On shaky ground: EU-India trade partnership
INDIA, a rising economic powerhouse, has been actively seeking to expand its trade relations with various regions across the globe. The European Union (EU) stands as one of India’s largest trading partners, representing significant opportunities for economic growth and development. However, despite the potential benefits, India has encountered several challenges in establishing a reliable and sustainable trade relationship with the EU. Kurt Campbell, the National Security Council’s Coordinator for the Indo-Pacific region, stated that India is a close partner and the United States’ most significant bilateral relationship in the twenty-first century, but it is not and will never be America’s ally. This type of statement affects relations between India, the US and the EU.
One of the key challenges for Indian exporters in the EU market is the presence of regulatory barriers and non-tariff measures. The EU maintains stringent product standards, health and safety regulations and technical specifications, which often pose significant hurdles for Indian exporters. These regulations require Indian businesses to invest in costly adjustments to comply with EU standards, affecting their competitiveness in the market. Furthermore, the EU’s non-tariff measures, such as sanitary and phyto-sanitary requirements, technical barriers to trade and intellectual property rights enforcement, create additional challenges for Indian exporters. These measures are sometimes perceived as arbitrary and burdensome, leading to delays, increased costs and trade disruptions.
India and the EU have been engaged in long-standing negotiations for a comprehensive bilateral trade and investment agreement, known as the India-EU Free Trade Agreement (FTA). These negotiations have been ongoing for over a decade with limited progress achieved thus far. The lack of substantial advancement in the negotiations has resulted in uncertainty and frustration for both Indian and EU businesses. The delay in reaching a trade agreement has hindered the establishment of a predictable and stable trade environment between India and the EU. This uncertainty discourages businesses from making long-term investments and hampers the growth of bilateral trade.
India has been the subject of criticism from the EU regarding its intellectual property rights (IPR) regime. The EU has raised concerns about the enforcement of patent rights, copyright infringement and counterfeiting issues in India. These concerns have resulted in disputes and legal battles between Indian and EU companies, creating an atmosphere of uncertainty and distrust. While India has made efforts to strengthen its IPR regime, the lingering concerns of the EU regarding the protection and enforcement of intellectual property rights continue to undermine the trust between the two parties.
Political and geopolitical factors have also played a role in the challenges faced by India in its trade relationship with the EU. The EU’s focus on human rights issues, labour standards and environmental sustainability often becomes an area of contention for Indian policymakers. India, as a developing country with different socio-economic priorities, may perceive some of these requirements as imposing external standards. Furthermore, geopolitical considerations, such as the EU’s changing relationships with other major global powers, can impact India’s trade relations. The EU’s increasing engagement with China and other Southeast Asian nations may divert its attention and resources from nurturing stronger ties with India Trade Imbalances and Competition
Trade imbalances between India and the EU further contribute to the perception of an unreliable trade partner. India has been grappling with a persistent trade deficit with the EU, meaning it imports more goods and services from the EU than it exports. This deficit has widened over the years, causing concerns about the sustainability of the trade relationship. The trade deficit is often attributed to the EU’s competitive advantage in sectors such as machinery, automobiles and chemicals, where Indian industries struggle to compete. This creates a sense of imbalance and dependency, making India more vulnerable in the trade relationship.
The inconsistency in India’s policy and regulatory environment adds to the challenges faced by both Indian and EU businesses. Frequent changes in regulations, taxation policies and trade rules can create uncertainties for businesses and investors. The lack of a stable and predictable environment hampers long-term planning and investment decisions, making it difficult for businesses to establish trust and build sustainable trade partnerships. Moreover, India’s complex bureaucracy and lengthy administrative procedures can hinder trade facilitation and increase transaction costs. The cumbersome processes for obtaining licenses, permits and approvals create barriers to entry for foreign businesses and dampen their enthusiasm for engaging in trade with India.
Infrastructure and logistical deficiencies pose additional hurdles for Indian exporters attempting to access the EU market. Inadequate transportation networks, inefficient customs clearance processes and inadequate storage facilities contribute to delays, increased costs and damaged goods. These challenges make it harder for Indian businesses to meet the demanding delivery schedules and quality requirements of the EU market. India’s journey toward building a reliable trade relationship with the European Union has been marred by various challenges. Regulatory barriers, slow progress in trade negotiations, tariff and market access barriers, intellectual property rights concerns, political and geopolitical factors, trade imbalances, inconsistent policies and infrastructural challenges have all contributed to India’s perception of the EU as an unreliable trade partner.
—The writer is Research Scholar and Academic; PhD in Political Science at the University of Pisa, Italy.
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