Posted on May 11, 2022
H I G H L I G H T S
• EU and its neighborhood
EU and its neighborhood
As the year 2021 dawned, there was collective good feeling in the EU with the election in the US of Joe Biden, a Democrat who believed in the trans-Atlantic alliance, and coming to the end of the constant EU baiting by Donald Trump. The US and EU basically being on the same page as far as global issues and thinking was concerned was evident at the G7 Summit and at the UN’s climate conference held in Glasgow in November 2021.
But as 2022 dawned, the trans-Atlantic alliance faced a challenge, the proportions of which had almost been forgotten in Europe with nearly 75 years of peace and the old Soviet bloc having broken down. This was armed conflict on the EU’s doorstep, between Russia and the west supported Ukraine. Now on for more than three months, several parts of Ukraine have already witnessed unbelievable destruction and devastation and more than 15% of the countries’ population has been forced to flee as refugees. The conflict in Ukraine may be between the Russians against the Ukrainians but really pits Russia against the Western alliance of the US and Europe. And apart from Ukraine, its heaviest costs are on the EU, which, of course, cannot be absolved as being unblameworthy in the games played between the West and Russia in Ukraine for nearly two decades.
The recent months also saw a major election in the EU. This was in France where President Macron was re-elected, once again besting Marine Le Pen. As a strong EU supporter and someone who may now think (given that Angela Merkel is no longer around) that the major mantle of EU leadership is on him, Macron’s win has once again shown that while the nationalist right wingers have a strong presence in France, the majority is centrist and pro-European. This having been noted, elections to the French National Assembly will be held soon with every possibility that the outcome forces Macron to be in a ‘cohabitation’ government with those with differing political ideologies. This can impact on how France reacts to EU’s internal policies.
The seminal national election, though, was held late last year in Germany. After a decade and a half helming Germany, and, indeed, Europe, Angela Merkel retired from politics and her party, the CDU, hasn’t returned to power. The new Chancellor, Olaf Scholz, is from the SPD and had been a partner in Merkel’s last government and could have been expected to continue with her foreign policy. With Russia this would have meant continuing to build links, in particular deepening hydrocarbon ties and opening a new pipeline, Nordstream2. But, of course, this was not to be and Olaf Scholz had, perhaps, no option but to stop the pipeline and join in the curtailing of economic ties with Russia.
Russia-Ukraine tensions from the very start of 2022 saw the US (supported by the UK, which was now no longer a part of the EU, and NATO as an organization) and the EU countries on seemingly different pages. While for the US and UK, Russian posturing, including amassing troops on Ukraine’s border, was an unforgiveable (by the West) challenge to Ukrainian freedom to decide on its future (including on joining NATO), the EU in general and Germany and France, in particular President Macron, sought to find diplomatic ways forward. Agreements reached in 2014 in Minsk, in the wake of the Russian annexation of Crimea, were sought to be energised as was a dialogue known as the Normandy process. This sought to bring together Russia and Ukraine with France and Germany. The US and UK not being a part of these processes, showed little interest in them. Domestic politics in the two countries also favoured a hawkish approach against Russia.
Initially, there was understandable hesitancy in the EU for curtailing economic ties with Russia – indeed, it is worth recalling that while President Biden was categorical that Nordstream2 would be cancelled, Olaf Scholz, on his maiden visit to Washington as Chancellor, was notably silent. Even after the start of hostilities in Ukraine and the initiation of levying sanctions on Russia, the Germans were reluctant to cut off the Russians from SWIFT. And as pressure builds for further tightening the sanctions on Russia, the Europeans are reluctantly finding themselves further corralled and may be forced to agree to stop or drastically curtail oil supplies from Russia even though they are critical for them and would seriously hurt their economies and people.
There has also been a significant movement, especially in Germany, on issues of defence with the country now indicating its willingness to seriously step up its defence expenditure and NATO contribution. It has reversed its long-standing policy of not sending lethal equipment to conflict zones and joined in supplying the Ukrainians with weaponry.
While there are people in EU who believe that the close economic ties that were fostered in the past by European nations, in particular Germany, with Russia need to be relooked at and Russia hemmed in and brought to brook no matter the costs, the fact is that these costs are fairly significant and would have to be borne almost entirely by the EU countries with Germany taking the biggest hit. This, however, not withstanding and no matter whether they fell in line willingly or were corralled into a common western line, the fact is that the line on Russia in Europe today is one that is largely determined in Washington. This, of course, has implications for multipolarity at the global level (as would a diminishing of Russia) including by providing what could be seen as a pass for China.
