EU heads of state and Indian PM Modi will meet for a virtual summit tomorrow and (likely) relaunch trade negotiations that were suspended in 2013. 1/20

I recently published a book chapter on the history of these negotiations. What lessons can we learn from the past and how likely do I think a trade agreement between EU and India is in the near future? (Spoiler alert: not very) 2/20

The EU and India had formal negotiations for a trade and investment agreement between 2007 and 2013. During this time, the negotiation space narrowed and some key issues were close to resolution (in particular pharmaceuticals and agriculture). 3/20

But a sequence of events threw sand in the gears: 4/20

(1) The 2009 Lisbon Treaty granted co-decision power for the ratification of trade agreements to the European Parliament, which has been quite vocal about the inclusion of labor and environmental clauses, a red line for India. 5/20

(2) Indian industrial policy (in particular the 2006 Automotive Mission Plan) was increasingly at odds with the export interests of key EU member states (in particular German automakers). 6/20

(3) UK domestic politics on immigration quotas for Indian IT professionals (Mode 4 services) and market access demand for Scotch proved contentious. 7/20

(4) The 2014 European and Indian general elections created political uncertainty. Modi’s Atmanirbhar Bharat (self reliance) policies also didn’t instil confidence in EU negotiators that an agreement would be possible. 8/20

(5) Brexit created uncertainties about market access demands and possible concessions. 9/20

For the last couple of years, negotiations have therefore been in limbo. EU negotiators have repeatedly said they would only resume formal trade negotiations if a serious offer were on the table. 10/20

At the same time, India has implemented a number of reforms that the EU had initially asked for (notably insurance liberalization, government procurement, some FDI restrictions) and is currently finalizing a package of regulations for the digital economy. 11/20

Moreover, increased geopolitical frictions between the West and China have become an opportunity for India to tap into global value chains. India left RCEP negotiations in November 2019 and instead started looking for other partners. 12/20

Indian negotiators are asking the EU for an ‘Early Harvest Scheme’. Imo, the EU is unlikely to agree to such demands, as it would lose bargaining power and further stress test GATT Article XXIV (trade agreements have to free substantially all trade). 13/20

So what should we look for in forthcoming negotiations? 14/20

Brexit has made some defensive areas of negotiations easier for the EU (e.g. Mode 4 visas), and removed some market access demands (in particular for Scotch, but also for legal and to some extent financial services). 15/20

The growing geopolitical nexus between the EU and India may make it more likely for political leaders to agree to trade-offs to strengthen relations. Both the EU and India have previously used trade agreements as tools of economic statecraft. 16/20

But they would have to overcome at least two significant hurdles: 17/20

Germany will likely continue to block any agreement that doesn’t include substantial concessions on cars and car parts. 18/20

The EU is doubling down on its trade enforcement agenda, including the projection of EU environmental and labor standards. India’s elite retains a strong post-colonial identity and has quite consistently rejected clauses that impinge on its self-perceived sovereignty. 19/20

If the EU and India are willing to compromise in these areas, there could be a landing zone. But judging from the protracted history of trade negotiations between the EU and India, we should not expect too much too soon. 20/20

For those interested, here is a link to my chapter on the history and background of the negotiations. https://link.springer.com/chapter/10.1007%2F978-3-030-65044-5_8

If you prefer a video, here is a short presentation of the findings:

In the absence of substantial progress in trade negotiations, the EU and India should constructively deepen their economic engagement with a digital economy partnership agreement. Here is a proposal I recently wrote:
https://euindiathinktanks.com/wp-content/uploads/2021/03/EU-India-cooperation-towards-a-Digital-Economy-Partnership-Agreement_A-steppingstone-to-update-the-multilateral-economic-rulebook-for-the-21st-Cen.pdf