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EU-India Relations: Obstacles to FTA and
deep economic cooperation
-Deepak Raj Pandaya
Research Question
 Why despite being strategic partners and
almost a decade long trade negotiation
India and EU don’t have enhanced
economic cooperation and trade deal?
State of Art
 The European Union pushed to transform its relation
with India in 2004 by establishing a Strategic Partnership.
 The economic structure of the European Union has
changed in the last three to four decades. The
manufacturing component has gone down, there has
been a substantial increase in knowledge based
economy.
 The rejuvenated relation which began after the end of
Cold War got accentuated further by signing of the Joint
Action Plan (JAP) in 2005. It was taken forward by
launching negotiations for a broad based free trade
agreement in 2007 with aim to conclude in 2011.
Factors restraining deeper trade engagement
and FTA?
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

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Strong Interest Groups
Indian Westphalian Realist View of State
Strong Bilateral relations with member states
Different Governance mechanism
Level of economic development and trade volume
Role of Interest Groups
 Trade policies have always had an element of import and
export protection.
 Interest groups in order to secure their welfare try to
influence the government to buy protection and
government seek to maximization of aggregated welfare.
 There is continuous process of formulation and
fulfillment changes over a period of time and the
demand formulation becomes very heterogeneous being
highly influenced from export or import industries or
market forces to favour more protection or free trade.
 Agriculture, Pharma, Automobiles and service industry
are are few of strong interest groups.
 Indian interest groups not as organized as EU but
together with NGO’s and opposition political forces play
crucial role.
Critical issues of trade agreement of 4 sectors
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Liberalization of Trade in services
Automobile tariffs
Agricultural Subsidy and Dairy
Pharmaceutical and Intellectual Property
Protection
Liberalization of Trade in services
 EU & India service economies with highest
contribution to their GDP.
 India has edge over trade in services with young
demography and IT competence and so pushing
for further liberalization.
 Key Challenges are for
 Harmonization of Service markets
 Indian demand for data secure nation status
 India’s rigidity to implement ILO conventions
on minimum labour standards
Automobile Tariffs
 EU & India are established automobile
manufacturers in their own segment.
 Industries from both sides have completely
different opinion about industry inclusion in FTA.
 Indian Industry wants automobile in negative
list of FTA as it is of view that India has
production capacity to meet growing demand
and European automobiles will negate make
in India policy
 EU eyes in growing demand for premium and
budget automobiles through tariff reductions.
Agricultural Subsidy and Dairy
 Indian strong defensive interest in agriculture
due to high population dependence-The
defensive
policy
unlikely
to
change
fundamentally
 EU dairy & agro sector is highly subsidized
making impossible for India to compete.
 Even in Doha round India is seeking for indefinite
extension of peace clause
Pharmaceutical and Intellectual Property Protection
 India not always recognize the international
patent rules and has competitive pharma sector.
 The basic argument to it is to provide access of
medicines to its own and developing countries
population.
 Largest supplier of drugs to aid organisations.
Indian Westphalian Realist View of State.
 Westphalian realist view is dominant for India is because
of its geopolitical realities.
 Neo-liberalists argue that with end of cold war and
bipolarity states are no longer polarized with geopolitical
lines, trade and technology is centre of international
politics but this has mixed realities in Indian case.
 EU as a collective entity has less to offer India versa in
terms of defense and military cooperation which is
considered as more important by India.
Strong Bilateral relations with member states
 The 28 member block is of lesser significance as a whole
only countries of Germany, Belgium, France, UK and Italy
account for most of trade volume, investment and
technological transfer.
 Colonial legacy/ Failed regional integration
 A strong bilateral relation is because the area of
convergence and cooperation is just evolving in
multilateral and bilateral arena.
 Indian initial concerns and reservations with the foreign
policy statement of EU at the United Nations. It
considered as statement (only a prior discussed paper
with member states) but not a foreign policy document
of union.
Different Governance mechanism
 Modern India discomfort to deal with post modern
Europe. India’s emphasis on territorial integrity,
sovereignty and strong unitary government. EUpostmodern
state
with
degree
of
mutual
interdependence and interference in each other’s
domestic and international affairs.
 EU is political union for collective governance where part
of sovereign powers handed to a bureaucracy. India is a
federal country with 29 states governed by elected
government and parliament.
 Matters of foreign policy and foreign trade are exclusive
competence of Indian central government where as in
the federation of EU member states and the union have
shared competence. Multiple ministries of diverse
opinion involved directly in trade negotiations in India.
Level of economic development and trade
volume
 The trade volumes between the two regions depend on
many factors of economic size, resistance for bilateral
trade (Geography, interests etc), level of infrastructural
development, disposable income of individuals and
governments, political institutions, form of governance
and economic performance of regions
 Higher the economic and trade concentration, higher is
the chances to enter into trade agreements.
Thank You