China, on its part, had over the years developed into the EU’s largest trading partner coupled with significant EU investment in that country. While to expect a large scaling back of these ties doesn’t appear possible, the deadly impact of COVID-19 has certainly seen China moving from economic opportunity to a country requiring a degree of questioning in the popular perception in Europe. This is, perhaps, best witnessed in the fact that the EU-China Investment Agreement reached in December 2020 is still frozen in the European Parliament. The lowering of China in a positivity rating in Europe is also pushed further down by the Chinese support for Russia in its action in Ukraine.
The EU and China held their 23rd Summit via Video Conference on 1st April 2022. The EU called on China to support efforts to bring about an immediate end to the bloodshed in Ukraine. It was also clear with China that all attempts to circumvent sanctions or to aid Russia by other means must be stopped. The Chinese have also been belligerent with certain Members of the European Parliament for their criticizing China and have sanctioned them. The EU’s disappointment with China on these “unjustified” actions was also underscored by the EU.
Recent weeks have seen a flurry of in-person activity on the India-EU front, even as the conflict in Ukraine rages, prompting a legitimate ask as to whether the relations are at an inflexion point. The first visit was that of the President of the European Commission, Ursula von der Leyen as Chief Guest at the Raisina Dialogue. The Raisina Dialogue also saw several Ministers and former HOS/G from EU countries participate. Soon thereafter, 2-5 May 2022, Prime Minister Modi undertook a whirlwind tour of three European capitals, visiting both Berlin and Paris, and participating in an India-Nordic Summit in Copenhagen where he interacted with six European leaders from the Nordic countries giving sway to both substance and development of personal chemistry with his counterparts.
One facet of the ask is the possibility of significantly improving economic ties including through an FTA and an Investment Agreement and collaborative action on climate change and sustainable development related activities. The other side is political with the Europeans being sceptical of the position taken by India on the Ukraine issue with an unwillingness to be condemnatory of Russia. For India it is furthermore critical that the upheaval in Europe does not result in the global gaze losing sight of the challenges in the Indo-Pacific and Chinese hegemonistic actions.
As things presently stand, there are indications that political heft is being brought to bear by both India and the EU on moving on the FTA and the Investment Agreement. Without doubt the signing of these agreements will be the true inflexion point in ties given the EU’s competencies and huge capabilities in the economic sphere, including trade, technology, innovation and financing. This will also give the required impetus for fostering green and clean in India and meeting India’s climate goals through collaboration with the EU.
Focus on convergences, particularly economic, while accepting that there are divergences, including on Ukraine/Russia, continues to be the best enabler for a win-win for both India and the EU.
The previous issues of EUROGAZE are available here: LINK
(The views expressed are personal)
Posted on December 17, 2021
H I G H L I G H T S
• Internal Issues in the EU
If the first half of this year brought cheer to the European Union and its key Member-States with a feeling that the gap that had developed in the trans-Atlantic alliance during the Trump years was being bridged, the second half was a reality check with fissures re-emerging in this crucial partnership.
An era in Europe also came to an end with Angela Merkel (from the CDU) choosing not to be in the fray for the German chancellorship. Following the recent elections, she stepped down and the SPD leader, Olaf Scholz, has over the reins of government in Germany.
Merkel held the helm for 16 years leading not only Germany but becoming the principal proponent of the EU. In recent times, she was, perhaps, most prominently in keeping up the European view and perspective under onslaught from President Trump during his time in office. The rise of the nationalist extreme right in Germany, propelled also by Trumpism and even Brexit, cost Merkel electorally in 2016 and her last coalition had to include the rival SPD. This time, in 2021, the extreme right didn’t do as well but their vote share was sufficient to hobble the CDU/CSU out of office. In-fact, the shenanigans of the extreme right has ended up costing the right (the conservative right to be precise) their continue leadership of the German government and huge influence in EU politics.
