India-EU FTA can be achieved in phases. Early harvest is a practical step

A high level dialogue was held between India and the EU this month. It was an outcome of the 15th India-EU Leaders’ Summit held last July, when both sides decided to look for ways to revive stalled trade talks. The EU accounted for about 11% of India’s total trade in 2019, making it more important than China. In 2007, both sides tried to deepen trade ties through a comprehensive Free Trade Agreement. After six years of toil, the negotiations were suspended due to “a gap in the level of ambition” between the two sides, according to the EU.

A couple of months ago, foreign minister S Jaishankar said the EU still appears reluctant. However, subsequent developments suggest that both sides have taken a practical approach towards a comprehensive FTA. Work is on to reach an interim agreement, or early harvest. This approach will help iron out potential irritants – the EU is a complainant against India at WTO on a tariff issue and has also flagged India’s switch to raising tariff barriers at a WTO review meeting this year. Both sides have a lot to gain by moving past these issues towards tighter economic integration.

India opted out of RCEP in 2019 as it felt its concerns were not addressed. Since then, others have closed the deal. RCEP will impact India as it creates conditions for a tighter integration of East Asian economies. In this backdrop, we should pursue a close integration with the EU as there is greater complementarity between India and Europe. More trade and export orientation is the key to moving India to a higher trajectory of economic growth. Closer integration with the EU will also help Indian firms access better technology. Much has changed since the two sides began negotiations. If anything, the case for an FTA is stronger than ever.


This piece appeared as an editorial opinion in the print edition of The Times of India.


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