It has not helped matters that the EU has been commenting on India’s internal matters, from Kashmir to Manipur.
Historically, India has been one of the largest trading partners of the EU. However, unfortunately, we’ve not been able to see the India-EU relationship reach its full potential. The two partners can have a great relationship but regrettably it has not been granted its due attention as is needed. Both sides have been slow in acknowledging the importance of this relationship.
At the same time, there have been many positive developments in the India-EU relationship in recent years. In 2021, the two sides launched the Trade and Technology Council, which is a high-level forum for discussing trade, technology, and security issues. The Trade and Technology Council is seen as a sign of the growing importance of the India-EU relationship. It is also noteworthy that the first Ministerial meeting of India-EU Trade and Technology Council was held earlier this year in May of 2023 in Brussels with key and senior ministers—S. Jaishankar, Piyush Goyal and Rajeev Chandrasekhar—in attendance with senior EU ministers and bureaucrats. There is great thrust and focus on understanding and partnering in the ongoing rapid technological developments, particularly in Artificial Intelligence between India and EU.
India and the EU have also worked together on a number of green energy initiatives, such as the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure. They have also agreed to cooperate on issues such as climate change and sustainable development.
The recent geopolitical tensions between China and the West have also highlighted the need for India and the EU to diversify their supply chains.
Both are looking to reduce their reliance on China for goods and services, and they are seeing each other as potential partners in this effort. For example, India is looking to the EU to provide it with technology and investment, while the EU is looking to India as a market for its goods and services. The diversification of supply chains is a complex process, but it is essential for both India and the EU. By working together, they can reduce their reliance on China and build a more resilient and sustainable economy.
We have also relaunched the negotiations for a Free Trade Agreement after a hiatus of nine long years. There is political will and renewed vigour to iron out long-standing concerns on both sides such as about flow of digital data for the EU and giving greater access to high skilled professionals to the EU market for India. India is poised, able and willing to attract companies that wish to partner with a democratic partner in Asia with strong developmental, economic and demographic credentials. One major impediment stems from their varied priorities. While India seeks broader market access for its products and services, the EU emphasizes safeguarding its intellectual property rights alongside ensuring adherence to labour and environmental standards. Furthermore, sectors like agriculture, pharmaceuticals, and automobiles are proving to be contentious areas in the discussions due to their significance for both parties. The FTA should be signed and completed at the earliest in light of upcoming delays such as elections.
A further area of disagreement is the issue of the EU’s comments on India’s internal affairs—from Kashmir to Manipur. India has been of the view that the EU should not comment on the internal issues of India. Another irritant that has emerged recently is EU’s announced Carbon Border Adjustment Mechanism (CBAM), which will levy a carbon tax on imports of products made from the processes which are not environmentally sustainable or non-green. CBAM will translate into a steep tax on select imports into the EU starting 1 January 2026. This will adversely impact select exports from India which will face a significant rise in cost going into EU, thus making Indian products uncompetitive. It is crucial that EU and India continue to grow trade and partnership for a stable relationship and the EU put in place specific exemptions under this tax regime to India.
It’s important that these issues be resolved amicably.
More importantly, geopolitical issues should not affect the business relationships between the two behemoth partners. It is vital that trade partnerships grow as the foundation for deeper geopolitical relations even if it’s not the other way around. India and EU can be a foundational relationship for this century in light of converging interests and values. Both parties must pay greater attention and importance to this growing partnership.
Rajesh Mehta is a leading international affairs expert, columnist and commentator.