GTRI Calls for Action on EU Trade Barriers Ahead of FTA Conclusion
The Global Trade Research Initiative (GTRI) stated on Monday that India must press the European Union to clear a dense web of non-tariff barriers for domestic products. This push should come under the proposed free trade agreement. The think tank emphasized that such restrictions often blunt the benefits of tariff reductions.
FTA Nears Finish Line After 18 Years
Negotiations for the India-EU free trade agreement started back in 2007. The conclusion of talks is now expected on January 27. This announcement will coincide with the visit of an EU team to India. The pact is finally nearing the finishing line after a lengthy eighteen-year process.
European Council President Antonio Luis Santos da Costa and European Commission President Ursula von der Leyen will be on a state visit from January 25 to 27. They are chief guests at the 77th Republic Day celebrations in New Delhi.
Key Barriers Facing Indian Exports
Indian products face multiple hurdles in the EU market. These include regulatory delays for pharmaceutical approvals. Stringent sanitary and phytosanitary rules affect food and agricultural exports like buffalo meat. Complex testing, certification, and conformity-assessment requirements create further obstacles.
Agricultural exports such as basmati rice, spices, and tea frequently face rejections or heightened inspections. This is due to sharply lowered EU pesticide residue limits. Marine exports encounter higher sampling rates over antibiotic concerns.
In manufacturing, compliance with regimes like REACH for chemicals adds significant cost. Evolving climate-related rules also pose challenges. These burdens hit MSMEs particularly hard due to their limited certification capacity.
Tariff Cuts Alone Are Not Enough
GTRI Founder Ajay Srivastava made a clear argument. He said tariff liberalisation alone will not deliver proportional export gains. Any trade deal with the EU must include regulatory cooperation, faster approvals, and mutual recognition.
India argues these EU measures are framed as consumer or environmental safeguards. However, their cumulative effect functions as a de facto trade barrier. Indian exporters face this dense web that often blunts the impact of tariff cuts.
Critical Concerns Over Carbon Tax
The trade pact should also resolve two critical Indian concerns regarding the carbon tax. The Carbon Border Adjustment Mechanism (CBAM) came into effect from January 1. It targets products like steel and aluminium that emit high carbon during manufacturing.
Srivastava noted this tax is particularly damaging for MSMEs. They face high compliance costs and complex reporting requirements. There is also a risk of penalties using inflated default emissions values.
The EU has already shown flexibility by offering CBAM carve-outs to US goods. India may ask for similar treatment. Without exemptions or safeguard language, the FTA could become structurally unbalanced. EU goods would get duty-free access to India while Indian exports remain constrained by Europe's climate-linked border measures.
Services Sector and Data Security Hurdles
On the services front, the EU limits remote delivery. It requires Indian firms to set up local offices. High minimum salary thresholds for Indian professionals create another barrier.
India argues these conditions defeat the purpose of digital trade. They weaken IT exports which rely heavily on cross-border delivery.
India is also seeking EU recognition as a 'data-secure' country under GDPR. This would allow smoother transfer of EU citizens' data. Without it, Indian firms face higher compliance costs than competitors from Japan or South Korea.
The EU wants India to adopt privacy rules closer to GDPR. New Delhi counters that its Digital Personal Data Protection Act, 2023 already provides adequate safeguards. Tighter alignment would burden India's fast-growing digital economy.
Other Negotiation Points
India is pressing for easier short-term business visas. It wants totalisation agreements to avoid double social security contributions. Mutual recognition of professional qualifications is another key demand.
The EU is seeking broader access to India's banking, legal, and financial services markets. With EU governments cautious about labour mobility, India's services gains will hinge on progress in data-secure status, totalisation, and temporary movement of professionals.
The 27-nation bloc also wants access to India's government procurement market. This market is worth about USD 600 billion and includes central government and PSU contracts.
India is likely to offer limited access. It points out that the EU's own procurement market remains largely closed to foreign firms. New Delhi may offer limited commitments similar to those agreed with the UK.
Geographical Indicators and Investment Protection
India and the EU are negotiating separate GI and investment protection pacts. The EU wants automatic GI recognition in India for products like Champagne, Roquefort cheese, and Prosciutto di Parma ham.
India insists these products must follow its standard registration process. Indian GIs such as Darjeeling tea, basmati rice, and alphonso mangoes undergo rigorous scrutiny before gaining protection in Europe.
The EU is a major source of foreign direct investment in India. Cumulative investment stock exceeds 100 billion euros as of 2024.
Since India scrapped most old bilateral investment treaties in 2016, the investment chapter has become critical. European investors seek predictability. India wants the agreement anchored in its Model Bilateral Investment Treaty. This limits investor protections to safeguard regulatory autonomy.
The EU is pressing for stronger investment protections. New Delhi remains wary, citing past disputes. In 2015, India terminated 22 of its 27 investment treaties with EU countries. It argued they exposed India to excessive legal claims and restricted its ability to regulate in the public interest.
