India-EU FTA to be a 'living agreement' with multiple review mechanisms

FTA will boost trade diversification, labour-intensive exports and services while safeguarding sensitivities on both sides, say officials

The free trade deal between India and the European Union (EU) will be a “living agreement”, embedded with mechanisms for multiple reviews and regulator consultations to manage new and sudden challenges. New Delhi believes the deal will send a strong signal to global businesses that India believes in open and fair trade, certainty and rules-based order.

 

The two sides’ negotiators are “cognisant of multifarious objectives placed on trade, dynamic nature of trade, fast-evolving technologies and increasing regulatory complexities,” Indian officials said. “The agreement relies on strong stewardship and trust to deliver gains for both sides.”

 

The foundation of the India-EU trade deal is “our trusted partnership, shared ideals of democracy, respect for human rights, rule of law, which is enhanced by deep people-to-people connect and living bridge of 1.7 million-strong diaspora and 121,000 students,” they said.

 

 

The agreement will leverage the complementarity, scale and diversity of India and the EU, the fourth and second largest economies in the world. The two comprise 25 per cent of the global gross domestic product and more than one-third of global trade. Integrating the two economies will create unprecedented trade and investment opportunities, officials said.

 

As Prime Minister Narendra Modi said on Tuesday morning in his speech at the India Energy Week, the deal will complement the India-UK and India-European Free Trade Association (EFTA) deals. Officials said it would “go a long way in India’s quest for trade diversification and supply chain resilience”.

 

They described the India-EU FTA as a “win-win deal” and commercially meaningful for both partners. The EU is India’s second largest export market after the United States. The FTA is likely to yield substantial net gains for India, particularly in labour-intensive industries such as textiles, clothing, gems and jewellery, leather and footwear that make significant imports but come under high EU tariffs. Modi congratulated India’s youth and all those associated with textiles, gems and jewellery, and leather sectors as the agreement will be beneficial for these sectors, adding that it will boost manufacturing in India and further expand the services sector. India is a large, fast growing market with relatively higher tariffs, giving the EU a significant advantage in relation to its competitors.

 

The deal protects sensitivities of both sides, excluding core agricultural activities, such as dairy, cereals, meat and certain fruits and vegetables.

 

It envisages an “auto-calibrated and carefully crafted auto liberalisation package”, which will not only allow EU automakers to introduce their models in India in higher price bands but also open the possibilities for “Make in India” and exports from India. Indian consumers would benefit from high-tech products and greater competition, official sources pointed out.

 

As for EU’s sensitive and complex regulations in the Carbon Border Adjustment Mechanism, the FTA opens the way for constructive engagement through most favourable treatment, technical dialogue and support from EU to India in future to tackle climate change, officials said.

 

With the services sector being the dominant and fastest growing part of both economies, the agreement has provided for certainty of market access, non-discriminatory treatment, focus on digitally delivered services, ease of mobility, and enabling of social security framework. The entry of Indian talent through students will provide a boost to India’s services exports, officials said.

 

The deal sends a strong signal among global businesses that India believes in openness and fair trade, certainty and rule-based order, said Modi.