“We want to reach an ambitious and balanced agreement," European Council President Herman Van Rompuy said in an interview with the Times of India. "This may indeed take some time. We have, since the beginning, agreed to put the content of the agreement before its timing. Both sides have worked hard to progress towards the conclusion of the negotiations, but there are some critical areas which remain to be resolved.”
The negotiations, on-going for four years, have been held back mainly by differences over industrial tariffs and market access. Officials on both sides said the talks are in the “closing stage and considerable progress has been made.”
But the EU said it still has concerns over India’s high tariffs in some retail sectors, while India is demanding greater access for its service professionals to European markets.
The EU particularly insists on the reduction of tariffs on wines and spirits, dairy products and cars. The cheaper imports of dairy products from the EU's heavily subsidised and protected dairy sector could result in a significant dislocation of local producers of milk and dairy products in India, said Kavaljit Singh, director of Madhyam, an independent policy research institute based in New Delhi.
Auto manufacturers in India are concerned about the inclusion of finished cars (called Completely Built Units or CBUs), and are strongly opposed to any lowering of customs duties on CBUs under the proposed agreement, noted Singh.
There is a strong fear in the domestic automobile industry that lower tariffs will prompt European car manufacturers to import finished vehicles instead of assembling them in India. This move could also negatively affect future investments in the domestic automobile industry as well as employment generation, he said.
The EU is India’s largest trading partner, accounting for approximately €86 billion in trade in goods and services in 2010. Bilateral trade in goods alone rose 20% between 2010 and 2011, with exports amounting to €33.4 billion and imports to €33.3 billion, with Germany, Belgium and the UK accounting for around 60% of exports to India.
On the other hand, India accounts for 2.6% of the EU’s total exports and 2.2% of the EU’s total imports, indicating huge potential.
The proposed FTA would cut import duties on over 90% of all tradable goods during the next 10-year period and scale up bilateral trade in goods and services to $200 billion by 2013.
But Indian officials underline that If not carefully managed, a drastic elimination of tariffs on a wide range of agricultural and industrial products could lead to a decline in domestic output, massive job losses, significant tariff revenue loss and negative implications for the trade balance.
Another sticking point is opening up the Indian banking sector, as the EU wants India to remove restrictions on branch licences and foreign ownership of banks, and also calls for the removal of priority sector lending on locally incorporated EU-based banks.
"The European banks are not located in rural areas and are not even serving the poor and low-income groups residing in metropolitan and urban areas," Singh said. "There is no regulatory ban on these banks to serve the urban poor. Therefore, it is not regulatory discrimination or the lack of a market which is hindering the delivery of banking services by European banks but their business model which tends to “cherry-pick” the most profitable businesses in India."
NGOs call not to shut down pharmacy in developing world
Meanwhile, NGOs are reiterating their concern over intellectual property rules under the FTA would harm the access to affordable medicines to hundreds of millions of people.
“The EU, backed by multinational pharmaceutical companies, are trying to impose new intellectual property and investment (IP) rules in India, which would result in drastically higher medicine prices for the poorest people across the globe,” said Oxfam’s activists.
“At a time of austerity and declining aid budgets, especially for health, efforts to increase medicine prices for the world’s poor would be a double blow and have a devastating impact on the achievement of health-related Millennium Development Goals,” said Oxfam policy advisor Rohit Malpani.
India plays a critical role in the global medicines market, producing over two-thirds of all generic medicines; affordable versions of drugs incensed by multinational companies, which are largely sold to poor and middle income countries.
According to Oxfam, over 80% of all HIV and AIDS medicines are manufactured by generic companies in India, but if new trade rules are agreed the price of life-saving treatment would increase drastically.