Maurizio Cellini

Biz@India

September 2015

EU-India FTA to Boost the Relationship

MAURIZIO CELLINI, First Counsellor, Head of Trade and Economic Affairs, Delegation of the European Union to India

The conclusion of negotiations on the Free Trade Agreement (FTA) between India and the European Union would give a boost to trade relations in many sectors, ranging from the automotive industry to services, says Maurizio Cellini. This would be the biggest FTA in the world involving more than 1.7 billion people.
 
What are the next steps in the European Union-India relationships in terms of trade? What are the prospects?
 
The negotiations on a Free Trade Agreement (FTA) between India and the European Union have been going on for eight years (and a dozen rounds of negotiations) with interruptions mainly due to elections in India and in the EU. But now, with the change in leadership of both India and the EU, it is certainly time to make progress. As substantial work has already been done, it’s a matter of both parties coming together at the negotiating table to discuss, constructively, the differences that still exist.

Although it will take several years before we see the full effects of the trade liberalisation to be translated into reality, the potential is huge for both India and the EU; and both sides have clearly expressed strong interest in resuming talks.

How much will the conclusion of the Free Trade Agreement boost the EU-India trade relationship?

In general, we have noticed that after the conclusion by the EU of other trade agreements, trade has flourished and increased substantially in volume with the partners involved.

While it’s difficult to forecast the exact impact of this FTA, I can tell you that it will be positive for both sides, as there is immense untapped potential for trade between the EU and India.

The more ambitious the FTA is, the larger would be the gains for both sides. An estimate suggests, in the short run, in terms of trade in goods and services, India could add EUR5 billion and the EU over EUR4 billion to their respective GDPs. The benefits could go up by several billions of euros along with the employment generated if we consider the additional investments that could come with the streamlining of regulations in India.

For example, by simply lowering import duties, there would be an immediate boost to two-way trade as the products become more affordable in India, and vice versa. But the FTA should also take into consideration non-tariff issues such as regulatory procedures, standards, public procurement and geographical indications.

The regulatory aspects are important because technical issues can become a serious impediment to trade.

Beyond its economic value, the conclusion of the FTA also signals a political willingness between the two sides to foster efficiency through the exchange of best technologies and practices between EU and India.

There have been roadblocks in the FTA negotiations, like in the pharmaceuticals sector, with the recent ban in the EU of 700 Indian generics causing a temporary halt in discussions between India and the EU. What is the way forward from there?

For us, the decision has been the result of an inspection conducted by the European Medicine Agency which has identified some irregularities in the testing of certain generic drugs done by a laboratory in Hyderabad. While this is seen by India as a roadblock in the negotiation, this is not our interpretation. The two issues should not be related and we hope that the FTA talks and the recent temporary ban on certain medicines can be dealt with on two separate tracks.

Let me also stress that this decision to ban, temporarily, certain medicines, has been the result of a long procedure – started in 2014 – with the knowledge of the Indian authorities and the concerned laboratory itself. In the end, it was conclusively established that certain tests were irregularly done, and therefore that certain medicines had to be stopped.

But there are ways to lift this ban. New tests can be undertaken, fresh investigations can be done, and if this laboratory, or other laboratories, can show that bio-equivalence certifications are good, the ban can be lifted.

I would like to reiterate that, for us, this topic should not be an impediment to the progress of the EU/India FTA negotiations.

What are the sectors in particular that would get a boost from the conclusion of the EU-India FTA?

Our economies are complementary: India exports to the EU primarily raw material and finished products, while the EU exports to India mainly semi-finished products. Trade certainly has a lot of potential, to grow further.

We have great interest in the automotive sector, from fully assembled vehicles to automobile parts, because India is a big market. Unfortunately, the market is currently protected by high tariff barriers. Similarly agriculture and alcoholic beverages are also sectors where we would have a strong interest. Europe is a quality producer in these areas and the Indian market is big and diversified, with large unmet demand.

But the whole spectrum, from agriculture to industrial products and services, would benefit from the FTA agreement, on both sides. For Indian industrial companies, which cannot produce everything, it will be for instance an opportunity to buy cheaper key components, such as in the electronics sector or engineering, to boost their own competitiveness. India would of course also benefit substantially in the export of agri products, textiles, machinery and medicines. The services sector also would certainly benefit.

India aims at developing smart cities. What is the way, from the European Union side, to address these opportunities in a comprehensive way?

While European companies that have the capacity, the technology and the ambition to address this huge market are also in competition with each other they can come together in consortia under the EU sponsored platform. Our attempt is to showcase the EU as a partner without prejudging the natural competition between companies. We are working to provide one such platform for the Clean Ganga initiative and will present this initiative to the Indian Prime Minister Office (PMO) soon, well before the end of the year.

Smart Cities is a very important and forward-looking initiative for India. We have been working with Mumbai to help them address the challenges of urbanisation by sharing European experiences and expertise. In addition, we have recently launched the World Cities Project under which three Indian cities- Mumbai, Navi Mumbai and Chandigarh are being paired with three European cities (Copenhagen- Denmark, Stuttgart-Germany, Lazio-Italy). The cooperation agenda includes urban innovation (the smart city) and green technologies (energy efficiency, low carbon development). Actions are designed to increase so-called ‘triple-helix cooperation’ between governments, research organisations and business.

World Cities will also strengthen market opportunities and job creation while pursuing the sustainable economic development of the cities involved, thus fostering win-win cooperation.

Moreover the EU companies have state-of-the-art technologies for infrastructure, urban development, clean and renewable energy. They can play a vital role in the success of these commendable initiatives.