Feeling the heat from an unpredictable Trump administration, the EU and India have lined up ambitious outcomes for the summit in late January that the 27-nation bloc believes will help set not just bilateral but also global agenda. These include not just the free trade agreement (FTA) under discussion but also a defense and security partnership and a determined effort to accelerate the IMEC connectivity project. These are expected to be among the key takeaways from a joint statement that will follow the summit. Both sides have not allowed the lack of a geopolitical alignment, most noticeably on Russia, to come in the way of trade negotiations in a sign of the political will at the highest level to carry the relationship to the next level. While a dozen chapters are yet to be closed, India and EU are confident they will be able to reach a deal in time for the summit that is tentatively scheduled for January 27. However, both sides need to address differences over critical issues related to steel, cars and the EU’s Carbon Border Adjustment Mechanism (CBAM), a carbon tax on certain goods. These 3 issues remain major sticking points in the FTA talks. If the summit does materialize on the same day, EU chiefs Ursula von der Leyen and Antonio Costa, will likely also be the chief guests at India’s Republic Day parade a day earlier. India has invited both to attend the annual celebrations. Before that summit though, the EU will observe with interest the outcomes of another summit that PM Narendra Modi will have with Russian President Vladimir Putin in December. Another contentious issue is the Paris Agreement, the international treaty for climate action, that both sides have joined but the EU wants the same commitment as an essential element in the agreement. India, however, sees it as a sovereignty issue that should not be mixed with trade. Political intervention at the highest level will likely be required to break this deadlock. The FTA of course tops the list of expected deliverables from the planned January summit. Keeping in mind that both sides are at different stages of development and have different sensitivities, diplomatic sources said, the EU is looking for a balanced, commercially meaningful and living FTA agreement that will evolve over time, allowing both sides to engage on any difficult issue in the future. According to the EU, the economic case for an FTA with India, which can facilitate reliable trade relations along with stable and integrated supply chains, had always been there but it has now been reinforced by the geopolitical situation. The FTA will be tailored specifically to meet the needs of both sides and the EU, accepting an asymmetry in favor of India, is ready to liberalise five percentage points more trade than India does. While only 12 chapters have been closed so far, and a lot of difficult technical and political work is still required, the EU believes that’s not really a good indicator of progress in talks as 90-98 percent of work on most remaining chapters or issues, including agricultural and non-agricultural market access, has been completed. India and EU need to address each other’s concerns related to steel and cars respectively for a relevant agreement though. While the Indian government seeks greater clarity about its steel exports, the EU wants decent market access for its car sector for the agreement to be commercially meaningful. Carbon import tax levied by EU remains a contentious issue amid reports that it could even act as a deal-breaker. According to the EU, both sides have their own internal laws and one can’t negotiate amendments to these through an FTA. Any politician doing that would be dead-on-arrival back home, said a source on condition of anonymity. However, both sides are looking at whether they can use a “living FTA” as a platform to facilitate the navigation of each other’s regulatory environment. Fortunately for the FTA, India’s purchase of Russian oil is not an issue in the ongoing talks. Creation of an EU-India Security and Defense Partnership that would also facilitate defense industrial collaboration, without discounting technology leakage threat, is expected to be a significant deliverable. Progress is also expected in efforts by the EU to advance, in the IMEC framework, the EU-Africa-India Digital Corridor through a submarine cable system connecting Europe to India via the Mediterranean, the Middle East and Eastern Africa. This EU initiative, as the new strategic agenda says, will provide ultra-high-speed, secure, and diversified data connectivity resilient to disruptions caused by natural disasters or acts of sabotage.
