Trade
What to expect from EU-India Free Trade Agreement?
With the signature of the UAE-India CEPA and Australia-India ECTA in 2022, India attempted to signal the country’s restored interest in trade liberalisation and bilateral trade agreements to global businesses. Accordingly, India launched negotiations with seven countries and sought a review of existing deals with Singapore and ASEAN. However, India’s existing FTAs have yielded limited benefits for the Indian industry. India gained little from eliminating import duties post‐FTAs as most imports already took place at zero or low MFN duties in the partner countries. Moreover, India’s trade deficit with ASEAN rose exponentially from 6.8 $ billion pre-FTA to 20.5$ billion post-FTA.
Hence, despite the resurgence of seemingly regional cooperation, as a way to compensate for RCEP's absence, India's trade policy shows a high degree of protectionism, reflected in its domestic policy. India remains averse to imports and primarily relies on its export-focused domestic policy. India’s FTA strategy continues to foster limited or early harvest deals emptied of ‘big ticket’ issues, which remain narrow and shallow in their coverage and commitments.
Moreover, under the dome of its self-reliance strategy, India aims to become a USD 30 trillion economy with a 25% share in global exports by 2047. Hoping to achieve its ambitious goal of replacing China as the world’s manufacturing hub, India seeks to expand its market access to developed and complementary economies. For instance, India-UAE CEPA brought tariffs down to zero for 90% of Indian exports and immediate relief on import duties on about 65% of tariff lines on imports. Nonetheless, the broad coverage of the agreement nevertheless lacks ambitions, as trade between the two countries is constrained to a few sectors and highly complementary with almost no sensitivities.
India remains reticent to open its market to imports, especially from the agricultural and dairy front, as seen in the agreements concluded with UAE and Australia. In addition, prospects of FTA negotiations as automatically stoke these deep-rooted fears of an overflow of imported products in its domestic markets without reciprocal access, and an adverse impact on the "Make in India" campaign. Ambitious market access commitments on automotive, alcohol or machinery also look challenging given the strong vested interests of domestic industry. On the rules front, India has important sensitivities on issues like IPR, SOEs, TSD etc.
More specifically, India begrudges the EU for introducing non-tariff barriers on agricultural exports in the design of severe sanitary and phytosanitary measures and berating it for environmental and labour commitments such as CBAM and due diligence. India is doubtful about signing trade deals (beyond systemic WTO reasons) with non-trade binding commitments on environment, labour and gender. Non-trade binding commitments are perceived as onerous for the manufacturing industry, nurturing the fear that new trade deals might infringe on India's domestic policy while offering no significant additional market access, contradicting its Self-reliant strategy.
Despite these many constraints, what is abundantly clear is there is a will on the Indian side to reformulate its trade strategy. What is less clear is the extent of political heavy lifting that the government is ready to deploy to reach its objective. The next months will be crucial in giving us insight.
Why is the Geographical Indications Agreement strategic for the EU's trade policy with India?
Recognized as intellectual property, Geographical Indications play an increasingly important role in commercial relations between the EU and third countries. Since 1992, the adoption of the first EU Ecolabel, the European Union never ceases to increase food quality protection. In the European Union, more than 3300 products are covered by quality schemes ensuring the authenticity of products and production. Participating in Eu food heritage global recognition, the Geographical Indication (GI) label protects the reputation of specific products' names. Regional productions, local plant varieties and traditional know-how are preserved by the GI label which reinforces European culinary heritage around the world, as 15 % of EU agricultural exports are GI products.
Combating counterfeit products, ease of product identification, and respect for authenticity, a Geographical Indication (GI) label is a key indicator of food quality and an adding value to EU food products, wines and spirits. More, Geographical Indication (GI) helps consumers by giving information concerning the specific character of the products, origins, given quality and reputation.
Quality labels reflect the diversity of European food and its rich culinary history and heritage. The protected designation of origin (PDO) is reserved for the names of products with the strongest link between their characteristics and their geographical origins. Raw materials and production steps all take place in a specific geographical area, and the final product is determined by these local ingredients and producers’ know-how.
Examples: The Parmigiano Reggiano from Italy, and Marzipan Chocolate from Hungary.
The protected geographical indication (PGI) also links a product to a geographical area, through quality characteristics and/or reputation. PGI registration requires at least one of the production, processing or preparation processes to take place in the specific region. Examples: Champagne from France, Żobrowka Vodka from Poland.
To date, the EU concluded 36 Geographical Indications (GI) agreements with Japan, Singapore, and Canada and is currently negotiating 13 new agreements with Indonesia, Australia and New Zealand. For the EU, the fast-growing Indian market offers great opportunities to develop GI brand recognition trade businesses. For consumers, GIs guarantees origins, quality and authenticity. For importers, GIs offer a superior differentiation in the market allowing a better price and a better added-value.
India and the EU share a longstanding GIs tradition, attaching high importance to local food, maintaining local knowledge and skills as well as preserving and promoting rich cultural heritage. In May 2021, the EU and India agreed to start negotiations on an EU-India Agreement on the Protection of Geographical Indications (GI agreement). Once concluded, the GI agreement shall bring new opportunities for quality products from both regions and enhance the presence, reputation and value of GIs from India and the EU on our respective territories.