Wednesday, 13 July 2011

EU-India Free Trade Agreement Negotiations

EU is India’s largest trading partner, and India ranks ninth on the EU’s list of major trading partners. To enhance trade  EU and India have set in place an institutional framework, such as the Annual EU-India Summit, EU-India Joint Action Plan, various committees and working groups discussing agri policy, trade barriers, market-access etc. EU is also providing technical and financial trade assistance to India- 13.4million Euros were allocated through the Trade and Investment Development Programme to India.

To take this momentum forward, India and EU considered the idea of a Free Trade Agreement. Negotiations on the same, titled India-EU Broad-based Trade and Investment Agreement (BTIA) were started in 2007 and 13 rounds have been held till July 2011. 

The potential of this trade agreement is that it is effectively a multi-lateral trade agreement masquerading as a bilateral one (because EU is a bloc of 27 countries). This pact can also form the basis for bilateral agreements especially in energy and defence.  The Indian Commerce Minister believes the deal could see India-EU trade rise from $72bn in 2010 to $100bn in five years. Similarly the European Union estimates an ambitious deal to open up key sectors of each others’ economies leading to nearly 30% increases in bilateral foreign direct investment.

While the EU is keen to have greater market access to India, especially for a large number of agricultural products and in the government procurement market; India sees the FTA as the key to unlock the services markets in Europe with fewer restrictions on the temporary movement of Indians working in Europe.

In many ways, the EU-India FTA was seen as a complement to the trade liberalization agenda pursued by WTO as a part of the Doha Round of multilateral trade negotiations. However, as the Doha Round started sinking, this bilateral deal became even more important for the two partners. Reflecting this sense of priority, in the EU-India Summit in December 2010 both EU and India pledged political support for concluding the deal at the earliest.

However final agreement is being delayed over issues like data protection for European pharmaceutical firms and the right of Indian rivals to sell generic medicines in third countries, the degree of access to Indian markets for EU financial service companies, and the free movement of professionals. Access to each others’ agricultural sectors has yet to be agreed upon, while the movement of professionals has raised immigration concerns. Of this the ‘data exclusivity’ clause supported by EU has proved to be a major road-block. Data exclusivity would forbid the Indian pharmaceutical industry to use available formulae of already patented products, especially medicines, to manufacture generic, low-cost copies and make them available to patients in developing countries. While EU officials are understood to have pressed it to go further in accepting ‘data exclusivity’ for medicines whose patents have lapsed, Indian medicine manufacturers say it would effectively extend patents and damage public health in poorer countries. However recent statements by Members of European Parliament show some hope that the EU will not press for inclusion of the ‘data exclusivity’ clause.

In the EU India has a trade partner to match its diversity and growth, and the potential for cross-border technology-sharing and market access is staggering. To this end the deal holds great promise for both EU and India.

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