India-EU FTA Negotiations Resume on June 27

The first round of India-EU FTA negotiations is taking place in New Delhi between June 27 and July 1. Talks to reach an investor protection agreement and a geographical indications (GI) agreement will be held in parallel. India and the 27-nation bloc formally resumed negotiations to reach a deal on trade, investments, and GI on June 17.

India and the European Union (EU) restarted their free trade agreement (FTA) talks on Monday, after an almost nine-year gap. The first round of negotiations is taking place in New Delhi between June 27 and July 1, 2022.

EU is India’s second largest trade partner

An FTA would be a big win for New Delhi as the EU is India’s second largest trading partner. India-EU merchandise trade reached US$116.36 billion in 2021-22 as per latest government data, showing a year-on-year growth of 43.5 percent. Moreover, India enjoys a trade surplus with the EU. Indian exports to the EU jumped 57 percent to reach US$65 billion in FY 2021-22. India’s merchandise exports to EU member countries stood at about US$65 billion in 2021-22, while imports aggregated to US$51.4 billion.

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In addition to FTA negotiations, India and EU will also discuss a stand-alone investment protection agreement (IPA) and a geographical indicators (GIs) agreement. The decision was taken during the India and EU Leaders’ Meeting, held at Porto in early May 2021.

All cards are on the table and we are coming with an open heart and an open mind… Agreements do not have to always be about gain or demands, I think agreements also have to be which is good for both negotiating teams and for the people. – Commerce and Industry Minister Piyush Goyal

After an almost decade long pause, efforts were made to resume negotiations to secure a trade deal that is balanced, ambitious, comprehensive, and mutually beneficial. The proposed IPA will provide a legal framework for cross-border investments to enhance investor confidence while the GI pact aims to establish a transparent and predictable regulatory environment and to facilitate trade of GI products, including handicrafts and agricultural commodities.

All three agreements will be negotiated in parallel and concluded simultaneously.

High-level support gives India-EU trade deal much needed momentum

A visit by European Commission President Ursula von der Leyen to New Delhi in April this year was followed by Prime Minister Shri Narendra Modi’s three-country visit to Europe (Denmark, Germany, France) in May. Together, the high-level bilateral and summit interactions have helped accelerate India-EU FTA discussions and define clear goals on the FTA roadmap.

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Previous efforts for an FTA had been frustrated due to differences in the scope and expectations from a trade deal. This included disagreements on custom duties on automobiles and liquor and the movement of professionals.

Now, as the world continues to combat a pandemic and is dealing with outcomes of a sudden Eurasian war, shocks to the global supply chain are becoming more frequent. It is thus likely that such bilateral and multilateral trade deals get pursued more aggressively among key markets – to widen liberal and uninterrupted access to goods and services, with renewed emphasis on fairer and more transparent terms.

For instance, India’s current economic position, targeted investments in developing public infrastructure alongside digital integration, and incentives for export-oriented manufacturing capacity – make it a stronger trade partner to the EU than even a decade prior. Meanwhile Brexit and shifting geopolitical realities have hastened EU interest in the timely culmination of a constructive trade deal.

Sector-wise opportunities under India-EU trade pact

The India-EU FTA could boost market prospects for domestic industries, such as textiles, leather, and sports goods, for export-oriented production targeting the EU market as per the federal commerce and industry minister Piyush Goyal.

We have our teams in place…It will further strengthen our relations. Our bilateral trade has grown significantly in the last few months…There is a significant untapped potential which we will hope to unleash with the execution of these three agreements — trade, investment, and GIs. – Piyush Goyal, India’s Commerce and Industry Minister

Meanwhile, findings from the EU’s statistical body, Eurostat, show that in 2021 India was the tenth largest partner for EU goods exports (1.9 percent) and tenth largest partner for EU goods imports (2.2 percent). That year, Germany led EU states as the largest importer of goods from India and largest exporter of goods to India.

Eurostat notes that in 2021, EU goods exports were dominated by manufactured goods (84 percent) over primary goods (nine percent). Top manufactured goods exports were machinery & vehicles (41 percent), followed by other manufactured goods (27 percent) and chemicals (16 percent). That year, the EU also imported more manufactured goods (86 percent) than primary goods (14 percent). Top most imported manufactured goods were other manufactured goods (47 percent), followed by machinery & vehicles (19 percent) and chemicals (19 percent).

Finally, the EU recorded trade surpluses in machinery & vehicles (€8 billion), other goods (€3 billion), and raw materials (€1 billion). The EU had trade deficits in energy (€2 billion), chemicals (€2 billion), food & drink (€2 billion) and other manufactured goods (€10 billion) (see Eurostat data here).

Additional Reading:

• Updates on India’s FTAs in 2022
• A Look at India-Bavaria Trade and Investment Relations

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