The free trade agreement (FTA) between India and the 27-member European Union (EU) would not be signed during the upcoming India-EU summit on February 10. However, talks have reached the final stage and are expected to be concluded by the second half of 2012, says João Cravinho, the European Union's new ambassador to India and head of the EU delegation to India, in an interview with Nayanima Basu. Edited excerpts:
As we enter the fourth year of negotiations for the India-EU FTA, all eyes are on the India-EU summit on February 10. Is anything big expected?
The FTA has gone on longer than we thought. But that is the nature of any negotiation. We had periods of great intensity. In the last couple of months, there had been a tremendous intensity in the talks. A day before the India-EU summit, there would be a meeting between (minister of commerce & industry) Anand Sharma and our trade commissioner, Karel De Gucht. So, things are building up for an important announcement during the summit. Besides taking stock of the progress on the EU-India FTA, many topics would be discussed. We will discuss issues related to the use of renewable energy. We will also clarify positions on trading on emissions and the Iran and West Asia peace process, where both India and the EU are engaged.
You said there would be an important announcement during the summit. Do you mean the FTA would be initiated by both the parties?
There will be no signature on the FTA at the summit. There is too much technical work to be done before we can have a signature. The most important thing is that a political decision on the trade-offs have to be taken. We are hoping there would some movement on the trade-offs when Prime Minister Manmohan Singh meets EU president Herman Van Rompuy and European Commission president Jose Manuel Barroso at the summit. The technical work going on till February 10 would help reach a breakthrough that would enable negotiators to complete work on the FTA by the second half of the year.
Do you mean the talks would be concluded by the second half of 2012?
I think these can be concluded by that time if between now and the summit, there is sufficient flexibility for both sides to arrive at a political formula that would give us a clear overall picture.
There was a formal round of negotiations earlier this month. What are some of the stumbling blocks that both sides still face?
I would not talk of stumbling blocks. We do not have a blind eye in trade negotiations. We have requirements that are more difficult to meet by both the sides. We are embarking on what would be India's most ambitious trade agreement, one that would arguably benefit India the most, but one that would also require flexibility. We know we also have to show flexibility. So, this is a moment when the political leadership takes a call.
But what about the issues concerning India's high tariff on wine and autos, which the EU had been vehemently opposed to? Also, one of India's primary demands in the FTA with EU is greater liberalisation of services trade. What is the position on that?
Yes, there are issues related to wines & spirits and Indian automobiles. India has very, very high tariffs in these areas. In services, there is a different challenge. The important thing about services is it requires give-and-take on both sides. We have to give mobility from the EU's side. There are some political difficulties on this, but these would be overcome. And, the Indian side has to open up its services market. The services package mainly requires greater mobility.
In the purview of the FTA, the EU had been insistent upon including issues concerning sustainable development like climate change and labour laws, which India had been opposed to. Have you been able to sort these issues?
This is not an obstacle. We are not asking for anything India has not already signed up to in other contexts. We believe sustainable development has to be part of the agreement. Trade agreements cannot be signed in isolation. We have to look at the social impact. What we want is the standards we have commonly agreed internationally should be reinstated in the trade agreement. We have not finalised this chapter at all. But I do not think this would be a problem if we find an appropriate solution.
Given the current crisis in the euro zone, would European businesses and industry be keen on supporting the FTA with India?
European companies view trade liberalisation as a favourable opportunity, and protectionism is identified as a major danger. However, countries are being defensive about their economies. Trade agreements give very good signals in this regard. There is great interest on the European side in extending their services. For instance, European companies are looking at running their accountancy firms from India or expanding legal firms in this market. This is a wide-ranging agreement, so numerous sectors are covered.