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In a post-Brexit scenario, EU may rework FTA with India

EU hints at negotiating balanced, ambitious and mutually beneficial agreements on trade, investment
The European Union (EU) may be looking at reworking the proposed free trade pact with India —called the Broad Based Bilateral Trade and Investment Agreement (BTIA)—in a post-Brexit scenario, negotiations for which have dragged on for 11 years with little progress.
In a strategy paper for India released on Tuesday, the EU did not mention BTIA, but sought to negotiate a “balanced, ambitious and mutually beneficial” free trade agreement (FTA) with sufficient level of ambition to respond to each side’s key interests in trade and investment.
“In particular, the EU will continue to engage with India to ensure that such an agreement will be economically meaningful, delivering real new market openings in all sectors to both sides, and contain a solid rules-based component,” it said in the paper released on Tuesday by the EU’s ambassador to India Tomasz Kozlowski.
The EU, however, is adamant on having a comprehensive trade and sustainable development chapter, notably in order to deal with social and environmental impacts.
Negotiations on the India-EU FTA started back in 2007 and 16 rounds have been held since then —the last in 2013, before negotiations were suspended. Both sides have explored restarting negotiations after the Bharatiya Janata Party-led government assumed power in May 2014, but uncertainties over Brexit and inflexibility on both sides have prevented a formal resumption.
The EU in its strategy paper said it wants the investment deal to be negotiated along with the trade agreement including a contentious dispute settlement mechanism which India is reluctant to sign it as it allows private foreign investors to sue the local government for unanticipated policy changes. “Ensuring a high level of investment protection in order to remain an attractive destination for new investments is also a key dimension of the EU-India partnership,”it said.
After India unilaterally terminated its current bilateral investment treaties last year with 57 countries, including with EU member countries, to negotiate fresh deals based on a new model, the EU had raised strong objection.
India brought out a new model BIT in December 2015, intending to replace its existing BITs and future investment treaties, after being dragged into international arbitration by foreign investors who sued for discrimination, citing commitments made by India to other countries in bilateral treaties.
The EU also expressed discomfort with India’s reluctance to “open up to imports” and its strong reliance on exports and inward investment. “The EU will continue to encourage India to open up its economy to strengthen its international competitiveness, benefit from a better integration into global value chains, and increase its share in global trade, to bring it more in line with its growing share of global GDP,” it added.
The EU also sought India’s constructive engagement in addressing global trade challenges in the World Trade Organization (WTO) to fight protectionism. “While the multilateral trading system has been instrumental in integrating the global economy and helping to prevent protectionism, it is confronted with a serious crisis. The EU wants to work with India to develop a common understanding on the issues to be addressed in the WTO and its modernization and to advance rulemaking on fundamental global trade issues,” the strategy paper added. The EU also proposed to establish a regular ministerial high-level dialogue to strengthen engagement with India at a strategic level and to identify shared interests on economic, trade and investment issues.
India had expressed reluctance to agree to a similar proposal by EU made earlier, holding that the existing mechanism is sufficient to address contentious issues on both sides. The EU is India’s largest trading partner accounting for 14% of its total trade in goods in 2017, while India is the EU’s 9th largest trading partner.