India-European Union Relationship

IN NEWS:

The European Union (EU) is set to push for a closer relationship and stronger presence in the Indo-Pacific, as released in the EU Strategy for Cooperation in the Indo-Pacific.

EUROPEAN UNION:

• After World War II, European leaders realized that drastic changes needed to be made to avoid further armed conflicts. Thus, the European Union, formerly known as the European Community (EC), was formed in the 1950s.
• The EU and European citizenship were established when the Maastricht Treaty came into force in 1993. Later in 2009, several organizational changes were brought forth through the Treaty of Lisbon.
• Subsidiarity is a founding principle of the EU. Member states must agree unanimously for the EU to adopt policies concerning defense and foreign policy.
• Unlike members of most international organizations, the member states of the EU are subjected to binding laws.
• Today, the EU is a political and economic union of 27 member states with its headquarters is located at Brussels, Belgium.

• Some of the group’s major successes are:
  • Developed an internal single market
  • A monetary union called Eurozone, composed of 19 EU member states which use the euro currency
  • No passport control for travel within the Schengen Area
  • Creation of General Data Protection Regulation (GDPR) to protect the data privacy of individuals and address export of data outside EU

ORGANIZATIONAL STRUCTURE:

• The main institutions that administer the EU are the European Parliament, the European Council, the Council, the European Commission, the Court of Justice of the European Union the European Central Bank and the Court of Auditors.

INDIA-EU HISTORY:

• India was the first developing country to establish diplomatic relations with European community in 1962.
• Relations between India and the European Union are currently defined by the 1994 EU-India Cooperation Agreement.
• Since 2004, India and EU are Strategic partners and hold high level summits from time to time.
• A Joint Action Plan was adopted in 2005 and it provided for strengthening dialogue and consultation mechanisms in the political and economic spheres and bringing peoples and cultures together
• India and the EU have been working on a Broad-based Trade and Investment Agreement (BTIA) since 2007. However, talks over it have been suspended since 2013.

SPHERES OF COOPERATION:

India-EU cooperation spans over 30 dialogue mechanisms, covering foreign policy, security, trade, investment and sustainable development among others.

• Political:
  • India and the EU interact regularly through annual summits and meetings at ministerial and diplomatic levels.
  • Eg: The India-EU virtual meeting focused on expanding overall cooperation in areas of trade, investment and connectivity was held n May 2021 and was attended by Prime Minister Narendra Modi and his European counterparts.
• Bilateral trade:
  • The EU is India's third largest trading partner, accounting 11.1% of total Indian trade, after China (12%) and the US (11.7%). India is the EU's 10th trading partner, accounting for 1.8% of EU total trade in goods in 2020.
• Investment:
  • EU foreign direct investment stocks in India amounted to €75.8 billion Euro in 2019. Some 6,000 European companies are present in India, providing directly 1.7 million jobs and indirectly 5 million jobs in a broad range of sectors.
• Technological collaborations:
  • India’s ISRO and the EU’s European space agency have cooperated in various space activities.
  • Eg: An ISRO-ESA Arrangement concerning network and operations Cross-support which will enable use of ground station to support each other’s spacecraft missions, was signed recently.
• Environment and climate change:
  • Both regions have underlined their commitment to the Paris climate accord and the UNFCCC despite USA’s withdrawal.
  • EU - India Clean Energy and Climate Partnership to promote access to and disseminate clean energy and climate friendly technologies and encourage research and development
  • EU is a close partner in initiatives like the Clean Ganga initiative and International Solar alliance (ISA).
  • Both parties have adopted a joint declaration on enhancing resource efficiency and moving towards a more circular economic model in 2017.
• Research and innovation:
  • India is participating in research and innovation funding program 'Horizon 2020'. Through this program, individual scientists can receive grants from the European Research Council.
  • India also partners with EU in International Thermonuclear Experimental Reactor (ITER project) which aims demonstrate the scientific viability of fusion as a future sustainable energy source.
• Security and strategic:
  • To a large extend, strategic cooperation is limited. However, Summits, ministerial-level meetings and regular foreign policy and security consultations are held. They deal on matters such as counterterrorism, counter-piracy, cyber-security, and non-proliferation/disarmament.
  • EU-India Cyber Security Dialogue has been set up to facilitate exchange of best practice on addressing cybercrime and strengthening cyber security and resilience.
• Socio-cultural:
  • Both parties have signed a Joint Declaration on Culture in 2010, committing to preserve and promote cultural diversity, as well as promote genuine intercultural dialogue.
  • Every year, almost 50,000 students from India travel to 4,000 European universities.

AREAS OF MUTUAL INTEREST:

• Multipolar global governance:
  • Faced with increased instability in world affairs, the EU and India have remained staunch defenders of a rules-based global order centered on effective multilateral institutions such as UN and WTO.

• Climate action:
  • Both regions are strong advocates of sustainable development and supporters of climate change. Both have underlined their commitment to the Paris climate accord and the UNFCCC despite USA’s withdrawal. They have also committed towards promoting clean energy, resource efficiency and circular economy.
• Relationship with China:
  • EU has begun raising its voice against China’s aggressive actions on the Line of Actual Control with India and its assertive approach to the security and stability of digital networks. This supports India’s stand towards China in recent times.
• Post-pandemic actions:
  • India and EU have emphasized the importance of strengthening preparedness and response capacities, of sharing information and of improving international response, drawing on lessons learned from the current global responses.
• Labour force:
  • There is a skills shortage in the EU labour market and India offers a growing talent-pool of highly-skilled workers. Hence, cooperation in movement of human capital can benefit both parties.

