With FTA talks set to start, EU seeks to tap Indian middle class

Source: Livemint

8 June 2015

EU director general for trade Jean-Luc Demarty wants more access for the bloc’s automobiles and wine

With FTA talks set to start, EU seeks to tap Indian middle class

Commerce minister Nirmala Sitharaman. Photo: Pradeep Gaur/Mint

The European Union (EU) is targeting the rich Indian middle class for enhanced market access in automobiles, wines and spirits, and cheese as Brussels and New Delhi kickstart stalled negotiations for a free trade agreement in goods, services, investment and public procurement.

“We want market access for our automobiles and wines and spirits,” said Jean-Luc Demarty, the EU’s director general for trade.

After attending a bilateral meeting between EU trade commissioner Cecilia Malmstrom and Indian commerce minister Nirmala Sitharaman in Paris on 4 June on the margins of the annual Organization for Economic Cooperation and Development (OECD) meeting, Demarty said the stage is now set for a senior-level officials meeting between the two sides.

Malmstrom and Sitharaman have directed their senior officials present at the meeting to start talks on all outstanding issues in the free trade agreement.

The talks will begin after the new Indian commerce secretary-designate, Rita A. Teaotia,takes over from her predecessor Rajiv Kher, who retired at the end of this month, Demarty said.

Negotiations for the trade agreement talks began in 2007 when the then commerce ministerKamal Nath and his EU counterpart Peter Mandelson decided to embark on a comprehensive deal covering all areas in goods, services and public procurement in both the markets.

But the negotiations stuck many dead ends on both sides due to differences on issues of market access in goods and services as well as the demands made by Brussels in areas such as intellectual property rights, trade and environment, and trade and labour.

Close on the heels of Prime Minister Narendra Modi’s recent visit to France and Germany, there is a renewed push from New Delhi to close the gaps to ensure that the agreement could act as a launching pad for investment in various ‘Make in India’ initiatives, analysts said.

The EU reckons India as an important trade partner and is now eyeing a “sizeable and growing market of more than 1 billion people,” said a former Indian government official, who asked not to be quoted.

The two-way trade between the EU and India was estimated at around €72.5 billion in 2014 while the EU’s investment stock in India was €34.7 billion in 2013. Trade in commercial services quadrupled during the last 10 years, increasing from €5.2 billion in 2002 to €23.7 billion in 2013, according to an EU official release.

The EU wants auto and auto-parts import tariffs, which are placed in a select sensitive list in India, to be brought into an open list with very low or nil import duty. Brussels had also proposed “zero-for-zero” duties for auto parts.

The Indian domestic industry in auto parts is concerned about reducing the tariffs to zero. India had rejected the EU’s zero-for-zero demand because of the harmful impact it would have on the Indian domestic auto-parts producers.

India had maintained that it will not reduce the import tariffs below the current applied level of close to 10%, the official said.

The EU also wants substantial access for wines to serve the rising middle-class consumers in India. New Delhi had agreed to give a tariff rate quota for guaranteed access at a minimum rate. But Brussels is not satisfied with the minimum price as it wants access at the actual price at which wines are sold in European markets.

On brown spirits, too, the EU wants the same treatment, namely, market access in the Indian market at actual European prices.

Effectively, the EU’s demands on wines and spirits amount to foregoing huge customs revenue, said another former Indian official.

In services, the EU wants liberal access in insurance, banking, and retail trade. With the Modi government’s latest insurance sector reforms, Brussels’ concerns are almost adequately addressed, the former Indian official said. But in banking there will be a demand for a higher level of participation in the Indian banking sector, according to the official.

The EU also wants easy access for legal services professionals, a no-go area for India.

On the other hand, despite its ambitious market-opening demands for access in capital-intensive services in India, the EU is not so forthcoming to provide liberal access to Indian short-terms services providers in Mode 4 or even in Mode 1 involving supply of services from one country to the other.

The EU also wants India to agree to a higher level of protection for intellectual property rights over and above the minimum standards in the World Trade Organization’s trade-related intellectual property rights agreement (TRIPS).

The EU, for example, wants data exclusivity for its pharmaceutical producers to ensure that when the patent protection expires after the requisite protection period of 20 years, the generic companies generate their own data before they market those off-patented drugs.

Brussels is also demanding a higher level of compliance in line with its Geographical Indication notifications and registration of wines and other products. The EU has also demanded substantial access for its cheese products but is unwilling to provide the same treatment to Indian sugar, basmati rice and mangoes, the official said.

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