India-EU – more economics, less politics
India and EU will hold a Leaders’ Summit in Portugal in May this year. This will be a special Heads of Government meeting, not just with the Presidents of the European Council and Commission as is the norm for India-EU Summits but hosted by the PM of Portugal with all EU Heads of Government. Marking two decades of India-EU Summits, which began in Portugal in 2000, the opportunity of such a gathering should be seized to strongly invigorate India-EU ties, which despite traditional links and a Strategic Partnership since 2004, continue to remain a case of grossly unrealised potential despite an array of institutional arrangements of dialogues and joint working groups, including at Secretary and Minister level, covering nearly every facet of international cooperation.
Even post BREXIT, the EU-27, has around 450 million people, a combined GDP of USD 18 trillion (in real terms, not PPP – Purchasing Power Parity), second only to US and significantly ahead of China, a massive common market and, without doubt, huge technological and regulatory competencies. The EU is unique with several facets of a ‘state’ even though sovereignty rests with the Member-States, who are also responsible for national security. It operates through a system of supranational institutions and intergovernmental negotiated decisions of its Member-States.
In recent years, the EU project has been under severe challenge with nationalist impulses in several of its countries as benefits of globalization appear to peter out for many but other than the UK’s leaving, fissiparous tendencies per-se are not to the fore. Moreover, several EU countries continue to remain mired in economic crisis, COVID has hit Europe particularly hard both on the mortality as well as economic front and the continent has brought on to itself a huge migrant crisis by upsetting a settled cart in North-Africa following the Arab Spring of 2010.
The EU remains India’s largest economic partnerships, even after BREXIT, despite the US looming large on India’s economic and political canvass and unprecedented growth in India’s economic ties with China, ASEAN and the Gulf in recent years.
In 2019-2020, EU was India’s largest merchandise trading partner at around Euro 80 billion accounting for over 11% of India’s foreign trade. The US was a shade less and China came in third. India-EU trade is balanced with the EU being India’s second largest export destination (14%), after the US. Trade in services has also grown and is now just under Euro 30 billion. The EU is also the largest foreign investor in India with some 6000 European companies present in India. And, in recent years, the European Investment Bank (EIB), one of the world’s largest development finance players, has become active in India financing key infrastructure including metros. Moreover, the EU is the go-to place for the development of Indian industry standards apart from norms and practises across the board.
On the other hand, India is only the EU’s 10th largest trade partner accounting for barely 1.8% of EU’s global trade and paling in comparison with China (11.8%), which has grown to become one of EU’s largest trade and investment partners. Even in terms of investment, India accounts for a just small percent of EU held overseas stocks well behind Brazil and China.
A major India-EU development was a decision to enter into a Bilateral Trade and Investment Agreement (BTIA). A pact on trade should benefit the EU with better access to a huge and rapidly growing market and, for India, particularly assist with technology and innovation access that could qualitatively upgrade the Indian economy. This idea was mooted in 2006 but has still to see the light of the day.
India and the EU are continental scale economies with bewildering cultural, linguistic, and religious diversity framed in democratic structures However, they have vastly different levels of economic development and Europe now purveys itself as the paragon of individual rights and enlightened governance. The preachiness that follows often leaves things strained in India-EU ties.
Moreover, while Europe needs to reconcile to a growing India and its own relative global decline, India needs to understand that the Europeans are old warhorses who play globally; indeed, while we have reason to be proud of our growing economic clout, for the Europeans almost equally good future opportunities lie in ASEAN and even Africa. Furthermore, their perspectives and India’s in real-politic on global issues often sees them on different pages. And China is not a dilemma for the EU, but a continued opportunity though laced with serious challenges. Indeed, while the EU accepts China as one of the Economic poles of the world, apart from US and itself, India does not find mention even in the ‘complex multipolarity’ of Josep Borrel [EU HR/VP blog of 16 March] that covers political structuring and regional power-play and where a place for the EU is sought. The reality, however, is that while Brussels spells out visions for a strong EU role in global governance it lacks the competences necessary to exert itself on most political and security matters. For India, foreign policy is an integral part its agenda with EU while the EU’s focus is invariably on trade, economy, global issues and development partnership.