The new German Chancellor is Olaf Scholz of the SPD, who had been the Vice-Chancellor in the Merkel Government. It is unlikely that he would push for any major change in German policy regarding the EU though his partners in the coalition are the Greens, who over the years may have started taking a more pragmatic view on environmental issues but favour a tougher line on Russia and China on account of human rights excesses in those countries than was the case advocated by Germany under Merkel, whose government saw a certain merit in the economic opportunities in these countries.
The continent continued to feel the heat of the COVID pandemic with numbers, as the year comes to an end and the Omicron variant becomes an issue, starting to rise across the EU. The EU, not having acted with alacrity on vaccines and vaccination drives, has lower vaccination rates, especially in comparison with the UK, and this certainly adds to its COVID problem.
The sudden US pull-out from Afghanistan mid-August left most Europeans, including stakeholders such as the UK and Germans, caught on the wrong foot. For them matters were compounded by being left almost unprepared to pull out their people, whose numbers were not insignificant. The human rights heat of deserting those who had helped them was also felt by the Europeans.
Just a little while later, in September, they were hit by another broadside by the US announcing the formation of AUKUS (Australia, UK, USA), a military alliance in the Indo-Pacific, the major consequence of which was the Australians pulling out of a major submarine purchase deal with France. Obviously, the French were angered, and President Macron pulled out the French Ambassador from Washington DC. President Biden admitted that things should have been handled differently and sought out President Macron during the G-20 Summit in Rome in October, but the damage was done and a certain trust-deficit with the Biden administration is now part of the trans-Atlantic equation for the EU. In recent days (early December), there have been reports that the Australians will opt out of European helicopters for their Air Force and go for US ones. This can only add to the political unease across the Atlantic. UK’s involvement in AUKUS added to its distaste as far as the French and the EU were concerned.
All, of course, is not unwell on the trans-Atlantic alliance with the Europeans and the US showing much resolve on being together during the recent (December) meeting of G-7 Foreign Ministers held in Liverpool on the issue of Russia and its aggressive actions aimed at Ukraine. They have also tried to put up a common front on climate change, witnessed earlier at the G-7 and in October at the G-20 Summit, though the EU, with its apparent championing of climate action, would certainly have noticed the US’s willingness to find common cause with China at the UNFCCC’s COP-26 held in Glasgow in November. Indeed, it would have been noticed by all that even though India found itself in the hot seat after proposing “phase down” instead of “phase out” on fossil fuels for the Glasgow Climate Pact, this was the expression used in the US-China joint statement.
The EU-UK trade deal, which came into force in 2021, was a compromise where issues relating to Northern Ireland and fishing rights were among the most complex to resolve. Sure enough, these flared up soon and the lack of licenses saw some fishing vessels being seized or denied fishing rights, especially around Jersey. Given the sensitivity of the fisheries business in both the countries, matters escalated with leaders at the highest level being involved and refusing to yield and even navies being put on stand-by! For a way out, perhaps, the UK National Federation of Fishermen’s Organisations put it best “done through quiet dialogue and far from excitable politicians”.
The trade deal included a special Northern Ireland protocol. While this keeps Northern Ireland in the EU’s single market for goods, it effectively creates a border in the Irish Sea between the British mainland and Northern Ireland. Obviously, this affects British businesses in trading with Northern Ireland as if it were part of the domestic market in the UK and there is political pressure for London to dump the protocol despite having signed it. The option for Brussels is sanctions but this is hardly the best route for both sides for which the other is the most important trading partner. Complex discussions continue.
In general, Brexit is nether hobbling the UK’s economy nor that of the EU and, as of now, there are little signs of London’s primacy as a financial hub being robbed by an EU pull-out. Of course, British markets have seen lessening of availabilities of certain imported products but many link this to COVID and supply chain issues including piling up of containers and not just the lack of European products due to Brexit. There have also been reports of fuel shortages in the UK linked to non-availability of lorry drivers, many of whom used to come to the UK from EU countries, particularly Eastern Europe.
Tensions with Russia continue unabated with sources signaling the distinct possibility of Russia waging a war and attempting to slice Ukraine. Reports suggest the amassing of over 75,000 Russian troops on its border with Ukraine and a virtual Summit on the matter being held between President Biden and President Putin. The EU has also been strong in calling on Russia to desist any attempts at forcibly violating Ukraine’s territorial integrity and making clear the possibility of severe economic sanctions. These could include targeting Russia’s banks and cutting them from SWIFT, the Brussels based international payments system, and hitting its sovereign wealth fund. Furthermore, if the Germans play along, and there are good indications that they may, then the new oil pipeline, Nord Stream 2, may not be allowed to start up in Germany soon even though it is ready. While this would have major economic consequences for Russia which has hugely benefitted from rising oil and gas prices and its position as a major supplier to Europe, it bears noting that the EU would also suffer costs of higher energy prices given the dependence on Russian supplies and the shortages that are being noticed as the economies pull up post COVID.
