Ministry for Foreign Affairs Sweden The EU-India FTA negotiations – a European perspective Anders Ahnlid Director-General for Trade Ministry for Foreign Affairs Sweden

Ministry for Foreign Affairs Sweden Outline The launch of negotiations –EU moratorium on FTAs and stalemate in the Doha-round –The Global Europe strategy and ”competitive liberalization” Intensive process from 2007… –Full work program –Autumn 2010 target for conclusion …comprehensive substance to cover –Trade issues… –…and trade related challenges Prospects and potential benefits

Ministry for Foreign Affairs Sweden Background to the negotiations : from uni-, bi- to multi-polar structure of power Rise of the emerging economies The EU driving force behind the WTO Doha-round Procedural success through launch in 2001… …but not so in substance, stalemate since 2006 EU moratorium on new FTAs in support of the round Competitive liberalization bilaterally not least in Asia The EU Global Europe strategy adopted in 2006

Ministry for Foreign Affairs Sweden The EU Global Europe Strategy 2006 WTO and the Doha-round top priority… …but complemented with selected FTAs: –market potential (economic size and growth) –level of protection against EU exports (tariffs and non tariff barriers) –potential partners’ negotiations with EU competitors Particular emphasis on Asia Negotiations with India launched in June 2007… …on a Broad Based Trade and Investment Agreement The ‘largest’ FTA ever under negotiation… …but India’s share of EU trade still low (about 1,5 %), while the share of the EU in India’s trade is higher (20-25 %)

Ministry for Foreign Affairs Sweden Intensive process from 2007… 8 negotiating sessions held on chief negotiators level, 9th this week European Commission and Indian Ministry of Commerce negotiate Push at EU-India summit in New Delhi in the autumn of 2009 Agreement to seek to conclude by next summit in October 2010 Ministerial meetings foreseen Substantial progress in many areas but considerable challenges in others

Ministry for Foreign Affairs Sweden 23. The EU and India confirmed the shared objective of concluding an ambitious and balanced Broad Based Trade and Investment Agreement, which will bring significant economic benefits to both sides and further strengthen the bilateral economic relationship. The EU and India took note of the progress made so far and agreed to intensify the negotiations with a view to concluding the Agreement as swiftly as possible. European Commission – External Relations 06/11/2009 India-EU Joint Statement November 2009 III. BILATERAL ISSUES

Ministry for Foreign Affairs Sweden … comprehensive substance to cover, and several difficult problems to solve Trade in goods – tariffs Services Investment Technical barriers to trade (TBT) Sanitary and phytosanitary measures Intellectual property rights Competition Customs and Trade Facilitation Trade Defense Rules of origin Government Procurement Sustainable Development Link to ‘political clauses’

Ministry for Foreign Affairs Sweden Trade challenges – market access Tariffs –14 vs. 4 % average –coverage % –symmetry or not –exceptions –textiles and chemicals Rules of Origin Services –cross-border trade –movement of individual service suppliers –financial and telecom

Ministry for Foreign Affairs Sweden Trade challenges – regulatory issues Regulatory convergence –Mutual Recognition Agreements, rules on conformity assessment, equivalency, or other means –Treatment of private standards Government Procurement –In or out? India has no mandate to negotiate percent of EU and India GDP Potentially substantial regulatory impact in many areas

Ministry for Foreign Affairs Sweden Political challenges – sustainability Issue-specific or comprehensive approach to international co-operation? ‘Trade-related’ or ‘non-trade’ issues Trade and environment, trade and climate… …possible to agree on climate friendly products? Trade and labor rights – non-starter for India Role of sustainable development… …important to the EU, rejected by India in an FTA

Ministry for Foreign Affairs Sweden Political challenges – ’political clauses’ The EU links FTAs to Political and Cooperation Agreements… …mandated through EU decision FTA only if rules on human rights and nuclear non-proliferation are observed India forcefully rejecting Stumbling bloc for the entire FTA- negotiations? The entry into force of the Lisbon Treaty, including increasing role of the European Parliament, adds to the challenge for the EU

Ministry for Foreign Affairs Sweden Potential benefits… (1) Simulations show small but not insignificant increase in EU and Indian production after entry into force of ‘shallow FTA’… …but larger gains to be made through deeper integration, including coverage of regulatory issues and investment Potentially large gains in productivity 30 percent increase in FDI possible Gains trough improvements in government procurement and trade facilitation, including through transparency Potential for regulatory convergence on both sides

Ministry for Foreign Affairs Sweden Potential benefits… (2) According to University of Sussex and CUTS International study a deep integration EU-India FTA: –“…could help India to bind domestic regulatory reform and underpin MFN trade liberalisation” –Could help do away with impediments to FDIs in India relating to “…procedural issues, labour laws, levels of corruptions and overlapping jurisdictions between states and central government…” The evidence points at considerable benefits, but are the respective political systems ready to realize them?

Ministry for Foreign Affairs Sweden …but political challenges in India… Affected interest groups resist tariff cuts and for them costly regulatory reform Differences over ‘non-trade issues’ is a potential stumbling bloc and slow down the negotiations NGO opposition and calls to halt negotiations –“An EU-India FTA would tie the hands of the Indian government – at a moment when more than ever it needs to keep its options wide open.”

Ministry for Foreign Affairs Sweden …as well as in the European Union The Lisbon Treaty changes the EU ‘trade game’ Increasing powers to the European Parliament while the Council and the Commission still play important roles Parliament vote in favour of EU-India FTA 2009… …but Parliament also calls for issue of child labour to be addressed and ask India to sign the Non-Proliferation Treaty Link between FTA an ‘standard’ political clauses according to the mandat: –“A clear legal and institutional link shall be established between the Agreement and the existing Framework Agreement and a comprehensive future political agreement that may be concluded.”

Ministry for Foreign Affairs Sweden Questions Are the respective economies ready for real integration through an EU-India FTA? Are the respective political systems ready for a broad based FTA? Could the FTA serve as an instrument for regulatory reform? Could transparency and other provisions of the FTA provide an anti-corruption tool?