Brussels, 26/02/2013 (Agence Europe) - A long way from the media attention given to talks with North America, the EU/India free-trade negotiations are continuing quietly.
Apart from the recent favourable call made by the French President François Hollande, on a visit to New Delhi in early February, and the European commitment reaffirmed by High Representative Catherine Ashton, receiving the Indian foreign minister, Salman Khurshid, in Brussels in late January, the EU has appeared very discreet, since summer 2012, about the free-trade negotiations with India, which have been underway since 2007.
After clear progress in autumn 2011, giving rise to hopes of the possibility of an agreement in 2012, talks have continued at a much less rapid pace since then. Nonetheless, the signs are that both sides are quietly working towards a final package. Because, despite relative silence at political level - the last meeting between Commissioner Karel De Gucht and his Indian opposite number Anand Sharma took place as long ago as June 2012 - the negotiations are progressing at a technical level, a Commission source assured us. Intense discussions are planned for the spring, a Community source close to the matter stated last week. Both sides would like to make as much progress as possible in 2013, ahead of the Indian general elections in 2014.
In its adoption of an ambitious raft of reforms in late 2012, India has given every reason to hope for progress in its free-trade negotiations with the EU in the coming months. The reform of the distribution sector, which was postponed in 2011 but has now been adopted, confirms New Delhi's wish to attract foreign investment to a high-potential market, which has been put at 450 billion dollars. India has also given its go-ahead to opening up its civil aviation sector and its airline companies to foreign investment. Its banking sector, which is dominated by the state-owned banks, does not escape the process either. The Indian parliament has approved a law opening the road to raising the ceiling for foreign capital, paving the way for more foreign subsidiaries to be established in the country.
The services sector is the “key component” of the talks, the Commission says. The EU wants, in particular, to obtain a good deal in the retail trade, insurance and banking services sectors. India has already taken firm steps forward in the first two sectors and must now pursue its efforts in the banking sector. A source familiar with the matter has said that “India's ability to finalise its reform in the banking sector is a crucial element”. On India's side, there are the active interests of its information technology industry, with qualified expertise in this field. It is now waiting for the EU to raise its 20% threshold in the safeguard clause introduced under “mode-4” of GATS (General Agreement on the Trade in Services), relating to the free movement of Indian professional people as part of a less strict visa scheme. “If India makes headway on reform, we are confident that we shall be able to make a mode-4 offer that will meet with its satisfaction”, the source said.
The EU and India must also settle other issues that are no less sensitive, for example the motor industry, for passenger cars as well as car parts. And also for wines and spirits, for which the EU wants maximum reduction in the imposing local and national Indian taxes. Then there are the public procurement markets, which are relatively open at the Indian central level but totally closed at the level of the states of the federation and local authorities. On this last chapter, the stakes are enormous, since public contracts represent 15-20% of India's GDP. Finally, the parties involved are still negotiating a clause pertaining to sustainable development.
Both the European and Indian sides hope to give impetus to a trading relationship which was worth €80 billion in goods trade in 2011 (€40.4 billion in exports for the EU, €39.4 billion for India) and €20.4 billion for services. Foreign investment flows exceeded €40 billion in 2010 (of which nearly €35 billion FDI in India). The EU/India bilateral investment trade agreement (BITA) aims to liberalise the trade in goods with an asymmetrical reduction of customs duties on 91-92% of European products compared with 95% of Indian products. (EH/transl.fl/jl)