Opportunity for India as UK, EU Involve in Potential Trade War post-Brexit

The recently held EU-India Summit witnessed India and the European Union sharing mutual concerns on the slow progress of their Free Trade Agreement (FTA) negotiations. Besides signing a financial contract for Bangalore Metro Rail Project Phase-2-Line R6 for USD 352 million out of the total loan of USD 587 million, the two sides laid down the agenda for Action – 2020 that underlined their vision to cooperate in the sectors of ICT, investment, energy and 5G communication among others.

In 2007 India and the EU started talks on an EU-India broad-based trade and investment agreement with an objective of improving their market access for goods by eliminating tariff lines, but negotiations had been stalled since 2013. Key points of contention include EU’s demands that India remove tariffs on automobile and automobile parts, wine and spirits, as well as their differences over intellectual property rights (IPR). The EU has indicated that it will launch an investment facilitation mechanism for EU investors in India and the strong engagement of the European Investment Bank in India as some key steps forward to improve their cooperation.

Brexit seems to have presented both the UK and the EU an unprecedented opportunity, to step up and thrash out an agreement of their own. Almost a year since British Prime Minister Theresa May visited India to explore and lay the foundation for future trade, economic and investment deals, the European Union has underlaid a similar agenda and reinvigorated attention to relaunching its bilateral FTA negotiations with India.

On her visit last year, May had indicated that India will be high on Britain’s list of potential trading partners after it leaves the EU in 2019. Industry analysts extrapolated that the UK can increase exports to India by more than USD 2.6 billion just by cutting EU red tape.

Meanwhile, European Council President Donald Tusk has pitched for an early resolution of India-EU free and fair trade agreements stressing that the deal is economically important for the Indian and European companies and citizens to prosper.

EU is India’s largest regional trading partner; the second largest investor; and the largest destination for Indian exports. India-EU bilateral trade in services was USD 30.75 billion in 2015 comprising Indian exports of services to the EU worth USD 15.17 billion, and Indian imports from the EU worth USD 15.58 billion.

Between April 2000 and April 2016, FDI equity flows from EU totalled USD 73.97 billion. At 25.34 percent of total FDI flows to India USD 291.87 billion makes EU stand out as India’s largest source of FDI.

This is probably the best time for India and the European Union to join hands for stimulating bilateral trade and investment, amid the shaky world order, in which the US is reducing its global influence while China is moving forward to fill the vacuum. The UK, on the other hand, remains in a state of impulsiveness, as it struggles for the very best outcome from Brexit amid all the possible contingencies.

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