The proposed India-European Union (EU) broad-based trade and investment agreement (BTIA) is expected to set new standards on issues related to investment, which has emerged as a bone of contention between both sides. While the EU has demanded the chapter on investment be negotiated before the trade deal is signed, India wants to negotiate the matter as part of the agreement, not earlier.
The issue was discussed extensively during a meeting between commerce & industry and textile minister Anand Sharma and EU trade commissioner Karel De Gucht on the sidelines of the India-EU summit in February.
During the meeting, India had proposed to discuss the investment chapter as whole, and not divided between pre-establishment and post-establishment issues. However, EU was insistent on negotiating pre-establishment provisions before the BTIA was through, and then negotiate post-establishment provisions with greater protection measures, as the EU had received a mandate to negotiate investment protection, according to an official involved in the talks.
Apparently, Sharma had told his EU counterpart there were “wide divergences” between both the sides and that India was willing to consider both pre-investment and post-investment issues, including protection clauses, simultaneously, not sequentially.
This issue is significant, especially in the wake of the recent imbroglio surrounding British telecom major Vodafone Plc’s tax case relating to acquisition of stake in Hutchison Whampoa’s Indian mobile business in 2007.
“There have been differences on the investment chapter,” admitted a senior official of the department of commerce.
The problem is expected to worsen, with the finance ministry planning to review all bilateral investment protection agreements (BIPAs) to reduce incidents of arbitration with India by foreign firms.
While India has demanded overseeing the existing BIPAs, the EU wants BIPA-plus provisions, which would give a freehand to EU-based companies to challenge any regulation by the Indian government, if these feel their investment faces a risk.
The EU has also demanded the removal of restrictions on investments for maximum access to Indian markets, in all sectors. On the other hand, according to India’s foreign direct investment norms, there are sectoral caps on foreign investment, coupled with other restrictions. If the EU’s demand is met, it would impact public health and access to medicines, banking, multi-brand retail, telecommunications and aviation.