Belarus is another trigger point for EU-Russia tensions. While things had been problematic for quite some time with Belarus, the crisis has become acute since July 2021 with Belarus threatening to “flood” the EU with migrants. To this end, Belarus started encouraging the influx of Iraqi Kurds and many others to its territory, including by issuing visas and bringing them over in flights, and then attempting to assist them with crossover to the EU, including Poland and the Baltics, including by providing border wire cutting tools etc. Humanitarian aid for those massed on their side of the border, was also refused by Belarus.
Tensions with Russia also give rise to ideas regarding the Europeans stepping up their own investments in a common defence, and not just relying on NATO where, in any case they are under presure from the US to step up to the plate. In the EU, the French have traditionally pushed such ideas which now gain a certain traction both as a result of BREXIT and the realization that the US also needs to pivot towards China and the Indo-Pacific. Obviously, toughened posturing against Russia gladden the hearts of most in East Europe, even while they keep expressing their unhappines at the EU and its meddling ways. A very recent case in point is that of the French President and Hungarians PM Viktor Orban jointly underscoring European determination to keep Russia checked.
COVID has been a major wake-up call for the EU moving it to look at the Chinese as hegemonistic competitors. While an Indo-Pacific strategy had been announced by the EU in April this year, they have now concretized countervailing action through the unveiling of their own global connectivity project called the Global Gateway. Euros 300 billion in investments between 2021 and 2027 are envisaged to boost investments in both hard and soft infrastructure paying special attention to sustainability. The EU is also looking at establishing a European Export Credit Facility to boost export credit for European exporters. Additionally, the much touted EU-China Investment Agreement, agreed at the end of last year, appears now embedded in a cold store.
Internal Issues in the EU
Internal contradictions within the EU continue with the two countries with right wing nationalist Governments, Poland and Hungary, increasing executive influence over the judiciary in their countries. In the opinion of the EU, these measures undermine the independence of their judiciary. It also raises the possibility of EU legislation and even European Court of Justice (ECJ) rulings being overruled by national courts. The EU has, therefore, sought to bring the recalcitrant to heel on its part by seeking to regulate the flow of monies to these two countries. This matter is now being before the ECJ where the advice of the Attorney General is to dismiss the challenges of Poland and Hungary. In so far as Hungary is concerned, there is also the issue of LGBT rights, sacrosanct for the EU, but which are being circumscribed through executive orders and national legislation.
The EU has and will remain mired in internal contradictions given the diversities among its member-states even in terms of level of economic development. In the coming months, these may once again become more visible as France, one of the key EU stakeholders, proceeds for its general elections and nationalists raise their usual bogeys versus Europeanism. Interestingly, the EU’s lead negotiator with Britain on Brexit issues, Michel Barnier, has thrown his hat in the ring for the French Presidential election due in 2022. A Republican, one of his key planks is to limit migration to the EU.
The European Parliament is likely to see a change under a power sharing deal made in 2019 on its Presidency. This should result in the Parliament having a woman President for the first time. Of course, all is not yet clear as the present incumbent is unhappy that his Presidency was wiped out by COVID.
Discussions between India and the EU on the trade and investment agreements have continued but mostly at a deliberate pace. While earlier, most of the EU focus was on an investment agreement, there are now indications of their being interested in an FTA too, underscored by the designation of a Chief Negotiator. On another point of interest in India, Croatia is likely to soon join the Schengen area, i.e. will be part of the Schengen visa.
Posted on July 7, 2021
H I G H L I G H T S
• The Trans-Atlantic Alliance
• Internal Issues in the EU
• EU’s Indo-Pacific Strategies
The European Union (EU) and its Member-States have reasons to be happy with the first half of 2021 despite COVID-19 continuing to plague them, their relatively low levels of vaccination and continuing issues with vaccine suppliers. The positivity is a result of the change in guard in Washington DC and the avowed aims of the Biden Presidency to rebuild the trans-Atlantic alliance which had been severely dented by President Trump.
