EU-India FTA: crucial to a more favourable business environment
The EU-India Free Trade Agreement (FTA) is under negotiation. Its conclusion will represent a major achievement in the economic relations, as the agreement has enormous potential in fostering the growth of the European and Indian markets.
Arnaldo Abruzzini is Secretary General of EUROCHAMBRES – the association of European Chambers of Commerce representing 20 million enterprises and 45 member associations
India is one of the fastest growing economies and is currently attracting ever more foreign investors. The European Union ranks first on the list of countries per number of investors in India. The potential of the Agreement as a tool of enhancing European economy is clear. It is very important for the Agreement to be concluded as soon as possible, which is deemed probable, given last week’s electoral results: the Bharatiya Janata Party (BJP) has been declared winner on the 16th of May. The party’s approach to economic issues, in fact, tends to be in favour of opening the Indian market to foreign investors and companies.
Nonetheless, the current economic scenario in India still impedes a smooth penetration by foreign companies in the national market. Drawing from our management experience of the European Business and Technology Centre (EBTC) assisting European companies and research centres in entering the Indian market, EUROCHAMBRES can clearly state that the conclusion of the Agreement is necessary to ensure a more favourable business environment in which companies can operate.
Intellectual Property Rights (IPR) protection in Indian legislation is far from attractive for European companies and researchers and provisions are often unclear. In the framework of the EBTC project, we established an IPR helpdesk, with the main aim of giving clear information and support in this sector to EU companies. However, more should be done at the political level. The FTA negotiations also focus on IP issues and the related chapter is expected to be extensive, going well beyond the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement’s standards, and even including the pharmaceutical sector. However, India being the leading global producer of generic medicine, local producers are trying to influence negotiations, asking for a looser regulation of this specific sector. Chambers think it is vital for the market access of European companies that EU institutions maintain a strong position, demanding a strong IPR chapter in the FTA and reassurance from the Indian Government that the protection of IP will be granted in a complete manner.
Public procurement in India is another major concern for European companies. Indian bureaucracy requirements are very burdensome for foreign companies and the grant procedures are too often conducted in a non-transparent way. The last government’s mandate is a clear example of this habit: one scandal on corruption in the public administration followed another and the government’s inability to tackle these issues is one of the main reasons why the opposition party is expected to win in the current elections. The FTA should contain an extensive chapter on the opening of the public procurement market to EU companies. Chambers believe that it is of the utmost importance that the European Commission is able to ensure, in the next rounds of negotiations, a clear regulation of public procurement and that it demands a strong commitment from the Indian Government in dealing with transparency problems.
In the event that a new breakthrough in the negotiations cannot be achieved swiftly, a new impact assessment needs to be commissioned to confirm the benefits of the FTA, not only on the European economy, but also on the Indian one. Such an exercise should ideally be conducted jointly by the European Commission and the Indian government in order to raise awareness on both sides about the positive effects of an ambitious FTA. It would also allow both countries to anticipate the adjustments needed in certain key sectors.
Therefore, the need for a prompt conclusion of the Agreement cannot translate into a reckless rush. EUROCHAMBRES urges the European Commission to maintain an ambitious but thoughtful approach throughout the entire negotiation phase.