India threatens to stall trade talks with EU

India has threatened to stall the negotiations on an ambitious free-trade agreement (FTA) with the European Union (EU). At a meeting of the chief negotiators next week, India is expected to give an ultimatum to the 27-nation bloc on recognising it as a 'data-secure' country.

At a meeting between Commerce, Industry and Textiles Minister Anand Sharma and EU Trade Commissioner Karel de Gucht last month, India clearly told EU without greater access into the European market for its professionals, it would "not be able to continue" the talks.

"India has offered the best deal to any partner so far. There is enough on the table from the Indian side in all sectors of EU's interest. Now, it is necessary that ambitions are tempered to ensure early closure of negotiations. Our main demand is greater opening of the EU market for our professionals. If we cannot get that, we will not proceed any further. If they cannot resolve the issue through negotiations now, so be it. We will not be able to proceed further," a senior commerce department official told Business Standard.

India is expected to convey this message "very strongly" to the EU at the meeting of the chief negotiators on May 15. The meeting would be followed by a last-ditch-effort meeting between Sharma and de Gucht in June. "To give meaningful market access to Indian IT (information technology)/ITeS (information technology-enabled services) companies, we need a declaration of data adequacy status from EU. Without this, any market access offered by EU in mode 1, particularly for smaller IT/ITeS companies, is ineffective… Otherwise, what is the point in dragging on the talks?" the official asked.

The deal, talks for which began in 2007, has become a contentious issue for the government. Now, with the Lok Sabha elections due next year, the government isn't likely to take any chances and invite criticism on failure to sign the deal, one that wouldn't even benefit the citizenry, especially the swelling services sector.

According to EU law, European countries doing outsourcing business with countries not certified as data-secure have to follow stringent contractual obligations, which increase operating costs and hit competitiveness. Though almost all Fortune 500 companies have entrusted India with critical data, EU has refused to declare India 'data-secure'. India has repeatedly told EU the existing provisions of Article 43A of the IT Act were adequate to ensure EU citizens' data was secure.

EU had been rigid in granting the coveted status to India, as it felt India lacked adequate data protection laws and incidences of security breach were rampant in India.

During a recent interaction with Indian industry, Joao Cravinho, EU ambassador to India, had said EU wouldn't be able to provide much under the trade pact, as it was a legislative issue. He said the matter would be resolved once India signed the deal with EU. For EU to make the changes and grant data-secure status to India, a meeting of the 27-nation bloc's data protection commissioners has to be convened. This would be followed by a voting process, after which the European parliament would take a decision.

STUMBLING BLOCK

* India threatens to stall talks for having FTA with EU if data-secure status demand not met

* India to give an ultimatum on grant of the status
* It is crucial India secures this status for its professionals to gain greater access to European countries
* Without relaxation on this, India will not gain much from the FTA
* India says it has given the best deal ever to EU
* EU says grant of data-secure status is legislative issue, not possible under trade talks