At EU meet, PM Narendra Modi to pitch for 'early harvest' agreement

Will convey India's position that key differences on trade, investment can be solved earlier

On Wednesday, in his first meeting with the new European Commission President, Ursula von der Leyen, Prime Minister Narendra Modi is expected to pitch for early resumption of trade talks. 

Looking to secure closer ties with the European Union (EU), when both share political and economic concerns over China, the PM will convey India’s position that key differences on trade and investment can be solved at the earliest, through an ‘early harvest’ deal, to be followed up with a full trade pact, senior government officials said.

‘Early harvest’ refers to a trade policy in which both parties sign off on a set of deliverables, in this case an Indian demand that it be granted data secure nation status and the EU’s wish list of lower tariffs on European wine and automobile exports.

The 15th India-EU bilateral summit, the first virtual one, comes four months after it was postponed because of the Covid-19 pandemic sweeping across Brussels, which was the venue. The previous summit, held in New Delhi in October 2017, was followed by strategic silence from both sides as talks on the proposed Broad-based Trade and Investment Agreement (BTIA) stalled. Despite India’s willingness to slash tariffs, the EU remained firm that an investment protection pact will have to go hand in hand with a proposed trade deal.

In December, New Delhi had reached out to the EU to restart talks on the BTIA after pulling out of the proposed Regional Comprehensive Economic Partnership. But European firms in India lobbied hard to push for greater investment protection, a senior EU diplomat said.

On the tariff front, the EU officially continues to demand reduced import duties and wider market access for sectors like alcohol, automobiles and auto components. After maintaining a trade surplus with the bloc for long, exports to Europe fell below imports in 2018-19 after goods from the continent surged. This was reversed last year.

“There had been a major push to restart talks in October 2017, during the 14th India-EU Summit in New Delhi. An offer by India to identify areas for tariff reduction was made then as well but no commitment on investment protection was made,” the diplomat added. 

Back then, European Commission president Jean-Claude Juncker had said after meeting Modi that any discussion would only be held once the terms of engagement had changed.

However, New Delhi remains hopeful that its concessions, especially on alcohol, might sway the bloc. In October, the US administration had imposed 25 per cent duty on European whiskies and wines. Now, it wants to double the tariffs. 

“The pressure on European winemakers is increasing and India has a robust, growing middle class with interest in European products,” a senior government official said.

Investment protection 

After being proposed in 2007, the BTIA saw 16 formal rounds of talks till 2013. But talks received a jolt after India decided to terminate the existing bilateral investment treaties (BITs) with 23 European countries in 2016, the official said. The EU had warned that this would stop investment from its member countries, asking India to keep individual agreements in force till a new pact was signed. However, India has maintained that all future investment pacts will be negotiated under the framework of the model BIT issued by the government in 2015.

However, four years after unilaterally terminating investment pacts in 2016, only six BITs — with Bangladesh, Belarus, Colombia, Taiwan, Kyrgyzstan, and Brazil — have materialised. Since the negotiations are not time-bound, there’s no deadline to conclude ongoing talks with 11 other nations, a senior official from the Department of Economic Affairs said.