Providing Direction To India-EU Relations

Publication for Institute for Study of International Politics

Summits are occasions to provide a sense of direction and the 15 th India-EU summit to be held in virtual mode on 15 th July is no exception. Prime Minister Narendra Modi, European Council President Charles Michel and European Commission President Ursula von der Leyen are fully aware that their meeting is taking place in unusual times when both India and EU are facing new challenges. The COVID-19 pandemic has accelerated many trends, both political and economic, that were barely discernible when the last summit took place in Delhi in October 2017.

From 2017 to 2020
Recall, France had elected its youngest president in Emmanuel Macron and in Germany, Chancellor Angela Merkel won an unprecedented fourth term, pushing back decisively against the populist trend that had been gaining ground as UK under PM Theresa May had commenced Brexit negotiations. President Trump had taken over and his statements about ‘America First’ had only strengthened European determination for ‘more Europe’ as the way forward and a democratic India would be a key partner.

The 53 paragraph long Joint Statement that issued in 2017 provided a rich menu for cooperation – human rights, counter-terrorism, outer space, cyber space, climate change, renewable energy, sustainable development, skill development, education, migration, water management, science and technology – these were all areas where India and EU had or were committed to having bilateral dialogues. In addition, there were paragraphs referring to common positions on a host of other issues – G-20, WTO, Afghanistan, Libya, Syria, Ukraine, Middle East Peace Process, Myanmar, Iran nuclear deal (JCPOA), Africa – reflecting the wide range of foreign and security policy consultations.

The India-EU annual summit process began in 2000 and the twelfth summit was held in 2012. The thirteenth took place after five years and this time too, it is taking place after a gap of three years. Why these long gaps? The answer lies in the fact that though the menu has been vast, it lacks depth. Differences have persisted on fundamental issues that have prevented substantial forward movement. So, the 53 para Joint Statement may reflect good optics about the breadth of the relationship, the fact that the next summit is taking place after three years means that the depth is lacking and fundamental gaps still need to be bridged.

Getting Rid of Bottlenecks
Politics is like riding a bicycle; one has to keep moving forward because standing still is not an option. India and EU launched negotiations on an ambitious Broadbased Trade and Investment Agreement (BTIA) in 2007 but these negotiations stalled in 2013. In the run-up to the 2017 summit, efforts to overcome the differences failed and the Joint Statement merely “noted the ongoing efforts of both sides to re-engage actively towards timely relaunching negotiations” for a BTIA.

In seven years, India-EU trade has grown but remains much below its potential. Unlike with some other partners, India and EU enjoy a balanced trade relationship with bilateral trade (in goods) at over Euros 100 billion and trade in services adding another Euros 40 billion. EU companies have invested Euros 90 billion and Indian companies that came in much later have invested Euros 70 billion in EU states. During these seven years, new trade and investment issues have been added. Keeping negotiations at an impasse creates an illusion but the reality is different. Both sides need to display political leadership and commitment to get the relationship out of this morass. If a BTIA is not considered possible then the infructuous exercise should be terminated and more modest agreements salvaged in areas where it is possible.

Basis For A Reset
This requires both sides to undertake a serious internal review. India needs to assess the merits of an agreement with EU now that RCEP does not appear to be on the cards. Brussels needs to push more with individual member states to soften their stands on their pet product lines so that India does not get frustrated about carrying out 27 separate negotiations. COVID-19 is bringing about fundamental changes in international trade patterns and altering supply chains driven in the direction of greater resilience.

EU’s core strength lies in a 440 million strong affluent consumer market that provides it with considerable regulatory clout in areas where Brussels enjoys authority. In such sectors as food safety, environment and labour standards, industrial safety and now with GDPR in data privacy, Brussels has competence and has developed technical capability.

However political solidarity has been severely tested during the COVID -19 crisis as it was seen as a national issue. Instead of the old response of ‘more Europe’, member states reacted by putting up walls going against the fundamental tenets of free movement of goods, services, capital and people. This has forced EU leaders to undertake serious introspection about its internal divisions, between ‘old Europe’ and ‘new Europe’, between liberal democracies and ‘illiberal’ democracies, and between the ‘frugal states’ and the weaker economies.

In addition, EU also needs to contemplate a future with a weaker trans-Atlantic alliance. This affects not just NATO members but also the non-NATO EU member states. And more crucially, it forces the EU to figure out whether it can adopt a common approach towards China.

In 2012, China launched a new cooperation programme with central and east European countries and with the recent addition of Greece, it now stands at 17+1. Of the 17, 12 are EU member states. In march, EU adopted new foreign investment screening regulations to bring about greater intra-EU harmonisation. The underlying concern was that in a COVID battered economies, European companies should not become easy pickings for Chinese cash rich entities. However, states are bound to take ‘utmost account’ of the EC’s advice but retain the final authority as a sovereign right.

India is in the middle of fundamental changes in its relations with China too. Recent incidents have shown that the old modus vivendi has broken down. There are many new areas that can bring EU and India together in a more meaningful and productive partnership because of a shared faith in democracy and an open, rule-based order. To achieve such a result at the 15 th India-EU summit, PM Modi and Presidents Michel and von der Leyen must get the legacy bottlenecks out of the way and set clear directions for the future course.