Time to move ‘beyond trade’ in EU-India relations

INDIAN Prime Minister Narendra Modi’s visit to Brussels for the EU-India summit on March 30 is good news.

The EU and India have much to discuss. There are hopes that Modi will use the long-delayed meeting — India and the EU have not met for summit level talks for four years — to open a new, more dynamic and more adventurous chapter in EU-India relations.

As John Lennon sang to Yoko Ono so many moons ago, almost 12 years after the EU and India vowed to become strategic partners — but then allowed their relationship to stumble and falter — it’s just like starting over.

Or at least it could be. If they are to reboot ties, India and the EU need a new conversation, a new focus on shared interests as well as new goals and ambitions.

Above all, they need to take a fresh look at each other, replacing tired misperceptions and clichés with a different, more up-to-date outlook.

India, with a growth rate of 7.5 per cent according to the World Bank, now has a more dynamic economy than China. The EU for all its current malaise has an interest in exporting and investment more in India and has the technology India needs for its modernisation drive.

As an increasingly influential regional and global power, India needs to have a more serious conversation with the EU on refugees, peace and security in Asia, Africa and the Middle East. Terrorism and threat from the militant Islamic State group are also issues of common concern.

Opening a new chapter means moving to a “beyond trade” agenda. Realistically, however, the summit’s focus will inevitably be on the Bilateral Trade and Investment Agreement (BTIA) or free trade agreement that Brussels and Delhi have been negotiating since 2007 with little success.

Negotiations on the deal stalled over a plethora of issues in 2013. If some of the key blockages can be removed in time by trade officials, the March 30 summit could mark the re-launch of the BTIA negotiations.

Such a scenario is certainly desirable. Trade and business are the glue that bind Europe to India and to other Asian states. Increased trade and investment flows will generate growth and jobs in both Europe and India. And resolving the trade stalemate will inject fresh momentum into the overall EU-India relationship.

But Brussels and Delhi need to be more ambitious. As illustrated by Modi’s high-profile visits to Britain, France and Germany, India has so far favoured its bilateral ties with national European governments over contacts with the EU. Meanwhile, Europe has spent more time and energy on building a strategy for China than on constructing a stronger relationship with India.

India’s new economic programme opens up fresh avenues for increased EU-India synergies which go beyond the two sides’ traditional interaction. This could include cooperation in areas where both sides have a strong economic interest such as infrastructure investments, sustainable urbanisation, renewable energy, innovation and synergies between “Digital India” and the EU’s agenda for a Digital Single Market.

The focus should now be on hammering out a more practical, pragmatic and operational agenda which seeks to find as much common ground as possible between Modi’s aspirational programmes and the EU’s initiatives to boost growth and jobs.

The EU is well-placed to share its experience in building a single market, economic reform and modernisation, cutting back over-regulation and improving the business environment.

A new EU-India action plan should be short, snappy and action-oriented, rather than the long “wish list” which the EU traditionally draws up with and for its partners.

Still, trade matters and it is important that the BTIA negotiations are re-opened and a deal is finally done.

The talks are like an obstacle race, however, with new problems emerging at every twist and turn. The latest bone of contention is over EU demands that India substantially bring down the “high” duties on automobiles as a pre-condition for resumption of the FTA negotiations. India’s import duty on cars range from 60-120pc as against the EU’s 10pc.

But the industry body for automobiles — Society of Indian Automobile Manufacturers (SIAM) — has asked the commerce ministry not to “buckle under pressure” from the EU, adding that this could ultimately hurt the government’s ‘Make In India’ initiative.

India is unhappy about restrictions on temporary movement of skilled professionals to the EU, especially the recent move by the United Kingdom to hike visa fees for skilled professionals as well as increase minimum salary threshold for intra-company transfers. India is also seeking data security status which it says is crucial for India’s IT sector to do more business with EU firms.

The EU, meanwhile, also wants lower Indian duties on wines and spirits and dairy products and a strong intellectual property regime. The value of EU-India trade grew from 28.6 billion euros in 2003 to 72.5bn euros in 2014 while EU investment stock in India was 34.7bn euros in 2013 and trade in commercial services quadrupled in the past decade, increasing from 5.2bn euros in 2002 to 23.7bn euros in 2013.

