India is in favour of envisaging the new Bilateral Investment Treaty under the larger framework of the Free Trade Agreement, so that the new BIT is a part of the FTA, writes Yumna Jamal for South Asia Monitor
By Yumna Jamal
India is an important trade partner for the European Union (EU), a supranational organisation promoting the economic interests of its member countries. Since its inception, the EU has been at the forefront of trade deals and negotiations with the world.
Interestingly, the international economy necessitates trade linkages between or among countries so that trade could flourish (with or without restrictions). Trade negotiations in the world system are mostly based on the idea of what is known as a ‘Free Trade Agreement’ or FTA.
FTA negotiations between India and the EU began in 2007. A Free Trade Agreement is a legally binding agreement between two or more countries with the aim of removing trade barriers and, at the same time, promoting the movement of goods and services across the boundaries of the member states party to this agreement. However, the India – EU agreement has not come to fruition because of several roadblocks arising from disagreements over various contentious issues.
The key issues are related to improved market access for goods and services in the Indian market, government procurement of certain goods, geographical indications for certain goods, strong investment safeguard rules, and sustainable development.
India enjoys unilateral trade preferences in accessing the EU market under the EU Generalised Scheme of Preferences. Under this scheme of the EU, developing countries are allowed to pay less or no duties on the goods they export to the EU.
Disagreements cropped up between India and the EU on the question of negotiating a Bilateral Investment Treaty or BIT aimed at protection and promotion of investments under the proposed FTA, or to negotiate BIT and FTA separately. The FTA is not a bad choice keeping in view the economic interests of our country. India started becoming a party to FTAs only after economic liberalization took place in 1991. So far it has signed 16 FTAs and many more are already in the pipeline.
The EU is determined to make India a party to the BIT before it concludes talks on the FTA. The EU’s argument is based on the fact that the individual investment protection agreements signed by the member countries of the EU have begun to lapse. Given this, the EU wants India to extend the existing BITs till new BITs are made. India, meanwhile, is in favour of envisaging the new BIT under the larger framework of the FTA, so that the new BIT is a part of the FTA. India is reluctant to extend the existing treaties with individual member countries of the EU after their term expires.
The EU has opined that treaties are important for trade ties. Extension of the existing BIT according to the EU will maintain the interests of investors in the Indian economy as the EU is one of the largest contributors of FDI in India. EU officials have warned that the new BITs would not be able to cover new foreign investments made from the EU side. India’s argument is that the EU should not be apprehensive about the future of foreign investment in India because the existing laws under the umbrella cover of the “Make in India” scheme are aimed at attracting and channelizing foreign investment on Indian soil. It protects the interests of the foreign investors and promotes utilization of domestic resources for production and manufacturing.
Despite assurances from India, the EU remains firm in its position. Why the EU expects softening of India’s stand on various demands made by it can be gauged from the fact that the EU is going through an economic slowdown, particularly after the Brexit.
It is not only trade tariff which is the EU is talking of, its concerns are many. The EU has shown discomfort about Indian laws which forbid ever-greening of patents. India is still far from being recognised by the EU as a ‘data-secure’ country. EU demands more stringent IP protection standards in India than what is prescribed by the WTO.
(The author has done her M Phil from South Asian University. She can be contacted at firstname.lastname@example.org)