The European Parliament (EP) is another bugbear as far as India is concerned with activism by some Parliamentarians (earlier mostly from the UK) on the issue of Kashmir and human rights often putting off India. Indeed, but for COVID, the EP’s Foreign Affairs Committee may have adopted a resolution critical of India on Kashmir (lack of political freedom, internet disruption etc.) and the Citizenship Amendment Act. And, as COVID unwinds, we need to be prepared for EP activism on protests around the farm bills.
Another limiting area is security cooperation including counterterrorism, despite EU countries themselves being victims of terrorism. One reason is because instrumentalities of hard counterterrorism cooperation, including intelligence sharing are with EU Member-States. India’s proposals for agreements with the Europol (the EU’s coordinating police organization) to cover counter terrorism and on mutual legal assistance have not seen the light of the day even after being pursed for years.
And till COVID and the in-your-face rise of China, India’s most important security concerns didn’t resonate with the EU with economic interests remaining to the fore as still appears the case with the EU signing a Comprehensive Agreement on Investment with China earlier this year. Indeed, the expression ‘Indo-Pacific’ only found mention in the documents of the latest India-EU Summit held virtually in May 2020. The EU has also not been unkind to Pakistan extending its special GSP+ scheme to Pakistan at the end of 2013 giving a special boost to the Pakistani economy no matter its sketchy human rights record and abetment to terrorism.
There are also differences on global issues. On multilateral reform, the EU remains stuck, possibly because both the UN and Bretton Woods Institutions (BWIs), as currently structured, are favourable towards Europe and a restructuring would necessarily rebalance influence. Moreover, while Germany wants a seat on the UNSC high table, Italy and Spain cannot countenance this.
Similarly, on climate change is the defining issue of our times where the EU is the standard bearer for strong Green House Gasses (GHGs) mitigation action by all countries paying only lip service to the principle of common but differentiated responsibility. India’s strong stake-holding at the Paris UNFCCC conference in December 2015 that led to the Paris Accord and its massive drive to push renewables should lead to greater accommodation for India’s development imperatives by the EU in the coming years, but competitive global economics are unlikely to diminish their push to bring India into a tighter GHG reduction hoop, including committing to net zero by 2050.
India-EU ties have also been compounded by bilateralism between India and EU Member States such as the issue involving two Italian marines that derailed a possible Summit in 2015. Moreover, most matters of interest to Europeans in India are really in the domain of Member-States and are pushed by them individually. On the other hand, matters of interest to India in Europe invariably fall in the competence of the EU and require action both in European capitals and Brussels and India needs a far better appreciation of the role of the EU. In addition, both EU Member-States and India have heavy weight bilateral representations that shade the key relevance of the EU in Europe as far as Delhi is concerned.
Despite COVID, the 15th India-EU Summit was held virtually in May 2020. It identified several new areas for cooperation, including maritime security and the two sides agreed to strongly push the BTIA with Ministerial level interlocution.
High-level interaction between India and EU has taken place on BTIA but not much movement is discernible. India appears to want a limited trade deal and that doesn’t appear to fit the European Commission’s broad trade expansion agenda. Investment, on the other hand, appears to be of greater interest to the EU. This should be worked on and the EU-China CAI (Comprehensive Agreement on Investment) used as a segue to one with India. An investment agreement should also help us change perceptions on Atmanirbhar Bharat, which is giving some people the feeling of rising protectionism in India, apart from institutionally encouraging EU investment flow to India given that we abolished Bilateral Investment Protection Agreements (BIPAs) in 2016 and Bilateral Investment Treaties (BITs) have not really taken off. Trade, including services/digital issues, and investment deals or deal would also be useful to open serious discussions on orderly migration and consular matters that are of significant interest to India. A Connectivity Partnership covering areas of digital, energy, transport and human connectivity is in the works and should help in pushing India-EU ties.
The Summit in Portugal is a golden opportunity for across the board reach out to the Europeans by India on issues of key concern to us, including the Indo-Pacific. It is also time for concrete action and realisation of the India-EU potential for which India needs to focus its attention on EU’s real competencies in trade and economy and push these for bilateral arrangements that game changingly benefit of the Indian economy. Global issues such as climate change and the fight against COVID are also critical for both India and EU and the Summit should be worked to encourage convergences between India and the EU.
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(The views expressed are personal)
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