Modi visit will energise India-EU FTA talks: João Cravinho

Source: Business Standard

13 April 2015

Ahead of Prime Minister Narendra Modi’s visit to France and Germany from April 9 to 14, João Cravinho, ambassador of the European Union (EU), hopes this would be an opportune moment to pave the way to re-energise the stalled negotiations for an India-EU bilateral trade and investment agreement (BTIA). EU is keen to get the deal sealed at the earliest for the benefit of both sides, he tells Nayanima Basu. Edited excerpts:

What issues will the EU take up, now that PM Modi is visiting some of the key countries there and meeting their leaders?

We are looking forward to the India-EU Summit, which is expected to take place before the end of the year. There is much enthusiasm in the government now. We will see if we can give a new energy to the trade talks. Besides, we have been following the Modi government’s flagship programmes — ‘Make in India’, smart cities, Digital India and Ganges cleaning — with a lot of interest. In relation to all these, we have a lot of potential to contribute to the success of these ambitions. So, we are working on developing on an EU platform to respond to these initiatives.

The Modi government will next month be completing a year in office, and there has not been any formal engagement on the FTA so far. When you meet the negotiators there, do you get a sense that India would like to start the talks from the beginning?

Not really. A lot of work has already happened on this. And this is considered to be a valid one. So, I do not see a question of restarting. We did not have a very clear idea of the level of enthusiasm of the Indian government; we had positive signals but not much follow-up in terms of meetings.

That probably is because the government is still reviewing all the FTAs it signed…

The review should be done on those FTAs that have already been signed. Ours is still under negotiation, so you cannot assess the impact. It is not for us to determine what India’s interests are; the government is quite competent to do that. What we were told is that there is an interest in restarting the negotiations but this does not seem to be followed up with concrete proposals for meetings. Now we hope there will be some movement. Meetings are expected to take place.

But do you sense this government will be slightly more flexible than the previous one when it comes to slashing tariffs on the automobile and wines & spirits sectors?

With this government, we have not had any formal round of talks yet. So I don’t think we can assess this.

Both India and the EU are not part of the Trans-pacific Partnership Agreement. Is that why you are so keen to sign the FTA with India? There is a concern here that EU will push for high-level WTO-plus standards under this deal.

We are seeing significant changes in the world trading patterns. In India, there is now a realisation that these changes are happening. And it is important for them to be engaged. Our engagement with India stands on its own merits. One of the merits of signing the FTA is that it gives us opportunity to adjust our standards. In the Intellectual Property Rights, we are not asking India to maintain WTO standards — not plus but definitely not WTO minus.

How keen is the European business community on the ‘Make in India’ concept. Do you find a dichotomy here, with the government pushing for investments on the one hand, and incidents like the Cairn India tax dispute taking place on the other?

The big problem with taxation is when there is uncertainty. There is absolutely no doubt that there are European companies, Indian companies and companies from anywhere in the world; the problem is when these companies do a transaction and then laws get retrospectively changed. That gives rise to massive uncertainty.

Do you feel uncertainty on taxation is still there in the present government?

The government has made certain positive announcements on what its taxation strategy is going to be. But that has to be shown in action. This we saw happening in Vodafone and Shell cases on the transfer-pricing issue. The government dropped the case. That was wise, because there was no case there. Retroactive amendment is still an issue but we are encouraged by the government’s statements. We will be more encouraged if the government says there is no retroactivity. They need to re-pristine the law. The European business community believes in the long-term future of India.

So you do not see any conflict between ‘Make in India’ and the taxation issue?

The taxation issue, I believe, has more to do with the ease of doing business. The simplicity of the tax regime is one factor.

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