India, EU to begin talks on free trade agreement
Ashok Tuteja
Tribune News Service

New Delhi, June 24
Their is still a big question mark on whether the much-anticipated Free Trade Agreement (FTA) between India and the European Union (EU) will fructify this year. India and the EU will hold talks on Tuesday in Brussels to resolve differences over the pact that is expected to give a major boost to bilateral trade between the two sides.

Commerce and Industry Minister Anand Sharma will hold substantive discussions with EU Trade Commissioner Karel De Gucht to explore the possibility of signing the accord as early as possible, according to Joao Cravinho, EU Ambassador to India. The two sides would also review the progress made in the talks under way since 2007. The India-EU summit in February this year had set a deadline of the year-end for concluding the pact.

Asked if the accord could come through this year, Cravinho was quite evasive, saying ''both sides will need to make a trade off...I think it is within grasp.''

Indications are that Sharma and Gucht would deliberate on issues like opening of services sector, which still remain unresolved.

Cravinho expressed his disappointment over what he called New Delhi increasing protectionism by raising already high tariff on car import, erratic cotton exports policy and insisting on higher domestic content by foreign telecom manufacture in India.

“The EU is committed as a whole to trade liberalisation. However, there are some protectionist measures like the rising car tariffs in India, the country’s back and forth policy on cotton exports and the domestic content requirement in manufacturing of telecom equipment which need to be resolved," he said.

As part of the bilateral investment and trade agreement, the EU has been pitching for opening up automobiles, wines and spirits as part of the free trade agreement that is being negotiated between India and EU. However, the two sides are yet to arrive at a consensus on these critical issues as Indian automobile industry feels that this would hurt the domestic manufacturers.

India has, traditionally, kept automobiles in the negative list under free trade agreements with other countries like Japan, Malaysia, Korea, ASEAN and Singapore. The EU, meanwhile, is reluctant to open up movement of professionals from India to the EU under Mode 4 to ensure job creation for its own people. Besides, the grouping has also been raising non-trade issues like human rights, child labour and environment during the ongoing negotiations for a broad based agreement.

According to Cravinho, the European Commission has also mandated that the objective of the negotiation should be to push for a single investor treaty with India, instead of several bilateral investor treaties that India currently has with some EU nations. The European Commission has already indicated to India that it was now looking at a single investor treaty.

"This was not part of the investment agreement when we started in 2007. However, the mandate for a single investor treaty has widened the investment negotiations," he said, adding that though this will take several years before it comes into practice. This seems to be the fallout of the Indian government's recent move to retrospectively tax overseas transactions involving Indian assets in the Vodafone tax case.