As the INTA Standing Rapporteur, I was part of the Workshop EU- India at the Committee on International Trade (INTA), this morning, where I shared my thoughts about the trade relations between both economies.
We have been given comprehensive information on the rationale of boosting EU-Indian trade relations, the current state of play of the negotiations, the possible impact of a trade agreement as well as some ideas for the way forward.
The presentations made clear to me that we are not yet there to bridge the remaining gap for concluding a trade agreement, but there are a lot of mutual benefits, which can be harvested, if we succeed in boosting our trade relations.
Currently, the EU has a positive trade balance in both goods and service. However, if we take a more long-term picture and leave the current imbalances aside, it appears that our trade relations are rather balanced and complementary. The increase in investment flows between the EU and India as well as the technical collaborations between India and the EU are good signs for boosting our trade relations. Of course, currently the EU is far more important for India as a trading partner than vice versa. If India’s economy continues to grow, the relative importance of India for the EU is, however, likely to rise. Concluding the EU-India trade agreement can act as leverage for further growth in India as it can be a strong leverage to reduce poverty.
Trade agreements do matter in this respect. The success story of Bangladesh’s textile sector – thanks to the EU’s “Everything, but arms” initiative – gives us a good example of how preferential access to the EU can lead to developing a global comparative advantage for a specific sector. The presentation by Mr Wymenga seems to confirm that a trade agreement with the EU could provide a strong stimulus for India.
However, with elections in India and in the EU approaching, we are now at a crucial point for reaching an agreement, and the window of opportunity is narrowing very quickly. We have also learnt today that we are not yet there to reach a political agreement. It is now time for India to deliver: The Banking guidelines need to be published – with conditions for foreign banks to become wholly owned subsidiaries in India as close as possible to national treatment. The insurance bill needs to be passed by Parliament – hopefully during the next Winter Session of the Indian Parliament in December – to allow the increase of investments by EU companies in the Indian insurance sector. Furthermore, India must commit at a certain moment in time to providing market access to some key sectors – protected by high tariff duties – such as the automotive sector and wines and spirits. And public procurement can not be left aside, increased market access and transparency needs to be ensured. In this context, I welcome that India is an observer of the revised pluri-lateral “Government Procurement Agreement” likely to enter into force before the end of this year. Last but not least, any agreement must comprise some provisions on sustainable development. The European Parliament believes that such a chapter is first and foremost for the benefit of our trading partner. It allows them to engage in a dialogue on this matter with the EU and learn from our experience. Only a comprehensive agreement can ensure for both sides free and fair trade.
But the EU must also deliver by providing all possible support to India to reform the regulatory framework for data protection to enjoy as quickly as possible data adequacy status. Member States must not be afraid of opening up their labour markets for MODE IV service suppliers from India to allow India to further benefit from its comparative advantage, notably in the IT-service sector. This implies, of course, also the necessary political will on the Indian side to complete this reform process. And we must not forget that a bilateral Free Trade Agreement between the EU and a BRIC country, which qualifies still as a developing country, will be the first of its kind, and, therefore, needs to be tailor-made.
As the benefits in the long-run can be substantial – the European Parliament strongly believes that we should not give up on finding soon an agreement to boost our trade relations. Let me stress that, when I will be travelling to India, in my capacity of the Standing Rapporteur for India, with an INTA Delegation at the end of next month, I will highlight this in the discussions with our interlocutors.