India, EU to start next round of free trade talks on Monday | Economic and political news

During the ninth round, both sides will discuss core trade issues covering goods, services, investment and government procurement, as well as essential rules such as rules of origin, SPS (sanitary and phytosanitary measures) and technical barriers to trade.

The Carbon Border Adjustment Mechanism (CBAM) or carbon tax (a type of import tariff) will come into effect on January 1, 2026. It will initially be imposed on seven carbon-intensive sectors, including steel, cement, fertilisers, aluminium and hydrocarbon products.

India has expressed concerns about the two regulations as they would affect the country’s exports to the EU.

The European Union Deforestation Regulation (EUDR) will hit India’s agricultural exports to the EU worth $1.3 billion from December 2024, according to think tank Global Trade Research Initiative (GTRI).

GTRI said Indian companies are concerned about the potential negative impacts of regulations such as carbon taxes, deforestation regulations and supply chain regulations.

“These regulations will have a negative impact on India’s exports to the EU.

Once the trade agreement is implemented, EU products will continue to enter India duty-free, but Indian products may be subject to a tariff equivalent of 20-35 per cent as CBAM charges. Appropriate text may be inserted in the FTA chapters addressing this possibility,” said GTRI Founder Ajay Srivastava.

In June 2022, India and the European Union resumed negotiations after a hiatus of more than eight years. They were put on hold in 2013 due to differences on several issues.

“Initially, there were multiple rounds of negotiations from 2007 to 2013, but they were hampered by disagreements over market access, intellectual property rights, labour standards and sustainable development. By 2013, the talks had stalled, particularly over differences in tariffs on cars, wine, spirits, data security for Indian IT companies and government procurement,” it said.

He added that one of the main reasons for the delay is the divergent aspirations of both sides.

The EU wants to remove tariffs on more than 95% of its exports, including sensitive agricultural products and cars, while India is only keen to open about 90% of its market and is hesitant to cut tariffs on bulk farm goods, the GTRI said.

GTRI founder Ajay Srivastava said India’s major exports to the EU, such as ready-made garments, pharmaceuticals, steel, petroleum products and electrical machinery, would become more competitive if the pact is successfully concluded.

In addition, key export services such as telecommunications, other business services and transportation services will also see significant growth.

On the other hand, the EU will benefit from increased exports of essential goods from India, including aircraft and aircraft parts, electrical machinery, diamonds and chemicals.

“The services sector will also benefit from the FTA, with improved trade in other business services, intellectual property services, and telecommunications and information technology services. These sectors stand to gain the most from the FTA, driving economic growth and strengthening India’s trade relations with the EU,” Srivastava said.

The total trade value exceeded $200 billion in 2023. India exported goods worth $75.18 billion and services worth $31.13 billion to the EU, while the EU exported goods worth $63.44 billion and services worth $31.35 billion to India.

First published: 22 Sep 2024 | 18:09 IST