India, EU to begin seventh round of FTA talks today

New Delhi: India and the European Union (EU) will begin the seventh round of negotiations on the free trade agreement (FTA) in New Delhi on Monday, along with talks on an investment protection agreement (IPA) and a pact on geographical indications (GIs).

This round of talks is expected to last five days, three officials aware of the development said on condition of anonymity. The sixth round of negotiations, which was held in Brussels, concluded on October 27, 2023.

The previous round covered policy areas related to goods and government procurement offers and the seventh round is expected to include services and investment, one of the officials said. The sixth round had also focused on accelerating work on the text presented by the two sides and some progress was made on technical matters, a second official said.

“The stage for the seventh round has been set by the chief negotiators of both sides after two separate meetings – the first in Brussels during mid-November and the second in New Delhi last month,” the first official said.

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The two sides have already held “substantial” discussions on matters related to goods and public procurements in previous rounds, the third official said. “The two sides were engaged constructively in the last three to four months to iron out differences and prepare the ground for the seventh round,” he said.

The sixth round consisted of 71 technical sessions covering 18 of the 23 policy areas and chapters. These talks were held in person and virtually.

The proposed trade deal with the EU is one of the most complex FTAs being negotiated by India. While there is interest on both sides to take forward the deal, a breakthrough is unlikely before the general elections in India and European Parliament polls this year.

India will continue to oppose the EU’s move to impose a carbon tax or the Carbon Border Adjustment Mechanism (CBAM) on various imports at multilateral forums such as the MC13 at Abu Dhabi later this month, but this is unlikely to affect the FTA talks, a fourth person aware of the matter said on condition of anonymity.

“India is committed to environmental protection and is doing more than it has committed at global forums. Prime Minister Narendra Modi has given a call for LiFE [Lifestyle for the Environment]. But India is against making this part of trade commitments, which would be nothing but a non-trade barrier,” the fourth person said, referring to CBAM, which is a proposed tariff on carbon-intensive products to offset carbon leakage.

CBAM could lead to tariffs of up to 35% on imports of high-carbon goods such as steel, iron ore and cement from India. EU officials have said CBAM will be implemented gradually and that their side is open to talks to address India’s concerns.

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Even as New Delhi opposes measures such as CBAM being made part of any trade deal, it is preparing its industry to make products with a low carbon footprint, such as green steel, green cement and green hydrogen, the fourth person said.

The EU’s demands include removing barriers to trade for smaller European firms, opening up services and the Indian public procurement market, and negotiations on such matters are being done on the principles of reciprocity and equity while protecting the interests of India’s micro, small and medium enterprises (MSMEs), the third official said.

“There are marked differences between the MSMEs of the two sides in all aspects – size, investments and use of technology. Hence, all such matters must be negotiated on the principle of equity,” the official said. MSMEs, agriculture and dairy are sensitive sectors for India, he added.

The third official noted India is the world’s fifth largest economy, but is also a developing nation with significantly low per capita income compared to European states. Reciprocal trade arrangements for farming and dairy are not possible as Indian farmers are very poor. For them, farming is for subsistence rather than profit, and the government is committed to protecting their interests, he added.

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Unlike the recently signed FTAs with Australia and the United Arab Emirates (UAE), the proposed deal with the EU is comprehensive in terms of size (27 member countries) and scope (the range of subjects under negotiation), and hence, the pact will take more time, the third official said.

India and the EU resumed bilateral trade and investment negotiations about a month after PM Modi participated in a leaders’ meeting in May 2021 at the invitation of European Council President Charles Michel. This was the first time the EU hosted a meeting with India in the EU+27 format.

The negotiations that were stalled for almost nine years were re-launched in 2022 along with separate talks for the IPA and the agreement on GIs.