Europe experiences periodic bouts of trade skepticism. The current situation is no exception, as the bloc grapples with reshaping its ties with China, reevaluates its climate agenda in response to populist pushback against green policies, and maintains a cautious silence on its free trade ambitions — after all, we wouldn’t want to startle the horses ahead of the European elections, which, much like Christmas, appear to approach sooner with each passing cycle.
This is why analysts in recent weeks have been expressing concern or enthusiasm regarding the perceived shortcomings of this geopolitical commission’s trade policy. The meager achievements in securing free trade agreements (FTAs) over the past four years (Vietnam, New Zealand, and Chile) are under scrutiny. The question looms: could the ongoing free trade negotiations between the European Union (EU) and India be adversely affected by these anti-trade sentiments?
To address this inquiry, it’s crucial to delve into the peculiar evolution of these negotiations. In May 2021, leaders, defying official counsel, opted to revive talks that had commenced in 2007-08 and had been put on hold in 2013. In the years leading up to the restart, officials consistently convened to assess the feasibility of resuming negotiations but consistently deemed the conditions unfavourable. The choice to recommence talks was evidently driven by geopolitical considerations: an early indication of Europe’s pivot toward the Indo-Pacific, an integral component of each region’s post-Covid recovery strategy, and an acknowledgment of the imperative to diversify markets and supply sources.
The relaunch itself resembled what the Duke of Wellington referred to as a ‘close-run thing’ in the context of Waterloo. For a span of 13 months, there was a notable lack of progress. Both sides exchanged accusations of foot-dragging and disinterest. When negotiations finally kicked off in 2022, the initial grandiloquence swiftly transformed into negotiations focusing on familiar challenges from 2013: disputes over agricultural and car tariffs, patent durations, procurement, financial services, and the provision of business visas for Indian entrepreneurs. The ambitious goal of wrapping up negotiations by 2023 quickly turned into a mirage. And, of course, India’s history with FTAs hasn’t been particularly stellar.
Indeed, the skepticism is quite understandable. However, proclaiming the demise of the FTA is premature for two compelling reasons. Firstly, all negotiations, including FTAs, are inherently challenging — easy to initiate but formidable to bring to a conclusion (and determining when to call it quits is perhaps the most daunting decision of all). This holds true for EU-India as it steps into what negotiation theorists term the standard ‘mid-game ‘— delving into the fundamentals of trade, tariffs, and rules, accompanied by the resonant symphony of sleeves being rolled up.
Secondly, both the EU and India are well aware that in today’s unpredictable political landscape, where neither holds an abundance of allies, diversification is imperative. India stands to gain from accessing the stability and magnitude of the EU market for its goods, services, and professionals, while the EU can capitalise on the relatively untapped potential of the Indian market. The EU, having faced setbacks in its trade policy, is in need of a success story with India. These two sides, representing the world’s largest, albeit imperfect, democracies, have the potential to collaborate on an agenda that spans economic and food security, connectivity, human development, and the collective fight against climate change.
For the FTA to thrive, there are at least two essential prerequisites. Initially, India must navigate challenging political decisions, involving the opening of certain procurement channels, welcoming new service sectors, and enhancing access for automobiles, dairy, wines, and industrial goods — despite the backdrop of its ‘Make in India’ mantra. Secondly, the EU must temper its ambitions significantly — reassessing its stance on procurement, easing access to sensitive sectors, and, above all, reevaluating the ‘sustainability’ agenda.
In its endeavour to globalise the aspirations of achieving a net-zero through the ‘Green Deal,’ the EU has presented an extensive sustainability agenda. The expectation is that the influence of 450 million consumers will be a compelling factor for India to join the initiative. This agenda spans health and safety, sustainable food systems, and a dedicated section on sustainable development. It involves a commitment from both parties to adopt and enforce crucial human rights and environmental conventions, incorporating their individual climate commitments.
This runs the risk of burdening the Indian boat. While India is willing to commit to sustainability goals within the flexible framework of G20’s best-endeavor approach, it remains steadfast in avoiding a binding treaty that could lead to sanctions or withdrawal of trade concessions. The EU’s agenda is vulnerable to being portrayed as an encroachment on India’s sovereignty — viewed not only as green protectionism but potentially perceived as regulatory imperialism. As elections approach, India aims to sidestep discussions that could spark a debate on “sustainability with neocolonial undertones.”
The EU has added to its challenges by simultaneously introducing sustainability laws that are applicable to both imports and domestic products. This includes the Carbon Border Adjustment Mechanism, which imposes taxes on imports not covered by greenhouse emission trading schemes, regulations on corporate due diligence throughout the supply chain, a ban on imports linked to forced labour, and a recent regulation prohibiting goods associated with deforestation. Despite good intentions (and often a necessity to address global issues), India perceives this suite of rules as a Trojan horse aimed at leveling the playing field for Europe’s companies and farmers. The concern lies in the face of stringent environmental regulations imposed on European entities, while ‘dirty’ imports remain exempt from such standards.
These measures, at the very least, are perceived as obstacles to market access. What’s the worth of a concession on soya or timber if the product, due to its environmental impact, is rendered unsellable in Europe altogether? It raises the question of giving with one hand and taking away with the other. Hence, we find ourselves teetering on the edge of a deeply paradoxical scenario, where negotiations could falter on an issue where India and the EU not only share fundamental goals but also where their collaboration in an increasingly unstable and divided world is more crucial than ever. Both sides, particularly Europe, must keep the larger geopolitical benefits of an agreement in mind and be willing to adapt.
Drawing from Nobel laureate Amartya Sen’s insights in “The Argumentative Indian,” which explores India’s tradition of dialectics and self-questioning, there’s a call for capacious tolerance for others’ perspectives. To avoid a recurrence of the misunderstandings of 2013, it’s time for Europe to engage in a similar introspection—urgently assessing what is realistically achievable, attempting to view the world through an Indian and Global South lens, and recalibrating its ambitions. Perhaps the moment has arrived for an ‘argumentative European.’
(The writer can be reached at dipaknewslive@gmail.com)
