India-EU Free Trade Agreement Talks Under Review Amidst Historical Complexities

The recent address by External Affairs Minister S Jaishankar to a European business leaders’ conclave has once again brought attention to the ongoing negotiations between India and the European Union (EU) regarding a potential free trade agreement. These negotiations, which have been underway since 2007, have faced numerous challenges and missed several deadlines over the years, despite various attempts to revitalize them.

Key issues that have hindered progress in the negotiations include Europe’s desire for extensive access to the Indian market and an investment protection treaty to safeguard European investors, contrasted with India’s push for a liberalized Schengen visa regime for its IT and ITeS professionals. However, navigating through these demands is far from straightforward, as both sides must address various complex issues to reach a mutually beneficial agreement.

The Modi government’s approach to trade agreements, which prioritized inward investments and led to a halt in ongoing negotiations initiated during the previous administration, received criticism from major European economies and even from strategic allies like France. The abrupt termination of investment treaties with EU member states in 2016 further strained relations and complicated the negotiations.

While efforts to negotiate an investment treaty have stalled due to differences in legal frameworks, the second tenure of the Modi government has seen renewed efforts to revive the FTA talks. In January 2022, negotiations resumed for the free trade agreement, investment protection, and Geographical Indications (GI) after a hiatus since 2013. Minister Jaishankar emphasized the importance of concluding the free trade agreement with the EU, highlighting India’s projected economic growth and its potential significance as a trading partner. However, the motivations behind India’s eagerness to finalize the agreement extend beyond economic considerations.

Recognizing the shifting geopolitical landscape and the need to counterbalance China’s influence in European markets, both India and Europe see the FTA as a strategic move. However, challenges persist, with differences over individual demands, including visa liberalization, access to sectors like automobiles and agriculture, and the EU’s plans to implement a Carbon Border Adjustment Mechanism.

Despite initiatives like the EU-India Strategic Partnership and the EU-India Trade and Technology Council, tensions persist, and progress remains slow. With the next India-EU Leaders’ Summit postponed until after India’s general elections, scheduled for April-May, and disagreements over additional demands such as energy and climate partnerships, the path forward for the negotiations remains uncertain.

While India expresses keen interest in concluding the trade pact, the EU’s stance reflects a cautious approach, with the option to pivot towards China if necessary. Addressing these challenges will require both parties to engage in constructive dialogue and potentially undertake long-term reforms beyond short-term political considerations.

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