The Trans-Atlantic Alliance
One of the first things done by President Biden, after his inauguration, was to rejoin the Paris Agreement (on climate change), an action that was music to the pro-climate Europeans. Similarly, his initial telephonic calls with European leaders underlined the importance of the trans-Atlantic relationship.
President Biden’s first overseas visit, in June, brought him to Europe where he participated in the G7 Summit in the UK. He then flew to Brussels for a Summit of NATO leaders and with the EU before traveling to Geneva for a Summit with President Putin. The Summit with the Presidents of the European Council and European Commission saw forward movement in a long-standing EU-US dispute on subsidies to Airbus and Boeing. While there was a certain “bonhomie” between him and the European leadership with both underscoring their commonalities of approach on global issues at the G7, NATO and EU Summits, certain differences, particularly versus China were also visible.
Chinese aggressiveness, including from its Belt and Road Initiative activities in Europe, quite apart from negative perceptions about it from COVID, has brought the country squarely in the EU’s eyes. And so, despite of the massive trade and investment relationship with China with two-way EU-China trade in 2019 touching a whooping Euro 560 billion (12% of EU’s external trade), the EU now notes China as a ‘an economic competitor’ and a ‘systemic rival’.
The European Parliament has also been critical of China adopting resolutions on the crackdown in Hong Kong and on denial of huma rights to the Uyghur people. And, Interestingly, NATO also commented on China noting that its “growing influence and international policies can present challenges that we need to address together as an Alliance”.
While most in the EU recognize China as a major systemic challenge like the US, Germany remains a voice pushing for engagement and dialogue with China. The fact of huge German investments in China, particularly in the automotive sector, plus its massive trade with the country, are, of course, factors clearly visible to all in their position. Indeed, towards the end of 2020, EU and China had agreed to a Comprehensive Agreement on Investment (CAI) largely pushed by Germany. However, its ratification now appears on ice and with Chancellor Merkel to relinquish office later this year, there may not be an effective pilot for the agreement within the EU.
In so far as Russia, Germany and France wish to follow in the Biden footsteps and show willingness to engage President Putin and they proposed this to the other EU Member-States. However, most European nations, and particularly those from Eastern Europe and the Baltics, remain extremely wary of President Putin and don’t wish to see him ‘rewarded’ in any way. For NATO, too, ties with Russia were at their lowest and it was made clear that “Russia’s aggressive actions constitute a threat to Euro-Atlantic security” and there can be no business as usual.
BREXIT related issues continue to plague EU-UK ties. This was most visible during the G7 Summit where bilateral meetings between UK PM Johnson and EU leaders were quite frosty. A key issue is the movement of goods to and from Northern Ireland with the EU demanding that the channel separating the UK from Northern Ireland be treated as a kind of hard border for goods, as was agreed in the last-minute BREXIT deal at the end of 2020. This is politically untenable for the UK and with PM Johnson enjoying a surging popularity, unlikely to be a give-in to the EU. The US, with President Biden’s Irish roots, has also stepped in asking both sides to find a solution that maintains the integrity of the Good Friday agreements.
Internal Issues in the EU
Internal issues continue to bog the EU, particularly with right of center governments in Poland and Hungary. The latest is a row over legislative enactments by Hungary barring LGBT issues in school curriculum.
Right wingers raising their heads on race and anti-Islam issues is also now visible in France where Presidential elections will be held next year. In Germany, on the other hand, Chancellor Merkel’s CDU is most likely to be challenged by the Greens.
EU’s Indo-Pacific Strategy
In April, after some of its major Member States had announced their own approached to the Indo-Pacific, the EU announced its Indo-Pacific strategy.
Noting the intense geopolitical competition in the Indo-Pacific as well as pressure on supply chains plus human rights issues, the EU was clear that the South China Sea should remain free and open. While underscoring its strategic focus on the Indo-Pacific, the EU identified specific areas for action – ocean governance, health, research and technology, security and defence, connectivity, and tackling global challenges such as climate change other than overcoming the devastating human and economic effects of the COVID19 crisis, ensuring a sustainable and inclusive green socio-economic recovery, and creating more resilient health systems. The EU would work with partners having their own Indo-Pacific approaches.
