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India-EU Still 'Far Apart' on Trade Deal as 'Atmanirbhar Bharat' Seen as 'Protectionist', Say EU Official Sources

FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels, Belgium.

REUTERS/Yves Herman/File Photo

FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels, Belgium. REUTERS/Yves Herman/File Photo

Ahead of the 15th India-EU summit on Wednesday, EU official sources said they believe India is showing a trend of moving towards the protectionist side and they were doubtful of how the "self-reliant India" (Atmanirbhar Bharat) move will play out in a trade relationship.

Seven years after the Free Trade Agreement (FTA) negotiations between India and the world’s largest trading bloc, the European Union, came to a grinding halt, EU official sources have again said that "conditions are not there yet to engage in formal negotiations".

Even as they acknowledged that the trade relationship is "below potential", they said India and the EU are still "far apart" on an FTA.

Ahead of the 15th India-EU summit on Wednesday, EU official sources said they believe India is showing a trend of moving towards the protectionist side and they were doubtful of how the "self-reliant India" (Atmanirbhar Bharat) move will play out in a trade relationship. While ruling out a limited trade deal, they stressed that the EU was looking at a far-reaching free trade agreement that is win-win and the focus shouldn’t be on a "low hanging fruit".

While the EU official sources said they were willing to look at a standalone investment protection agreement as “an early harvest” but India was not open to the idea. Indian government sources had said it is looking at an FTA and investment treaty woven into one. But EU officials said the proposal of a separate investment agreement will be taken up at the summit.

Indian government sources had also indicated that since the new EU leadership assumed office a little over six months ago, the discussions on FTA have been renewed. The matter was being discussed at the highest level in India by the Prime Minister, Commerce and External Affairs ministers, said government sources.

However, EU official sources indicated that India and EU were no closer to convergence. Key differences on tariff related issues, opening up the services sector and procurement market for European companies, remained. But they revealed that a high level dialogue on trade investment will be created to keep he communication going so as to narrow the gaps.

Significantly, only a week ago Foreign Secretary Harshvardhan Shringla had tried to dispel concerns over the call for “Atmanirbhar Bharat”.

He had said that “the call for Atmanirbhar Bharat is not about reverting to economic isolationism. Its essential aim is to ensure India’s position as a key participant in global supply chains. Through building capacities at home, we also intend to contribute to mitigating disruptions in global markets.”

EU is India’s one of the largest regional trading partner while India was the EU’s 9th largest trading partner in 2018-19. India’s overall bilateral trade with European Union for the period 2018-19 was $115.64 billion comprising India’s exports to EU at $57.20 billion. This is 17.33% of India’s exports. Imports of $58.43 billion which is 11.37% of India’s imports, according to the Ministry of Commerce and Industry.

Prime Minister Narendra Modi will be holding a virtual meeting with the Charles Michel, President of the European Counciland Ursula von der Leyen, President of the European Commission. The EU High Representative for Foreign Affairs and Security Policy, Joseph Borrell, will also be participating. The summit had to be postponed in March when Prime Minister Modi was set to travel to Brussels due to the COVID 19 pandemic.

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