India and the European Union (EU) will begin the next round of negotiations for their free trade agreement (FTA) on Monday, aiming to conclude an interim agreement as early as possible.
This follows the announcement last week by the Prime Ministers of India and the UK, who confirmed the conclusion of key elements of the India-UK FTA.
New Delhi and Brussels have agreed to complete the FTA in two stages, with the first phase of the deal expected to be finalised well before the year-end deadline, according to an official. The deadline for the second and final round will remain the year-end.
Buoyed by the completion of negotiations on the full-scale FTA with the UK, India wants to sew up as many trade deals as possible this year. The global uncertainty caused by Trump-era tariffs is also driving the EU and India to complete the deal. The upcoming round of talks, which will be the 11th, will continue until May 16.
The negotiations in tranches will allow faster implementation of trade liberalisation in areas where there are least differences. More contentious issues can be taken up in later phases.
To accelerate the process, commerce and industry minister Piyush Goyal had visited Brussels in the first week of this month where he met his counterpart Maros Sefcovic, commissioner for trade and economic security of the European Commission. The discussions focused on expanding market access and reducing non-tariff barriers (NTBs).
India is also in talks with the US for the first tranche of a Bilateral Trade Agreement (BTA).
A similar strategy has been applied with Australia where both sides promptly concluded an Economic Cooperation and Trade Agreement (ECTA) in 2022. Negotiations are underway to expand this into a broader trade agreement and sign the Comprehensive Economic Cooperation Agreement (CECA).
India and the EU began negotiations on the FTA in June 2022. The agreement spans 23 chapters covering key policy areas such as trade in goods and services, rules of origin, customs, technical barriers to trade, trade remedies and dispute settlements.
The agreement also has to cover areas like government procurement, intellectual property, competition, merger control and subsidies, transparency and good regulatory practices and sustainable food systems which can be taken up later.
In the 10th round for the first time sectoral sessions took place looking at specific industries such as automobiles and medical devices. The issues around tariffs and rules of origin in the industry sectors were also discussed.
India’s key request from the EU is for zero tariffs on labour-intensive exports and greater access to the services market of 27-member grouping. The EU is pushing for India to cut tariffs on cheese and skimmed milk powder, which India currently shields through high duties to protect its domestic dairy industry. Indian officials say that they would be unwilling to provide concessions in dairy in any of the FTAs. Even in the UK FTA dairy has been kept out.
European winemakers are pushing for greater access to the Indian market, where imported wines currently face a 150% tariff. The EU wants India to eliminate or significantly reduce these duties to 30-40% levels. India may like to match what it offered to Australia under the ECTA, where tariffs on Australian wines were slashed to 50% in 10 years, according to a GTRI report.
European car manufacturers want India to cut import duties on completely built-up (CBU) vehicles to 10-20%, down from the current 70%. The EU already exports over $2 billion worth of automobiles and auto parts to India annually, with most arriving in completely knocked-down (CKD) form, which face a 15% tariff when assembled locally.
The EU is an important trading partner for India. Between April and February of the previous financial year, India’s exports to the EU stood at $69 billion, while imports were $54.6 billion.