Just recent days have brought a promising India summit with the European Union, and another promising agreement with the UK. India is already working on a free trade agreement with the UK, and it has agreed to resume talks for one now with the EU. Talks earlier on an FTA with the EU went nowhere when the UK was a part of it. The reopened question now is what could be agreed with the UK and the EU minus the UK now that could not be agreed when the two negotiated as one.
The India summits with the UK and the EU have remarkably parallel overtones, primarily and predictably over COVID-19. At his meeting with British Prime Minister Boris Johnson, and later at the EU summit, Prime Minister Modi pledged more active cooperation on fighting coronavirus through and past the present crisis. EU leaders were particularly warm in appreciating Indian support before it got engulfed in its present crisis.
To further that, the two “agreed to cooperate on resilient medical supply chains, vaccines and the Active Pharmaceutical Ingredients (APIs), and on the application of international good manufacturing standards to ensure high quality and safety of products.” The agreement with the UK was broadly similar.
Other parallels emerged. Britain has made the Indo-Pacific region a foreign policy priority, but so have leading EU countries such as France, and the EU itself as a bloc. The agreement was expressed over common strategies to fight climate change. But it is the apparently common goal of reaching free trade agreements with both that will prove the trickiest area to progress in.
Consider for a moment, cars and Scotch whisky. Through years of FTA negotiations between 2007 and 2013, Britain as then member of the EU pushed for lower Indian tariffs and reduced Indian limits on cars and Scotch whisky imported from Britain. That is not a demand India met then, and not one for India to meet now. India always has an election round the corner, and it’s hard to see Prime Minister Modi seeking the popular vote citing any lower duties on Scotch whisky as an achievement of the government.
If through the course of the talks India does make concessions here, the related question is what India may get in return. One of India’s strongest talking points here is a curious one—it is the easier movement for Indian professionals to Britain, or to the EU as the case may be. The Indian ‘demand’ is for European countries to take away some of its brightest and best in ‘exchange’ for giving them greater access to the Indian market. This may do something for a few among an Indian elite; it’s less clear what it can do for India and its economy.
For Indian exporters, the two markets are far from equal. Concessions for Indian goods coming into the EU could bring an expansion of exports at a time when Indian manufacturers need to step up exports. The EU is already the largest buyer of exported Indian goods. The decision to resume talks on an FTA is clearly the most significant outcome of the EU summit. The declared aim is a “balanced, ambitious, comprehensive and mutually beneficial trade agreement.” The two agreed to find solutions to “long-standing market access issues” and to improve investment opportunities. All this, easier said of course than done.
On investments from India, Britain has had a huge and hugely disproportionate advantage over the EU. A report produced by the firm Grant Thornton alongside the Confederation of Indian Industries (CII) shows 842 Indian firms operating in the UK, that created 110,793 jobs in the UK last year, 6,000 more than over the year before. This was when it was well known that Britain is due to exit the EU at the end of 2020. Britain’s position as a stand-alone country outside of the EU, far from deterring investors, appears to have become more attractive.
Britain’s promise to cut the red tape of the EU kind and prospects of eased regulation could in fact attract yet more Indian capital, and signs of that have been emerging this year already. Britain may be less equal in the size of its consumer market but emerge as unequally more attractive for investment. Governments can only go that far in setting up a framework. Money and business can move largely independent of that.
—London Eye is a weekly column by CNBC-TV18’s Sanjay Suri, which gives a peek at business-as-unusual from London and around.
Read his other columns here
(Edited by: By Ajay Vaishnav)
First Published: IST