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Determinants and Impediments of the EU-India Bilateral Trade and Investment Agreement: The Proof of This Old Pudding Is in the Eating

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EU-India Relations

Part of the book series: Contributions to International Relations ((CIR))

Abstract

This chapter traces the origins and the negotiations of the EU-India Bilateral Trade and Investment Agreement (BTIA), which has been under discussion since the mid-2000s. It argues that the exceedingly long duration of the trade talks can be attributed to the European Union’s limited external competences and India’s idiosyncratic trade policy agenda. Unlike the governments of most nation states, the European Union has exclusive competences for international trade, but has struggled in recent years to meaningfully link trade policy with other strategic objectives. India’s drive for regional trade agreements (RTAs) involves a mix of foreign policy objectives and export interests that are largely defined by the government. This chapter examines how these divergent preferences developed and shaped the course of the negotiations for a BTIA between the EU and India. It identifies three distinct phases of negotiations: the inception, during which an outcome seemed within reach (2005–2010), a period during which negotiations ground to a halt and were suspended (2010–2013), and an ongoing limbo phase, during which some progress has been made but compromise is still not within reach (2013–2020). It concludes with an outlook on the implications of greater strategic cooperation between the EU and India for a successful conclusion to the BTIA negotiations.

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Notes

  1. 1.

    For an up to date insight into the bilateral economic relations also see Sangeeta Khorana’s chapter in this volume.

  2. 2.

    See, for example, the Joint Statement from the EU-India Summit on 6 October 2017, which promised to “to re-engage actively towards timely relaunching negotiations [sic] for a comprehensive and mutually beneficial Free Trade Agreement” (European Commission 2017).

  3. 3.

    India had been one of the founding signatories of the General Agreement on Tariffs and Trade (GATT) in 1947. According to the WTO’s Regional Trade Agreements Database, the only other trade agreements India signed under GATT Article XXIV until the late 1990 s were with Bhutan in 1949, Nepal in 1950, the United Nations (UN)-led Asia Pacific Trade Agreement (APTA) in 1975 and the SAARC Preferential Trading Arrangement (SAPTA) in 1993. India was also a signatory of the Global System of Trade Preferences amongst Developing Countries (GSTP) in 1988 under the GATT’s enabling clause. All of these agreements are shallow by contemporary standards and liberalised only a limited number of tariff lines.

  4. 4.

    The India-MERCOSUR agreement only came into force in June 2009.

  5. 5.

    Muchkund Dubey (former Indian Foreign Secretary) in discussion with the author, 27 March 2017.

  6. 6.

    Leela K. Ponappa (former Indian Ambassador to Sri Lanka and Deputy National Security Advisor) in discussion with the author, 21 April 2017.

  7. 7.

    Former advisor to the Indian Prime Minister (de-identified) in discussion with the author, 1 December 2014; BIST-EC was later renamed BIMSTEC and now also includes Myanmar, Nepal and Bhutan.

  8. 8.

    Former member of the Planning Commission (de-identified) in discussion with the author, 27 May 2013.

  9. 9.

    Address by Atal Bihari Vajpayee, Prime Minister of India, Tenth SAARC Summit, Colombo, 29 July 1998.

  10. 10.

    Leela K Ponappa (former Indian High Commissioner to Sri Lanka and Deputy National Security Advisor) in discussion with the author, 21 April 2017.

  11. 11.

    In July 1998, all members of SAARC, except for Pakistan and Sri Lanka, were classified as Least Developed Countries (LDCs) by the United Nations.

  12. 12.

    Former Indian High Commissioner to Sri Lanka (de-identified) in discussion with the author, 13 November 2015.

  13. 13.

    SAFTA entered into force in 2006.

  14. 14.

    India later successfully campaigned to include Afghanistan in SAARC and SAFTA.

  15. 15.

    South Africa had been seeking trade agreements with India (and other large developing countries) as early as February 2000, amidst rumours that this would serve as a negotiating device to create outside options and therefore leverage during negotiations for a trade agreement with the European Union, and also for multilateral trade negotiations (Reuters 2000; The Hindu 2000).

  16. 16.

    In the case of SACU, tentative discussions started with South Africa in July 2001 and were only later expanded to include other SACU members; former Ambassador of India to the WTO (de-identified) in discussion with the author, 10 December 2014.

  17. 17.

    Former member of the Indian Planning Commission (de-identified) in discussion with the author, 27 May 2013.

  18. 18.

    Nagesh Kumar (former Director-General of RIS) in discussion with the author, 5 December 2014.

  19. 19.

    Former Indian Minister of External Affairs (de-identified) in discussion with the author, 10 September 2015.

  20. 20.

    Keynote Address by Goh Chok Tong at the Singapore Conference, London, 15 March 2005, https://www.mci.gov.sg/pressroom/news-and-stories/pressroom/2005/3/singapore-is-the-global-city-of-opportunity?page=206; for ASEAN counterbalancing strategies cf. Storey (2000).

