India-EU trade talks to resume by December 2021

Context:

After an eight year hiatus, India and the European Union (EU) are set to resume negotiations for a Bilateral Trade and Investment Agreement (BTIA) by December 2021.

Relevance:

GS-II: International Relations

Dimensions of the Article:

1. India – EU BTIA
2. What does EU Want?
3. What does India want?

India – EU BTIA

• India and EU had launched talks for having a wide-ranging Free Trade Agreement (FTA), officially called broad-based BTIA, long ago in 2007. The talks stalled in 2013 over differences on market access and movement of professionals.
• Bilateral Trade and Investment Agreement (BTIA) between India and the European Union (EU) is expected to promote bilateral trade by removing barriers to trade in goods and services and investment across all sectors of the economy.
• The BTIA was proposed to encompass trade in goods, services and investments.
• The primary issue: India’s pursuit of self-reliance has been accelerated by the Covid-19 crisis under the Atmanirbhar Bharat Mission. This is perceived by the European Union as India’s “protectionist stance”.
• However, it is important to note that India seeks to signal that it means business and is not averse to signing trade agreements after it opted out of the Regional Comprehensive Economic Partnership (RCEP) at the last moment.

What does EU Want?

• The EU wants India to liberalize accountancy and legal services. This has met with controversy as Indians do not want foreign lawyers and accountants to practice in India.
• European banks have been eyeing India’s relatively under-tapped banking space. But they are suspicious of the restrictive rules on priority sector lending and obligation on financial inclusion.
• EU is requesting India to reduce import duties on wines and spirits (France wants lower import tariffs on wines). But tax reduction on wines and spirits is not acceptable as these are regarded as ‘sin goods’ and the states which derive huge revenue from liquor sales, would be reluctant to cut taxes.
• Import duties on Dairy products has to be reduced substantially by India according to the EU along with reduced taxes on automobiles.
• The major contentious issues that remain are the differences on Intellectual Property Rights (IPR), investment protection and trade in agriculture and food items. India fears that any commitment over and above the WTO’s intellectual property rights (TRIPS, or Trade-Related Aspects of Intellectual Property Rights) will undermine its capacity to produce generic formulations.
• The EU also seeks liberalisation of FDI in multi-brand retail and insurance

What does India want?

• India is asking for ‘data secure nation’ status to be granted by the EU. The matter is crucial as it will have a bearing on Indian IT companies wanting market access.
• India also seeks improved market access Mode 1 (ITeS/BPO/KPO) and Mode 4 (movement of software professionals).
• India demands that the EU help the country in the development of textile and chemical industry, including leather goods and apparels, as gaining better access to the EU may help in the expansion of these sectors and their operations, thereby contributing to the overall growth of the Indian economy
• Other sticking points are the presence of non-tariff barriers that the EU imposes on Indian agricultural products in the form of sanitary and Phyto-sanitary measures which are too stringent and enable the EU to bar many Indian agricultural products from entering its markets

-Source: The Hindu