New European Commission can kickstart EU-India ties

Some 6,000 European companies are present in India, providing directly 1.7 million jobs and indirectly 5 million jobs in a broad range of sectors

After several delays, multiple leaks, political manoeuvrings, muscle flexing by Hungarian Prime Minister Victor Orban and a dramatic last-minute resignation of French Commissioner Thierry Breton, on September 17, the Commission President Ursula von der Leyen presented her new team of European Commissioners for the next five years. 

She has revealed the names and the portfolio of her new ‘cabinet members’. But it is not yet over for them. All the 26 nominees still need to undergo confirmation hearings at the European Parliament early November. Their grilling is likely to be interesting as many appointees will face their past controversies and lack of experience and competence. Brussels is haven for many rejected politicians in their home countries, and many get political favours as Commissioners. Thierry Breton was different; he was a technocrat, head strong and he knew his job. His letter to Elon Musk posted in X ahead of Musk’s interview with Donald Trump was the last nail in the uneasy and difficult working relationship between the Commission President and the Commissioner.

Developments in the recent weeks in Brussels and the announcement of new College of Commissioners reveals that von der Leyen is reborn as Brussels’ undisputed power broker. Having been born and raised in Brussels, she has taken cue from Belgian politics and mastered the delicate art of political plumbing on appointing the College of Commissioners.

The drama in Brussels, which is still unfolding, speaks of the conflict between national politics of the Member States and the European Union politics at the highest political level. Brussels has always been Europe’s complicated capital, and the European Union remains as complex structure as ever, which is not easy to learn, swallow or digest. However, over the years the EU has been able to make significant reforms, especially fiscal, monetary and regulatory and it has happened only because the EU wields power, and it knows how to compromise with member countries national interest for the larger interest of the Union.

Despite this complexity, EU is the only unified global economic market in the world and its importance cannot be undermined or underestimated, by its partners, including India. The EU matters for India as much as United States matters. No one will deny that the strategic partnership agreement India inked 20 years ago in 2004, has remained more in rhetoric and less in substance. The EU and India therefore need to introspect and reset their relations.

EU-India relations remain difficult to characterise. Significant strategic differences remain, including disagreements over trade practices. And most notably, India has been the only major democracy not to directly condemn Russia over its conflict with Ukraine. This has not gone down well with Europe. New Delhi has long pursued strategic autonomy in its foreign policies as it welcomes a multipolar world and aspires to be a leading power, rather than just a balancing power. The EU will need to digest this fact. 

Strategic partnership challenges

In a changing global environment, the EU cannot ignore the fact that India today is much too an important partner and its importance will only keep rising. With significant changes sweeping across the continents, the new Commission’s success is very much linked to how it handles its relations with India. 

The EC cannot overlook the fact that by the time its tenure expires in 2029, India will be on way to become the third largest economy.  Also, India is expected to drive 20 pc of the world’s economic growth over the next decade.

On its part, India will need to actively engage with the proposed new EU team. The EU is India’s largest trading partner, accounting for EUR 124 billion worth of trade in goods in 2023 and trade in services between the EU and India reached EUR 50.8 billion in 2023. Some 6,000 European companies are present in India, providing directly 1.7 million jobs and indirectly 5 million jobs in a broad range of sectors.

But beyond trade, too, the EU is important for India in terms of strategic cooperation around the world as well as in the domains of research and development and academics.

Access to Indo-Pacific 

India is central to EU’s Indo-Pacific Strategy and for combination of geopolitical, strategic and regional considerations means that EU must keep engaging with India and it would be extremely important for the new EU’s High Representative to focus on the challenges in the region and how EU and India can jointly address them.

However, the EU has not been able to address the China challenge and for the sake of trade, it has on many occasions overlooked the Chinese threat. This has made India very sceptical of EU’s willingness and courage to face China. 

Sustainable development 

India aiming to install 450 GW of renewable energy by 2030 (Photo: Canva)

Another area where the two countries can do a lot together, but have failed so far is sustainable development. Commission President Von der Leyen is set on tightening the norms around carbon emission, not just in the EU, but also around the world, India may come in its crosshairs. 

On energy, von der Leyen has made clear that she intends to pursue the EU decarbonisation policy already embarked upon during her first mandate, and save the continent’s industrial heartlands and rebuild its energy systems in the process, which will affect few energy and climate stakeholders. India fears this will be used by the EU as a non-tariff barrier and it has raised its concern on many occasions.

India says that EU’s Carbon Border Adjustment Mechanism (CBAM) will take away the ability of developing countries like India to finance decarbonisation and that these unilateral measures shift the burden of the transition. However, India must accept that the EU’s carbon policy is a challenge, it is real, and it must be negotiated. India’s strategy so long has been to delay the implementation, but the new Commission’s firmness means that India must seriously look way forward.

As India has set its ambitious energy transition goals, aiming to install 450 GW of renewable energy by 2030 and achieving net zero carbon emissions by 2070, the success of India’s energy transition is crucial not only for its domestic economy but also for global climate goals. EU has an opportunity to partner with India for a new momentum in the clean energy corridor.

Free Trade

The EU is India’s largest trading partner, accounting for EUR 124 billion worth of trade in goods in 2023 (Photo: Canva)

Ironically, even though trade is one of the strongest bonds between the EU and India, trade policy has remained one of the weakest areas of bilateral engagement and both sides have wasted years on trying to agree on a new bilateral trade agreement. While the two sides are reported to have made some progress in their nearly two decades of FTA negotiations, they still appear to be far apart. If after 17 years of negotiations, any party decides to withdraw from it or the negotiation is suspended, it will dent the spirit of negotiation and will reflect the trade diplomatic failure. Both must learn how to make compromises where it is needed. Reaching an agreement rapidly ought to be the top priority for both the sides. 

Semi-Conductor

Global economies including the European Union exhibit high dependency on semiconductor imports with China  (Photo: Canva)

Another priority for EU Commission and India is stepping up cooperation on semi-conductors and supply chain. EU will require to see how it can take advantage of India’s potentials in the semi-conductor field. As the US has recently announced a “new partnership” with India to explore semiconductor supply chain opportunities, which will include a “comprehensive assessment” of India’s existing semiconductor ecosystem, regulatory framework, workforce and infrastructure needs, it would be useful for the EU to develop such cooperation with India too. 

Global economies including the European Union exhibit high dependency on semiconductor imports with China and Taiwan being prominent suppliers. And notably as the EU wants to reduce its dependency on China, and as India’s semiconductor industry is poised for rapid growth, and as India’s aspirations to become the next global semiconductor leader are bold and ambitious, collaboration in this field will open immense potentials for both. 

Artificial Intelligence

EU and India should consider launching an Artificial Intelligence Task Force (AI-TF) (Photo: Canva)

 It would be important for EU and India to enhance cooperation in emerging technologies, artificial intelligence (AI) and data regulation. EU and India should consider launching an Artificial Intelligence Task Force (AI-TF) which should aim at aligning the leadership of India and the EU countries in the realm of artificial intelligence. It will help advance AI concepts and principles, drive multistakeholder processes, and promote the development and commercialisation of AI technologies.

Before the elections, the EU had already lost precious time in enhancing its ties with India, primarily because it was too focussed on Ukraine and its domestic issues. But now, with a fresh start, both here in Brussels and there in New Delhi, there is no more time to be lost. The two sides need to sit across the negotiating table and get up only when they have an agreement. 

Kicking the ball further down the road will only come back to haunt both the sides.

(Sunil Prasad is the Secretary General of Brussels based Europe India Chamber of Commerce and the views expressed here are his personal views.)