EU toughens stance on FTA, India could miss the boat

european unionAfter nearly three years of negotiations, Indian & The European Union (EU) hopes of concluding a Free Trade Agreement by the close of this year are fading fast.

It is thought unlikely that Delhi & Brussels can hammer out any meaningful resolutions before the EU-India Summit next month.

The talks have historically been bogged down over a number of issues; for example Europe wants India to sign up to stringent food safety criteria, which Delhi is reluctant to enforce on it’s own producers & also wants India to relax rules on foreign investment & ownership in Indian companies.

Additionally, India has made great efforts to ring fence government procurement including public utilities at state, provincial & local government level as it seeks to onshore these areas for Indian service companies. At the same time, India is also trying to get Europe to relax it’s Schengen controls with regards to Indian nationals seeking employment across the 27 member states, as Europe has it’s own issues regards catering to emigration from new member states to more develpoed countries, it obviously wants to keep this issue at arms length.

None of this wrangling has been helped by the financial crisis, expecially from a European point of view, whilst India has also been distracted as it attempts to jockey for position with China on a global scale, whilst on a domestic level social movements, including fishermen & labor unions, are building up strong campaigns against the Free Trade Agreement.

What should not be ignored is that India is being forced to again become more competitive in global markets if it wisheds to continue it’s economic growth plans. Plenty of other Asian economies are looking to Europe as destinations for products & export markets, not just China. Another area of contention that has not yet received any significant attention from Delhi is sustainable developmentclimate change issues raised by members of the European Parliament, who in turn, are being pressured by environmental groups across the Union.

The bottom line is that the EU is India’s largest trading partner, accounting for approximately €77 billion in trade in goods & services in 2008, whereas India is ranked tenth in the list of EU’s main trading partners. Understandably the EU is concerned at India’s attempts to force what is effectively one way economic traffic further. The danger for India is that it’s near neighbours in SE Asia including Korea, Taiwan & emerging tigers Malysia, Indonesia & Vietnam will get a head start.

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