• Iran’s future:
  • The European Union had reaffirmed their commitments to the Joint Comprehensive Plan of Action (JCPOA). This surety is vital for India to ensure that her interests with Iran are safeguarded even if the USA imposes further sanctions.

• New and emerging threats:
  • Both parties are victims of emerging threats such as terrorism, piracy and cyber-attacks and seek active cooperation towards combating them.
• Strategic interests over Afghan:
  • The re-emergence of Taliban threatens the strategic interest of both parties over Afghanistan.
  • Eg: The oppressive regime could increase radicalism and the flow of refugees to Europe, and also pose a threat to India national security.

CHALLENGES TO BETTER RELATIONSHIP:

• Criticism over Political matters:
  • The abrogation of Article 370 and the subsequent imposition of a communications blackout in Jammu and Kashmir, the passage of the Citizenship Amendment Act (2019), and the institution of the National Register for Citizens (NRC) have garnered significant criticism from the European Union.
• AUKUS partnership:
  • AUKUS is a new strategic defence alliance between Australia, the UK and US, initially to build a class of nuclear-propelled submarines, but also to work together in the Indo-Pacific region. While it is seen as an effort to counter China, it also undermines India’s role in the Indian ocean region.
• Impact of GDPR:
  • Europe is a significant market for Indian service sector companies. But the high compliance cost and lack of data secure status for India would be a challenge for firms and startups to become GDPR compliant.
• Ease of doing business:
  • European investors have repeatedly complained about India’s Intellectual property regime, fragmented labour legislations and complex taxation regimes. These factors, coupled with the lack of investor protection measures, has increased the risks of investing in India.  
• Protectionist policies:
  • India had, in recent times, exhibited a protectionist streak–raising tariffs, speaking of self-reliance and reducing procurement opportunities for foreign firms. This has not gone well with European investors.
• Relationship with Russia:
  • India has a longstanding relationship with Russia. However, the EU has been isolating Russia for the annexation of Crimea and destabilization of eastern Ukraine. Hence, it will be a diplomatic challenge for India to keep close relations with both the parties.
• Brexit:
  • The impact that Brexit can have on European Union and India is not clear yet. While trade relations between India and the EU have been strong historically, Brexit may adversely affect this status quo.
• Influence of China:
  • Though there have been increasing criticisms of China, noticeably over the coronavirus pandemic, the EU is not ready to really upset China as it is an important partner of the EU and carries much more weight than India across all aspects of its relationship with the EU.

BILATERAL TRADE AND INVESTMENT AGREEMENT (BTIA):

Bilateral Trade and Investment Agreement is a Free Trade Agreement between India and EU, which was initiated in 2007. Despite a decade in talks, the agreement has been in deadlock.

The contentious issues for India are:

• Data secure status: India has not been granted “data secure nation” status by EU. If the EU provides India with the status, it will lift restrictions on the flow of outsourcing business to India.
• U.K. visa rules discriminate against Indian technical professionals, making it difficult for them to acquire work visas.
• Barriers to trade: EU has imposed stringent non-tariff barriers on Indian agricultural products in the form of sanitary and phytosanitary measures. EU has also imposed a ban on sale of several pharmaceutical products even though they were clinically tested.
• Bilateral Investment Agreements: India decided to lapse the most BITs with EU member states, whereas EU wanted India to continue the existing treaty until EU India FTA is signed.
• Free access for textile industry: Apparel exports from competing countries such as Vietnam enjoy zero/preferential access to European Union whereas India faces a duty disadvantage. Hence, India has been seeking free access for its textile sector.

The contentious issues for EU are:

• Demand for further liberalization: EU has demanded greater market access for automobiles, wine and spirits, and further opening up of the financial services sector such as banking, insurance and e-commerce., with less duty interference.
• Tax reduction: The EU wants India to reduce taxes on liquor (which would benefit France) and automobiles (which would benefit Germany)
• Investor-State Dispute Settlement (ISDS): India’s ISDS mechanism is such that in case of any dispute, a foreign company has to go through the domestic jurisdiction process for at least five years before going to international arbitration; the EU is against this provision.
• Bilateral Investment Treaty: EU has been pushing to negotiate upon Bilateral Investment Treaty before it starts negotiating the EU-India BTIA, which contradicts India’s stand.

CONCLUSION:

• The European Union is the third axis (the other two are the US and China) upon which the world’s near-term future depends on. Given the common values and objectives, the EU and India, working together, will have a greater impact on shaping global political and economic governance.
• Hence, a fresh start in the relationship is essential. India’s proposal to negotiate an early harvest agreement with the UK, ahead of a full-fledged free trade pact can be seen as a first step in this light.
• Also, India needs to diversify its cooperation with the EU by leveraging upon the Indo-Pacific strategy and strengthen its position as the net security provider in the Indian ocean region.

PRACTICE QUESTION:

Q. Despite having a good long-standing relationship, the full potential of the India-EU bilateral partnership is yet to be realised. Examine the reasons, with special reference to Bilateral Trade and Investments Agreement (BTIA)?