Germany calls on India to open up more to free trade

German Chancellor Angela Merkel and Indian Prime Minister Narendra Modi (R) walk through a portico to an economic forum in Bangalore, India, 6 October 2015. [Kay Nietfield/ EPA]

Indian Prime Minister Narendra Modi is in Germany to drum up investment in his country. A new study claims that an EU-India free trade deal could boost Europe’s economy, Germany’s especially, by over €21 billion. EURACTIV Germany reports.

Germany has already seen the value of investing in India and has backed a number of energy projects. “Our solar energy partnership, which was launched in 2015 with the aim of increasing India’s solar energy capacity, has now entered a crucial phase of implementation,” Modi told German newspaper Handelsblatt.

The German Greens’ climate spokesperson, Annalena Baerbock, has praised India for indicating it wants to produce less energy from coal-fired power plants but warned that the country still “lies too deep in fossil fuel energy generation”.

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German Chancellor Angela Merkel met with Modi outside of Berlin last night (29 May), as a fresh round of biennial German-Indian government consultations kick off.  They were first held in 2011. The Indian leader described it as a “very good interaction”.

Beyond investment, other topics discussed included Brexit and its effects on both countries, the future of the European Union and terrorism.

For German companies, India is an important growth market. But the German economy often complains about tariffs and legal uncertainty, as well as excessive bureaucracy and a dearth of quality awareness among consumers.

Chairman of the German economy’s Asia-Pacific committee Hubert Lienhard said yesterday that “in terms of tariffs and other trade barriers, India has to open up more so that our companies can up engagement in the country.”

He called for negotiations on an EU-India free trade deal to resume. Brussels has been brokering an agreement with India since 2007 but talks have been on ice since 2013.

Part of the problem has been India’s insistence on protecting its domestic economy with high tariffs. This has prevented its citizens from benefiting from imported products.

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A new study says that Germany stands to gain a huge amount from an EU-India deal, should it ever see the light of day.

The Bundesrepublik’s GDP could grow by €4.6 billion, according to the IFO Institute, on behalf of the Bertelsmann Foundation. Only the United Kingdom, which is closely tied to India as a result of its colonial past, would benefit more from a trade agreement.

German carmakers, as well as other industrial producers, would be the biggest beneficiaries of an EU-India deal. The study claims that turnover could be increased by up to €1.5 billion.

Germany’s textile industry could, on the other hand, lose out, because India pays significantly lower wages and can produce clothes much more cheaply, also due to lower environmental standards.

But a free trade deal is unlikely in the current climate, especially given the troubles affecting the stalled TTIP negotiations. In Germany, opposition to the planned EU-US agreement was particularly vocal.

India ready to revive trade talks with the EU

In a move to resume negotiations for a free trade agreement with the EU, Nirmala Sitharama, India’s Minister of State for Commerce and Industry, said on Monday (23 March) that New Delhi was “ready to talk”.

Some economic theories insist that tariff-free trade, which encompasses all countries, would allow each country to produce the goods for which they have the best production conditions.

For example, industrialised countries could focus on complex technologies, while poorer countries would busy themselves with worker-intensive industries.

Economists believe that this form of trading would bring more prosperity than every country trying to produce every possible product in house.

 

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