UPSC MAINS 2020: Trade talks with EU

Topic : Trade talks with EU

Topic in Syllabus: General Studies Paper 2: International Affairs

Context:

As the economy begins to suffer from the U.S.-China trade war, it is imperative for India to pursue a free trade agreement with the European Union (EU). 

Why EU:

  • Moving beyond the U.S. and China, this is the right time for India to engage the EU.
  •  It as an indispensable democratic partner to craft a favourable geo-economic order. 
  •  India risks being left behind amidst a collapsing global trade architecture, rising protectionism and a new emphasis on bilateral FTAs. 
  • India is the only major power lacking an FTA with any of its top trade partners, including the EU, the U.S., China, and Gulf economies. This is a problem as most trade is now driven either by FTAs or global value chains.
  •  EU’s revived focus on FTAs could exacerbate this risk for India. EU concluded a trade deal with Vietnam and an FTA with the Mercorsur countries in South America. India is hanging on to its Most Favoured Nation (MFN) status.
  • India’s status under the EU’s Generalised Scheme of Preferences (GSP) will face rising competition from Pakistan or Sri Lanka, who enjoy GSP+ benefits.
  •  India will struggle to keep exports competitive for Europe, which is its largest trade partner and where 20% of its exports land up.
  •  Concerns about the Regional Comprehensive Economic Partnership are not resolved yet.
  • The collapse of the Transatlantic Trade and Investment Partnership and concerns about excessive economic reliance on China have propelled the EU to become a little more pragmatic.
  •  EU India a unique regulatory model that balances growth, privacy, and standards. 

Steps Taken:

  • From agriculture to intellectual property, the EU and India have been exchanging and aligning views on many issues. 
  • New areas like e-commerce have seen convergence because India’s position on data privacy is not that different from the EU’s. 
  • India can delay discussions about the free flow of data and freeze differences on the tax moratorium issue or data localisation while committing to liberalise in other areas.

Way Forward:

  • Beyond mere economic cost-benefit analysis, India must approach EU FTA from a geostrategic perspective.
  • EU negotiators are now more willing to make concessions on labour or environmental regulations.
  • India’s governance framework shares the European norms of democratic transparency and multi-stakeholder participation in a variety of new technological domains.

Conclusion:

When New Delhi speaks of Europe as a strategic partner to uphold a multipolar order, it must go beyond security and begin with the business of trade and technology.

 

Sample Question:

Despite issues concerning convergence, the WTO needs to be sustained as an international platform to formulate trade rules and bring convergence on divergent matters. Comment.(250 words)