INDIA-EU TIES

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Context: Russia-China ‘no limit’ pact opens doors for India-EU convergence. India and the US are also working on a similar trade and technology council on the lines EU has now set up with India and has with Washington.

More about news:

With the EU having a trade and technology council with US and now with India, it is only a matter of time that India and US will finally be able to close negotiations and set up a similar trade and technology council.
This means that there will be political and strategic convergence between India, EU and US on economy, trade, and technology with direct impact on security and climate change.

About EU:

The European Union (EU) is a political and economic union of 27 member states that are located primarily in Europe.
The EU has developed an internal single market through a standardised system of laws that apply in all member states in those matters, and only those matters, where members have agreed to act as one.
EU policies aim to ensure the free movement of people, goods, services and capital within the internal market; enact legislation in justice and home affairs; and maintain common policies on trade, agriculture, fisheries and regional development.

Overview of India EU relations

India and the EU will be collaborating on green hydrogen and renewable energy technologies.
It is only after the Chinese belligerence in the Indo-Pacific and the Russian invasion of Ukraine in Europe that the EU has started looking at India as a viable alternative for global supply chains and as a technology partner.

Political:

Both take great pride in their democracies and both are under pressure from hard nosed authoritarian neighbours.

Economic:

The EU is India’s first trading partner and the biggest foreign investor, with €67.7 billion worth of investments made in 2018, equal to 22% of total FDI inflows.
Europe is also the biggest source of foreign investment in India – though many European firms operate from Mauritius or Singapore shell companies for tax reasons.

Climate Change:

The EU is building on its ambitious target to render the continent carbon-emission neutral by 2050, through its new industrial strategy, the Green Deal.

Broad-based Trade and Investment Agreement (BTIA)

India and the EU have been working on a Broad-based Trade and Investment Agreement (BTIA) since 2007.
The EU's major demand is that India should lower its tariffs on automobiles, wines and spirits. India has demanded the lowering of the non-tariff barriers such as sanitary and phyto-sanitary barriers along with the strict technical barriers to trade.
Trade-in services are the most contentious area in the BTIA negotiations.
There are disagreements with regards to Intellectual property protection standards.

COVID-19 effects

The EU work together in order to mitigate the economic and human effects of the COVID-19 pandemicand work towards ensuring an inclusive and sustainable socio-economic recovery.
The EU’s approach and engagement look to foster a “rules-based international order, a level playing field, as well as an open and fair environment for trade and investment, reciprocity, the strengthening of resilience, tackling climate change and supporting connectivity with the EU.
Free and open maritime supply routes in full compliance with international law remain crucial.
On trade partnerships, the EU aim to conclude free trade agreements with Australia, Indonesia and New Zealand and take further steps towards the Comprehensive Agreement on Investment with China.
The EU continue to explore deepening economic relations with India.

Security cooperation

The EU will continue to develop partnerships in the areas of security and defence, including to address maritime security, malicious cyber activities, disinformation, emerging technologies, terrorism, and organised crime.
On security cooperation, the Council build on its experience of protecting critical maritime routes in the Indian Ocean through maritime domain awareness.
EU has taken the decision to extend the geographic scope of its CRIMARIO (Critical Maritime Routes) II activities from the Indian Ocean into South and Southeast Asia with a view to contribute to safer sea lanes of communication with the EU.

Export potential:

India has an untapped export potentialof $39.9 billion in the EU and Western Europe.
The top products with export potential include apparel, gems and jewellery, chemicals, machinery, automobile, pharmaceuticals and plastic.
India benefits from tariff preferences under the EU’s Generalized System of Preferences (GSP)for several of these products.
India is among the major beneficiaries of the EU’s GSP, with exports under the GSP valued at nearly $19.4 billion in 2019, accounting for nearly 37% of India’s merchandise exportsto the EU.
However, there are several products where India has export potential in the EU, but these have “graduated” or are at the brink of “graduation” under EU GSP.
Product graduation applies when average imports of a product from a beneficiary country exceed 5% of EU-GSP imports of the same productfrom all beneficiary countries over three years.
India’s exports of products such as textiles, inorganic and organic chemicals, gems and jewellery, iron, steel and their articles, base metals and automotives are already out of the ambit of EU-GSP benefits.