While such horse-trading is important and Modi and his EU counterparts must give the trade negotiations a much-needed push, the success of the summit will also hinge on a political agreement between Delhi and Brussels to start over.

View From Abroad: Europe, India and Modi — could be starting over (Originally published 20/06/2015 at dawn.com)

It has taken one year, but Indian Prime Minister Narendra Modi has finally signalled an interest in reviving ties with the European Union. And the EU is ready to reciprocate, albeit cautiously.India has in fact long been the big gap in the EU’s outreach to Asia. While India and the EU declared that they were strategic partners some years ago, the relationship has never really taken off.Indians complained the EU was distracted by problems at home and its focus on China. Europeans said India was too mesmerised by the US to pay attention to Europe. Contacts between the two sides were desultory, slow-moving and lacklustre.Finally, after a year-long wait, it looks like this could change. Whether it is his “Make in India” campaign or plans for “Digital India” and “smart cities”, Modi knows he needs European know-how and money. Europe, for its part, is eager to be involved in the massive overhaul of the Indian economic system that the prime minister is promising.Modi’s warm embrace of foreign partners could soon therefore also extend to the EU and not just national European governments. To make the Delhi-Brussels rapprochement sustainable, action is required in some important areas.First, after a year of little or no high-level contact, Delhi and Brussels must resume negotiations on the much delayed Bilateral Trade and Investment Agreement (BTIA), a comprehensive deal covering all areas in goods, services and public procurement in both markets. Once signed, the agreement could act as an important launching pad for increased European investments in India.Second, India’s new economic programme opens up fresh avenues for increased EU-India alliance which go beyond the two sides’ traditional interaction. This could include cooperation in areas where both sides have a strong economic interest such as infrastructure investments, sustainable urbanisation, innovation and synergies between “Digital India” and the EU’s agenda for a Digital Single Market.Third and most importantly, there are hopes that EU and Indian leaders could meet for summit talks, possibly in November this year to coincide with the G20 summit in Antalya, Turkey. With no bilateral summit held over the last three years — the last such gathering was in February 2012 in Delhi — the EU-India relationship is in desperate need of renewed political direction to give it a new lease of life.Both sides agree that EU-India relations need to be broadened to include a “beyond-trade” agenda — and that Modi’s wide-ranging modernisation programme offers ample opportunities for such new synergies. Realistically, however, a quick relaunch of the stalled BTIA negotiations is required to get the relationship back on a constructive track and for discussions to begin in new areas.This may now happen. EU Trade Commissioner Cecilia Malmström and Indian Commerce Minister Nirmala Sitharaman, who met on the margins of an OECD meeting in Paris on June 4, have agreed to restart the BTIA talks as soon as possible. Contacts are expected to resume soon, leading to cautious hopes that the deal — eight years in the making — will finally be clinched early next year.The EU has made clear that it is targeting the emerging well-off Indian middle class for enhanced market access in automobiles, wines and spirits, and cheese. Brussels is also calling for reform in Indian laws on intellectual property rights, trade and environment, trade and labour, and wants liberal access in insurance, banking and retail trade. India, for its part, is insisting on more labour mobility, professional work visas and recognition as a data-secure country to attract more European investments in its high-tech sector.With two-way trade estimated at around €72.5 billion in 2014 while the EU’s investment stock in India was €34.7 billion in 2013, there is certainly ample room for improvement. But agreement on BTIA will require that both sides summon up the political will to look beyond the array of technical issues to the deeper strategic importance of their relations.In order to get India and the EU talking to each other on these and other equally interesting topics, Modi’s can-do spirit needs to filter down to different, less adventurous echelons of the Indian bureaucracy. The European External Action Service, meanwhile, must work in tandem with the European Commission’s trade and other departments to hammer out a fresh EU-India agenda for action which looks at new areas and interests. Such an action plan should be short, snappy and action-oriented, rather than the long wish list which the EU traditionally draws up with and for its partners. Hopefully, Such a pithy document could then be approved at the EU-India summit later this year.Above all, both sides must take a fresh look at each other. European member states have already recognised the importance of India, both as a regional actor and an influential global player. It is time the EU institutions shed their reservations and engaged with India as an increasingly powerful 21st century partner.Equally, India should recognise that while relations with national European governments are important, the EU also has much to offer. It would be a pity if the full potential of EU-India ties were to remain untapped and unexplored for another long period.