers have lost a majority of their market share to Indian textile manufacturers for which one reason in Government of India’s Atmanirbhar Bharat scheme. However , Atmanirbhar Bharat scheme is important support source for a lot of industries like MSME’s, farming community, horticulture to name a few during the coronavirus crisis.
The EU imposition of carbon border tax on the goods that have high carbon footprint, coming in the forms of imports, also act as a trade barrier, as EU imports a lot of refined oil energy from India after the breakout of the Russia-Ukraine war, such kind of an arbitrary tax will lead to rise in the domestic price which would act as a tariff barrier which would prevent other countries from exporting to the EU, one of the losers in this issue will be India which is the leading manufacturers & service sector in the world. This is a protectionist stand that the EU has imposed on the nations for climate change, whereas, their carbon footprint is one of the highest in the world. This is also acting as a dispute between India & EU for the BTIA.
The BASIC countries have already voiced their concern for the issue. The second issue between the nations, is the exchange of skilled professionals which is deemed to be unfair as its only India has to send its skilled professionals, vis a vis, the highly skilled engineers. Already India as a country faces with the issue of brain drain which saw over 1.28 lakh citizens renounce citizenship in the last 2 years. Such kind of an agreement will deprive India of a skilled set of professionals which is not ideal for the growth of India.
This is a prime dispute between India &EU for the BTIA.
Future challenges & problems:
The point of connectivity looks very attractive to the viewers of International relations, who see it as a counter to China’s BRI policy. However, serious concerns remain on the mode of implementation. Fulfilling such ambitious projects would face 3 practical hurdles: 1. The cost of infrastructure projects would be very high which would mean either any one of the sides has to pay a lot of money to ensure the projects are completed on time, who will contribute how much for the projects would be a point of discussion, further the projects may also see repeated Stallings due to changing geopolitical issues around the world. The second, future challenge that looms over the BTIA agreement is the changing political atmosphere in the EU nations where there is a rise of the ultra conservative wing (like the rise of polarising powers like Marine Le Pen in France) or the ultra liberal parties(like the rise of Olaf Scholz in Germany ) along with a charged political atmosphere which is polarising in nature, which is also increasing the challenge of Euroscepticism among members of European union which will also pose a stiff problem while negotiating the BTIA with Europe, as Euroscepticism will mean that, there would be less consensus on decisions related to EU, which will take up a lot of time for the negotiations for the BTIA.
The third, would be, there are a lot of strategic points that fall between India & EU like Crimea, Transnistria, Kazakhstan, POK on which there are serious disagreements between India & EU on these issues, hence, it is important to understand the connectivity point in the BTIA seems irrelevant as well as a direct threat to national security of India. Indian security experts will become more cautious as well as sceptical when hostile colonial powers like UK start acquiring ports in the Indian Ocean region which would be not seen kindly by the Indian firms. Hence the connectivity point is also more or less irrelevant as it has too many hurdles in the implementation.
Is BTIA required & its future?
Whether BTIA is required depends upon the viewpoint from where its viewed. If viewed from the viewpoint of European union, its definitely required after covid & Russia-Ukraine war, which has destabilized their supply chains, in this case, if India comes up with a BTIA with them it would be a booster for their economy, along with regaining their strength in global financial markets.
However, if we view from an Indian perspective it is not urgently required, India can take the approach FTA’s with individual nations as it gives, India can get a more specialised attention, understanding of nation wise economy which will boost India’s trade relations, also when there is a FTA with a bloc then it becomes tougher for the nations to debate & formulate policies as now negotiations is with multiple countries, which translates that one side has to give too many concessions, which is clearly visible with the points placed forward by the European union like removal of Atmanirbhar Bharat scheme to name a few, carbon border tax etc. its doesn’t put India in an advantageous position. It simply implies that the BTIA is irrelevant if we view it from an Indian context.
The only FTA that was successful from an Indian point of view was with that of ASEAN as it was comparatively a small bloc, along, with many friendly nations, the same cannot be said about the European nations who have taken anti India stands publicly in the past on matters like Article 370 revocation to name a few. India’s recent track record of executing FTAs with individual nations like Australia, UAE, Indonesia is sector specific & extremely pragmatic, hence, India bowing down to the outrageous demands made by the EU in FTA looks trivial as well as too far-fetched. To add to the overall situation, the BTIA will also lead to foreign intervention in Indian judiciary where GI issues will prop up more regularly & since EU wants India to liberalize the GI rules, it will make thing tougher to the Indian business community which is expanding at a decent rate recently.
Also, when a BTIA is signed, it will alter India’s policy towards EU very significantly as we would always have an extra constraint of the FTA that will play with the minds of Indian diplomats in the long run. This would surely weigh on the minds of the Indian diplomats, because the prime rule of the international relations is self interest first followed by other issues. In case, BTIA has to be implemented it can be implemented between BRICS+, OPEC nations with EU which would at least give equal bargaining power for both sides.
Conclusion
Any FTA or PTA needs to have 4 issues at the core: Pragmatism, Mutual trust, Future prospects, mutual benefit, however the draft BTIA fails at all the 4 core issues, which has been illustrated with examples in the above paragraphs. Also since it is not urgently required, India should adopt a wait & watch approach towards the BTIA.
Given how the challenges, future challenges largely outweigh the benefits along with the system of preferential trade agreements with individual nations like Australia, UAE giving good results, it makes the BTIA look trivial in the current circumstances. A trade agreement has to have mutual benefit, which is lacking due to the a lot of provisions of BTIA which will place its implementation into serious doubt which points to the point that the BTIA will not be futuristic. In fact, it would be good for both the parties to evaluate free trade agreements at a mutually bilateral level instead of looking at a hybrid agreement between a nation with 27 nations.
Hence in my opinion, the India-EU BTIA is irrelevant if viewed from an implementation standpoint for which some provisions need to be amended, which will make the FTA stand on all the 4 core values of free trade agreements and make it beneficial for the parties involved.
References:
1. (Unacademy)
2. (Kumar)
3. (Salvatore)
4. (Next Ias)
5. (Ministry of Commerce & Trade )
6. (A Mukherjee)
7. (M Katrak)
8. (Sachdeva)
9. (Dhristi IAS )
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