  21. 21.

    Former Ambassador of India to the WTO (de-identified) in discussion with the author, 10 December 2014.

  22. 22.

    The exception to this is the Confederation of Indian Industry (CII), which was an early advocate of bilateral trade agreements for market access, in particular for textiles (Press Trust of India 2002; The Hindu Business Line 2002).

  23. 23.

    Although the EU did not enter into any new RTAs between 1999 and 2007, it did conclude bilateral negotiations that were started before the moratorium with Mexico (July 2000), South Africa (January 2000), the Caribbean Forum (CARIFORUM) (2003), Tunisia (1998), Morocco (2000), Israel (2000), Jordan (2002), Lebanon (2003), Egypt (2004), and Algeria (2005).

  24. 24.

    The Global Europe Strategy emerged at least in part due to a political pressure campaign from business groups, in particular by the European business association Union des Industries de la Communauté Européenne (UNICE) and the European Services Forum (ESF) (cf. Corporate Europe Observatory 2008).

  25. 25.

    Even though the 2006 suspension of the multilateral Doha Round was mostly due to disagreements between the United States and India, the EU and India had in prior years frequently found themselves on opposite sides in multilateral negotiations, including on environmental and labour standards in trade, the so-called Singapore issues, agricultural subsidies, NAMA and TRIPS. Any bilateral negotiation on these issues would therefore be difficult from the outset.

  26. 26.

    Report of the EU-India High Level Trade Group to the EU-India Summit, 13 October 2006; the European Parliament during this time also voiced its support for a bilateral trade agreement (Financial Times 2006b).

  27. 27.

    This was behind the dismissal by key economic policy makers of a 2000 proposal by the Confederation of Indian Industry for a bilateral trade agreement between the EU and India (Press Trust of India 2000; The Hindu Business Line 2004).

  28. 28.

    The World Bank warned in December 2004 that India had a ‘penetrating interest’ for exports in business process outsourcing, services, textile and auto components, for which market access could best be achieved in multilateral negotiations (Press Trust of India 2004b).

  29. 29.

    The intra-industry trade for precious stones and gems is mostly related to cross-border value chains in jewellery manufacturing. This also corresponds to a September 2005 survey by the industry body ASSOCHAM, which found interest for an FTA with the EU from the Business Process Outsourcing and IT Industry, as well as amongst biotechnology and pharmaceutical firms (The Hindu Business Line 2005).

  30. 30.

    60–70% of Indian textile exports at this point were to the EU and US, and in the EU these faced duties from 4.5 to 13% (The Hindu Business Line 2007a; The Hindu 2007b).

  31. 31.

    Former Head of International Trade Policy at the Confederation of Indian Industry (de-identified) in discussion with the author, 9 December 2014.

  32. 32.

    This corresponds to the EU’s interpretation of the GATT requirement that RTAs free ‘substantially all trade’.

  33. 33.

    Report of the EU-India High Level Trade Group to the EU-India Summit, 13 October 2006, p. 8.

  34. 34.

    Ibid., p. 9.

  35. 35.

    As would soon become evident, whisky producers play an important role in the political economy of the UK. They are not only the third biggest industry in Scotland (behind energy and financial services), but are especially important for rural areas and would thus become a core UK demand for market access in the negotiations (The Guardian 2015).

  36. 36.

    Former Indian Minister of Commerce and Industry (de-identified) in discussion with the author, 3 September 2015.

  37. 37.

    Later in the year Patel also indicated willingness for concessions on luxury cars in exchange for market access for the export of small Indian cars to the EU (Press Trust of India 2012d).

  38. 38.

    The insurance bill was passed in 2015.

  39. 39.

    The ability to bid for public procurement remained a major prize for European companies, as it would allow them participation in India’s annual procurement market of USD 160 billion, in particular for the telecom, railways, energy, roads, industry and health sectors (with exceptions for national security and public order) (The Hindu Business Line 2013d).

  40. 40.

    While the ban was initially announced to last until December 2015, it was lifted in January 2015.

  41. 41.

    European Court of Justice Opinion 2/15 of the Court.

  42. 42.

    EU negotiator (de-identified) in discussion with the author, 13 March 2020.

  43. 43.

    Regarding scenarios for the future of EU-India cooperation, see Stefania Benaglia’s contribution in this volume.

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Köhler-Suzuki, N. (2021). Determinants and Impediments of the EU-India Bilateral Trade and Investment Agreement: The Proof of This Old Pudding Is in the Eating. In: Gieg, P., Lowinger, T., Pietzko, M., Zürn, A., Bava, U.S., Müller-Brandeck-Bocquet, G. (eds) EU-India Relations. Contributions to International Relations. Springer, Cham. https://doi.org/10.1007/978-3-030-65044-5_8

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