India-EU FTA

India-EU FTA

News: After signing comprehensive economic and trade agreements with the United Arab Emirates (UAE) and Australia, India has stepped up efforts to negotiate a free trade agreement (FTA) with the European Union (EU).

India-EU Trade Ties
• The EU is India’s third largest trading partner, accounting for 11.8% of India’s total trade in 2020-21, after the US (12.61%) and China (12.59%).
• It is India’s second-largest export destination after the US.
• India is the EU’s tenth largest trading partner, accounting for 1.8% of the EU’s total trade in goods in 2020.
• The EU is also a major source of FDI in India. Between April 2000 and March 2021, FDI flows from the EU to India totalled $88.32 billion.

How would an FTA be win-win for both?
• It will help Indian exporters gain competitive advantage in the EU markets while helping domestic manufacturers get cheaper access to imports from the EU.
• India’s major exports to the EU include mineral fuels, mechanical appliances, electrical and electronic machineries, organic chemicals, automobiles and auto components, pharmaceuticals, precious stones, and iron and steel products.
• Post the Brexit, European Union is trying to clinch trade deals to diversify supply chains and find profitable exporting destinations for European companies.
• Intra-EU trade has remained stagnant, trade with UK has been hit as well due to institutional trade barriers. India will provide a large market that EU can have access to in that case.

Key issues:
• Visa requirements and work permits for Indian workers to the EU have been major bone of contention.
• Restrictions on transfer of personal data from the EU to other countries is a barrier for trade in digital services.
•A major point of contention has been the EU’s demand for reduction in India’s tariff rate. Earlier talks did not resolve issues involving trade in agriculture and services, digital trade, intellectual property rights, and commitments on sustainable development issues such as environmental, social, and labour rights.

Can a FTA be agreed upon?
• The president of the European Commission recently agreed to establish a trade and technology council to deliberate on data protection regulations and strengthening digital trade between India and the EU.
• PM Modi’s recent visit to three key EU member countries is expected to further reinvigorate the FTA talks.