An India-EU trade pact may still remain elusive
Context: India plans to start negotiations on investment and trade agreements with the European Union (EU).
Background:
- The discussions that began on a comprehensive free trade agreement in 2007 but were aborted due to differences on movement of professionals, labour, human rights and environmental issues and India’s high tariffs, inconsistent tax regime and non-payment of arbitral awards.
- Before COVID-19 and Brexit, the EU had the same GDP as the United States and was one of India’s major trade and investment partners.
- Being the largest democracies and unions of linguistically, culturally and ethnically diverse States, both the EU and India are well suited for a special relationship, but the reality is that the status is one without any spark of mutual chemistry.
Crisis in EU:
- COVID-19, Brexit and international tensions caused by former U.S. President Donald Trump has unsettled the EU and exacerbated internal discords.
- The crises of 2020 obfuscated the structural lack of unity in the EU, because despite its desire for greater integration, it faces obstacles from adherence to the rule of law to a strategy for dealing with China, Russia, Turkey and Iran.
- After months of tortuous negotiation over Hungary and Poland’s objections, member States finally agreed on a long-term budget and a COVID-19 recovery package of $2 trillion.
- The two countries had opposed anti-COVID-19 support being linked to good governance, in particular, accusations of suppression of human rights and lack of independence in the judiciary.
Shadow of Euroscepticism:
- The EU’s attempt to condition its budget on the rule of law during the pandemic and recession only sharpened the emphasis on the veto power to which every member State is entitled.
- Apart from the two main defaulters, many others also resiled on civil liberties, making the option of approving COVID-19 recovery funds by excluding the dissenters a proposition that would have risked a dangerous controversy on how united the EU should be.
- Europe’s many Eurosceptic parties now focus on preventing closer unity, which has been lacking in the eurozone and migration crises and implementing COVID-19 lockdowns.
- Elections are due in many EU States, including Germany and the Netherlands, which both have strong Eurosceptic movements.
Trump and a recalibration:
- The Trump presidency forced Europe to reassess its relationship with America, which stimulated the EU’s drive for greater self-reliance in security, economics, supply chains and climate change, and an attempt to emerge as a major global pillar alongside the United States and China.
- Europe will resist taking sides in any U.S.-China tug of war. This is underlined by the EU-China Comprehensive Agreement on Investment concluded after minimal consultation with Washington.
- A common security and defence policy also causes division. Mr. Macron would like to see Europe take greater control of its security, but Germany, the Netherlands, Portugal and others are uncomfortable with the prospect of building larger military capabilities, and remain content with security being subsidised by the North Atlantic Treaty Organization and the U.S. while they continue to engage in profitable business with China and Russia.
Conclusion:
- For the EU to resolve these innumerable and diverse problems without further widening existing ruptures will require enormous political will and adroit skill. Trade agreements with India will be the least of its problems.
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