Political hurdles may dampen EU-India FTA talks

Political differences between India and the European Union (EU) over non-trade issues are emerging as a major dampener in the negotiations to clinch a free trade agreement (FTA) by October.

The talks are set to enter the most crucial phase, where the two sides negotiate market access for goods, duty elimination and government procurement.

According to Indian officials, both the sides have had "fruitful consultations" regarding elimination of tariffs on 90-95 per cent of goods, but the EU's insistence on including non-trade issues, such as child labour, labour laws and climate change, in the trade pact are coming in the way of concluding an agreement.

The European side, however, views these issues as important for having a comprehensive approach. "The European citizens are now saying, through their leaders, that liberalisation of trade should bring full-fledged benefit in terms of employment, security, better environment and also values. You can call this a comprehensive approach to trade liberalisation. Some call this unfair protectionism," Jean-Joseph Boillot, co-chairman, Euro-India Economic and Business Group (EIEBG) told Business Standard.

A series of meetings concerning non-tariff measures, sanitary and phytosanitary measures (SPS), which are aimed at protecting human and plant health, and technical barriers to trade (TBT), are going on both in Brussels and New Delhi.

However, the main negotiations on non-tariff barriers (NTB), market access, tariff lines (both agricultural and non-agricultural products), sensitive items and reduction in high tariffs and government procurement would be held from April 28 to April 30 in Brussels between chief negotiators from the two sides.

According to Boillot, some emerging countries are largely benefiting from the trade openness and gaining in terms of growth beyond 9-10 per cent, whereas their own markets remain under heavy protection, using non-tariff barriers and labour, as well as environmental norms, as unfair elements in the competition.

He added India could not continue to behave like it did in the 1980s, before liberalisation, and argue it was a poor country deserving asymmetrical treatment while opening up its markets. He also said China and India would have to "offer more now to continue to get free trade and investment."

Last month, visiting EU Trade Commissioner Karel De Gucht had said it would be difficult for them to make the European Parliament agree to a deal that remained silent on issues like human rights, labour regulations, child labour laws and environmental protection and would work out an alternative method by putting them in the agreement in a different language.

However, India's commerce and industry ministry has refused to go ahead with the deal if such clauses are made part of the agreement. This has also resulted in slowing down of the talks. But Commerce and Industry Minister Anand Sharma has committed that the negotiations would be concluded in the next India-EU Summit in October this year in Brussels.

The EU had even taken into consideration the non-trade clauses while negotiating bilateral trade deals with Korea and Latin America. According to officials in the EU Secretariat, the negotiators are actively engaged in putting the clauses in a language that would be mutually acceptable to both the parties -- an effort to promote trade that addresses "societal values for sustainable development".

"Even though some of the crucial economic issues still remain, for which negotiations are going on, political hurdles would emerge as the main stumbling block eventually. The EU had been saying for a while now that they would look at including those clauses by tweaking the language. It would have larger implication at the multilateral trade forum if India agreed to them," said Pradeep S Mehta of Consumer Unity and Trust Society (CUTS).