The announcement was a diplomatic plus for India with its major interest in the Indo-Pacific. At an India-EU Leaders’ Meeting in May, the two sides emphasized a “a free, open, inclusive and rules-based Indo-Pacific space”.
The second quarter of 2021 was a time of possible major forward movement in India-EU ties. Prime Minister Modi and Leaders of all 27 EU Member States participated in a virtual India-EU Leaders’ Meeting on 8th May 2021. The EU Leaders were in Porto, Portugal and an in-person Summit would have been a unique diplomatic opportunity to reach the entire EU leadership. COVID did not let that happen but India’s serious stake holding in the global order and the EU’s recognition of the same stands registered.
The India-EU Leaders’ Meeting was only the second time that the EU has used such a format; the other time being with President Biden in March this year. The Chinese had been keen on such an all-Leaders’ Meeting with the EU in September 2020 but, ironically, COVID prevented it from taking place!
The India-EU Leaders’ Meeting also celebrated 20 years of India-EU Summits which started in 2000 from Portugal when Shri Atal Behari Vajpayee was PM of India and Mr. Antonio Guterres, now the UN Secretary General, was Portugal’s Prime Minister and concurrently held the Presidency of the European Council. Interestingly, this time, the PM of Portugal, Mr. Antonio Costa, has familial links with Goa in India and greatly helped in pushing the dialogue.
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. A concrete outcome of the Leaders’ Meeting was an agreement for the EIB to provide Euro 150 million for the Pune Metro project. A Connectivity Partnership covering areas of digital, energy, transport and people to people connectivity was signed and should help in realizing concrete measures to strengthen India-EU links.
Partnership in climate change was underlined but the key issues at the global negotiations’ table, including the push for “net zero (GHG emissions) by 2050” and upping mitigation ambitions are bound to remain points of major contestation even though India, like the EU, is among the few major players on target to meet its commitments under the Paris Accord.
The Leaders’ Meeting took place against the backdrop of the huge fall-out of COVID in India and the support received from the EU and its Member-States. Obviously, vaccines and imperative for their affordable access across the world could not be shaded and India strongly pushed the EU to support its effort at the WTO to seek a waiver on COVD vaccine IPRs. Interestingly, even though at the India-EU virtual Summit in July 2020, both sides “called for the future COVID-19 vaccine to become a global common good”, the EU was reticent this time around. Obviously, commercial interests trump principles though the changed US position caught the EU off-guard and is bound to keep them under pressure at the WTO.
Given the fact that the EU’s real competency is as a common market and is in trade and economic issues, the most important take away from the Leaders’ Meeting is to restart negotiations on trade and investment, that have stalled for years, and have them overseen by a high-level interaction at ministerial level. The Joint Statement mentions separate trade and investment agreements, a useful approach of particular importance to India given that Bilateral Investment Protection Agreements were terminated in 2017 and there has not been much success in signing new Bilateral Investment Treaties. An investment agreement should also help change perceptions on Atmanirbhar Bharat, which gives an impression to some of protectionism on the part of India.
In the above context, the global size of the EU (GDP of USD 18 trillion, second only to US, and significantly ahead of China) and the fact that EU is India’s largest economic partner demands constant reiteration. In 2019-2020, it was India’s largest merchandise trading partner at around Euro 80 billion accounting for over 11% of India’s goods trade. Trade in services has also grown and is now just under Euro 30 billion. The EU is, moreover, the largest foreign investor in India with some 6000 European companies present in India. And the EU is the go-to place for the development of standards in India.
Ties between India and the EU, despite the Strategic Partnership between them, have an inherent propensity for problems. Recently, the issue hitting the headlines was recognition of COVID-19 vaccines with the EU not accepting COVISHIELD and COVAXIN and India threatening to quarantine EU citizens on their arrival in India. At the time of going to print, several EU Member States have accorded acceptance of COVISHIELD – given that this is a European vaccine, Astrazeneca, the issue wouldn’t have arisen had the Serum Institute of India made the required application with the European Medical Agency in time.
‘Cultivate Europe’ was noted as one of the action points for India’s foreign policy by External Affairs Minister Dr. S. Jaishankar in his book “The Indian Way”. It is good that the EU has recognized the importance of the Indo-Pacific, but it is really time to leverage economics and realize the potential of India-EU cooperation.
Posted on March 23, 2021
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.