India and the EU will announce a progress report on the ongoing free trade negotiations this Friday at the 11th EU-India summit in Brussels. Philippe de Buck, secretary general of Business Europe, the most influential EU industry lobby in the region, spoke to Pallavi Aiyar to reflect on the European businesses’ perspective on the potential trade accord. Edited excerpts:
What does European business hope to gain from a free trade agreement with India?
The FTA with India will really be a breakthrough. We (the EU) just signed one with South Korea and that has already been considered a breakthrough, despite the fact that South Korea is a much smaller country. But what we really hope for is a balanced agreement, done on an equal approach. The FTA is not a one-way negotiation. If it is balanced, I tell you the results will be very positive. We have a lot to discuss with India, so the negotiations are complex. But we believe it’s worth doing for both India and the EU. Businesses on both sides would like to expand their possibilities and market access. Indian companies are now becoming real global players, so it’ll be in their interest as much as in our companies’ interest.
Are there any particular industry sectors in Europe that are nervous about the domestic impact of a potential FTA? For example, the auto industry in Europe was not happy with the South Korean agreement.
As long as we don’t have the details of an agreement, everybody is nervous! I can say for sure that the car industry is nervous. For two very real reasons, and we share their concern. Even though the Indian industry is not at the same level as the Korean one, so if we open the market perhaps it will have a smaller impact than the Koreans, but there will be an impact, nonetheless. And over the years the Indian automotive industry will improve in quality. But on the other side there is the 100 per cent or more duty that the European car industry has to pay to enter the Indian market. So there are high barriers in India to an important segment of our exports. There are therefore concerns, not only in cars but in every sector. We don’t have all the details yet about what’s going on in the negotiations. But I’m told that in some products, chemicals for example, 98 per cent will have tariffs eliminated. But for us it’s important to know what’s in the remaining two per cent. This two per cent can be worth much more than just two per cent of the trade in those products.
What are the main obstacles that European businesses face in India?
You have issues of access in terms of tariffs but you also have a long list of non-tariff barriers: on public procurement, on sanitary measures. These can sometimes be more important than the tariffs themselves. On public procurement we really want the European Commission to push for it. I know it’s a complicated matter with all kinds of different public procurements at the federal, state and local levels and there is always resistance to change. In all the FTAs there is resistance because there are vested interests and traditions and so on. But public procurement is an important element of world trade, 25 or 28 per cent of world trade, so it’s not a small thing. An FTA without opening public procurement is an unfinished FTA.
One contentious issue is the chapter on sustainable development, by which the EU wants to bind India to a range of human rights and environmental commitments. India rejects this chapter as inappropriate to a trade agreement. Where does European business stand on this issue?
We believe there are other forums to deal with these important issues (of human rights and environment). For example, on labour conditions, there is the International Labour Organisation and India has accepted many of the ILO’s agreements. Of course you have to implement these well. But we as business subscribe to the idea that the ILO would be the right forum to address labour issues. If you try and mix everything up you never end up with an agreement. That some questions are asked or some references made in an FTA, that’s perfectly understandable. But we would regret it if everything fell apart on this chapter.
How have perceptions of India as an investment destination changed recently?
There are still many problems when it comes to investing in India. Tariffs, non-tariff barriers, the bureaucracy, the infrastructure difficulties. Nevertheless we have seen an increase in (European) investments. I hate to compare two large countries because their history and level of development is different. But when you compare EU investments in India and those in China, India is just a fraction of China’s. What does this show? When EU companies have the possibility to invest they localise, provide local jobs and transfer technology. This is what they have done in China because in China we were welcomed and saw opportunities. We would like to do the same in India now. And the fact is that when large European investors are able to establish a presence in India they are satisfied. In India one factor is that there are very competent domestic companies in the private sector which are strong competitors. But if India continues to grow and the business climate for foreigners is positive an increase in investment is bound to take place. India has advantage compared to the other BRICS (Brazil, Russia and China) in terms of education, skills and language. There are few countries with one billion people. And few countries with a real democracy like India. These are key facts in favour of India’s future.
India is keen to ensure the FTA helps Indian professionals move about with greater ease in Europe. At the moment, the visa restrictions are very onerous. Where does European business stand on this?
We realise that politically this is a sensitive issue but for the business community Mode 4 (of the General Agreement on Trade in Services (GATS) treaty of the WTO which deals with cross-border movement of service professionals) is crucial. We are in favour of it. We want people to be able to move. If you have a business you need personally to be able to come and go easily without cumbersome procedures. And when you are investing as a company people have to be able to stay for a while to make it work. Mode 4 needs to be solved and is one of the conditions to increase trade and investment and that’s the purpose of the FTA.
The EU and India have clashed in recent times over the issue of generic drugs. How are European pharma companies concerned by the FTA?
What is important for us in this issue is not individual cases but IPR (intellectual property rights) in general and in particular from the pharmaceutical industry standpoint. What we want is that IPR is respected and it is a request from European business that this be discussed at length in the FTA.
So you want to see TRIPS-plus provisions in the agreement?
Yes. We already have TRIPS. But the question is, are they well implemented? I suppose my answer depends on what you consider to be TRIPS- plus. There we will pronounce ourselves only once we see in which direction the negotiations go in the end.