New Delhi: The European Union (EU) has introduced strict environmental regulations, including a carbon tax, deforestation rules, and supply chain laws. These regulations pose significant challenges in trade talks with India, according to the Global Trade Research Initiative (GTRI).
Indian exports may face extra costs due to the Carbon Border Adjustment Mechanism (CBAM). This mechanism could impose tariffs of 20-35% on Indian steel, aluminum, and cement exports to the EU, even if a free trade agreement (FTA) is reached. While EU goods could enter India without tariffs, Indian products might still face hurdles in Europe.
Ajay Srivastava, founder of GTRI, stated that India is seeking exemptions or compensatory measures within the FTA to address the impact of these regulations. He expressed concerns that EU climate policies could act as hidden trade barriers, making exports to Europe more difficult for India.
In addition to environmental rules, the EU has restrictions on remote services. Indian IT firms must establish local offices and meet high salary standards for workers in Europe. This makes it harder for Indian companies to offer remote services, contradicting the goals of digital trade. India hopes the EU will recognize it as a ‘data secure country’ under its data protection laws, which would help reduce compliance costs for Indian firms handling EU citizens’ data.
The EU is also asking India to strengthen its privacy regulations to align with the General Data Protection Regulation (GDPR). India recently enacted its own data protection law, but it doesn’t fully meet EU standards, leading to complications for Indian businesses.
On the services side, India wants to simplify the process for Indian professionals working in Europe. Meanwhile, European companies seek better access to India’s banking, legal, and financial services, and they want India to recognize professional qualifications for easier operation.
The EU is pushing for access to India’s government procurement market, hoping European firms can compete for public sector contracts in India. However, India is reluctant, as its own procurement market is not very open to foreign companies, and it aims to protect its small firms in critical sectors.
In investment discussions, India proposed its Model Bilateral Investment Treaty (BIT), while the EU seeks looser investment protection clauses. India is likely to stick to its current framework to safeguard its regulatory autonomy and limit foreign investor claims.
There are also demands for India to commit to binding labor rights, environmental standards, and data protection measures. India prefers a voluntary approach, arguing that strict obligations might conflict with its domestic regulations.
Intellectual property remains a sticking point, with the EU requesting that India adopt stricter rules that could raise the costs of life-saving drugs. India is wary of these changes, fearing they could hinder its generic drug industry.
In terms of Geographical Indications (GIs), the EU desires India to give certain European products automatic GI protection, bypassing standard registration processes. India insists that all products, including those from Europe, should go through its established procedures.
This India-EU trade agreement has the potential to enhance trade and investment significantly. The EU, with a GDP of $18.4 trillion and a population of 448 million, is a major player in global trade, while India, with a $3.9 trillion economy and 1.4 billion people, is expanding its trade footprint.
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Source linkFTA, EU, GTRI, EU'S AGGRESSIVE ENVIRONMENTAL REGULATIONS BIGGEST HURDLES OF FTA TALKS WITH INDIA: GTRI
