Mentioning the India-EU FTA (free trade agreement) to European officials involved in the talks usually elicits a groan and furrowed brow. Complaints of the slow pace of negotiations and the perceived intransigence of Indian negotiators are rife in Brussels. But, the ninth round of negotiations that kicked off at the EU headquarters on Monday are taking place in an atypically optimistic atmosphere.
Speaking at an event in Brussels two weeks ago, James Moran, the European Commission’s Director for Asia, summed up this new hopefulness when, in response to a question about the persistent foot-dragging plaguing the FTA talks, he smiled knowingly and assured the audience that they could expect “some good news” on that front soon.
The smiles on EU trade negotiators lips appeared after the European Commissioner for trade, Karel De Gucht, met with his Indian counterpart, Anand Sharma in Delhi in early March. Sources within the EU say the meeting exceeded expectations. Sharma’s commitment to concluding the negotiations by October of this year, ahead of the next India-EU summit, have been taken as an indication of a “seriousness” on the part of the Indians that was hitherto supposedly lacking. The current round of talks is thus expected to be the last full round of negotiations before a deal is struck. On the core trade issues, some progress has indeed been made. Both sides have exchanged legal texts on the “trade in goods” chapter, where offers and requests have been exchanged.
According to a source on the Indian side, New Delhi and Brussels have agreed to eliminate tariffs on 90 percent of all tradable goods. But, India wants the EU to up their offer to include 95 percent of goods, while the EU wants India to offer a slash in tariffs on 98 percent of goods.
The present round of talks will thus focus on these requests regarding “sensitive items.” The EU is reportedly particularly keen on persuading New Delhi to remove cars, dairy products and wines and spirits from its negative list.
However, neither the trade in goods chapter nor the one on services (where progress has been even slower) is the real bone of contention. It is in fact the non-trade related chapter on “sustainable development” that has emerged as the biggest stumbling block to an agreement.
The EU wants the FTA to include this chapter which will entail a commitment by India to adhere to certain labour laws, environmental standards and other human rights principles. For New Delhi, the inclusion of non-trade issues such as these in an FTA is a red line they are unwilling to cross.
And, while, Parliament in India is extremely unlikely to approve any deal which imposes human rights conditionality to a trade agreement, the European Parliament is extremely unlikely to accept one that doesn’t.
Commission officials privately say the chapter is a “formality” necessary to appease the EU’s parliament and that it would merely be a statement of intent, rather than a legally binding commitment.
The Indian side is chary of such arguments, since there is no guarantee that the EU will in fact not use “human rights” as a trade weapon. The European Parliament has recently been granted greater powers of supervision on trade issues over the Commission, under the recently enacted Lisbon treaty.
Moreover, were India to agree to non-trade issues in a bilateral FTA, it would have implications for its position on similar matters at the multilateral WTO negotiations as well.
Chapters on government procurement and intellectual property rights (the EU is pushing for TRIPS-plus protection) also remain highly contentious.
The manner in which the negotiations proceed this week will determine whether or not the EU belief in Anand Sharma’s ability to deliver on his promises is justified. The odds may be long but the bets are on.
