India-EU trade talks fail to bridge gaps; ministerial meet unlikely

In a set back to talks for the long-pending India-European Union (EU) free-trade agreement (FTA), the chief negotiators' meet today failed to bridge "substantial gaps" on crucial issues, including insurance and data security status for the information technology (IT) sector, creating a bleak possibility of a ministerial meet next month.

The two sides began negotiations to iron out differences on various vexed issues from May 13, spearheaded by their chief negotiators who joined them on May 15 to reach a final position on the proposed trade pact.

However, the week-long talks ended with "substantial gaps" after which sources clearly indicating that there might not be a ministerial meet as was scheduled for next month, since the session could not achieve any major deliverables.

People in the know noted that "a sense of urgency" as was witnessed in the previous rounds from the European side was "missing" this time and asserted "both sides failed to achieve any major breakthrough which was expected from this meet as this was treated as the penultimate round".

They also maintained that with "failure" of this round, now the inking of the agreement seems unlikely in the current regime in India, which will be soon poll bound.

While Indian side was led by Additional Secretary in the Commerce Ministry Rajeev Kher, Ignacio Garcia Bercero headed the EU side. Launched in June 2007, the negotiations for the proposed Broadbased Trade and Investment Agreement (BTIA) between India and the 27-nation European bloc has witnessed many hurdles with both sides having major differences on crucial issues.

While on the first day itself, the EU side made it clear that hiking FDI cap to 49 per cent in the insurance sector was must for concluding the negotiations, Indians expressed its inability to do so without an approval from Parliament.

From the Indian side among other issues, granting data secure nation status to it by EU was very crucial as it will have a bearing on Indian IT companies wanting market access. Besides demanding significant duty cuts in automobiles, EU is pressing for tax reduction in wines and spirits and dairy products and a strong intellectual property regime. On the other hand, India wants liberalised visa norms for its professionals, data secure status and market access in services and pharmaceuticals sector.

India is among nations not considered data secure by the EU. The EU law mandates that European countries doing outsourcing business with countries that are not certified as data secure have to follow stringent contractual obligations which increases operating costs and affects competitiveness.

Last month, Commerce and Industry Minister Anand Sharma met his EU counterpart Karel De Gucht in Brussels and had discussed the progress in BTIA. It was agreed their that chief negotiators would remain engaged and a ministerial meeting was scheduled for June.

During the Berlin visit of Prime Minister Manmohan Singh last month, India and Germany had set a target of concluding the talks for India-EU free trade agreement this year.

The hope for concluding the FTA this year was voiced even as German Chancellor Angela Merkel candidly advocated that the two sides were yet to overcome "all the difficulties", while pressing for increase in the foreign equity cap in India's insurance sector and reduction in tariffs on import of automobiles from Europe.

The total trade between India and EU stood at USD 94.43 billion during April-February 2012-13. It had aggregated to USD 109.86 billion in the entire 2011-12 fiscal.