India has urged the European Union (EU) to create a meaningful and balanced Free Trade Agreement (FTA) aimed at generating mutually beneficial outcomes for both Indian and European businesses. This appeal was made by Commerce and Industry Minister Piyush Goyal during the launch of the Federation of European Business in India (FEBI) in New Delhi. Goyal stressed that India-EU trade relations must be free from unfair practices and irrational standards that serve as barriers, particularly calling out duties imposed by the EU on steel and aluminium products, which he believes violate global trade rules.

One of the key points raised was the criticism of the EU’s Carbon Border Adjustment Mechanism (CBAM). According to Goyal, this regulation does not align with the Paris Agreement's pledge to support developing nations responsibly. He noted that developed countries must shoulder the burden of assisting developing nations like India in addressing climate change, without resorting to retaliatory measures that harm global trade dynamics.

Additionally, Goyal highlighted that many European companies operating in India contribute to trade deficits by importing products from their subsidiaries abroad. Addressing these concerns, he called for a broader perspective when assessing trade imbalances between the two regions. Indian companies, for instance, face challenges when winding down unviable operations in Europe due to stringent labor laws and complex regulations. In contrast, India offers a more business-friendly environment, with Goyal pointing out that labor disputes have been notably absent in the country for nearly a decade.

As a gesture of goodwill, Goyal referenced India's commitment to reversing policies that hinder foreign investment, such as the government's recent decision to eliminate retrospective taxation—a policy that previously affected companies like Vodafone. He reassured the EU that no similar retrospective actions would occur in the future, urging for enhanced cooperation rather than retaliation.

Goyal announced a crucial meeting scheduled for October 23, where he will engage with EU ambassadors to further discuss the FTA and address lingering concerns. He noted that India's vast market of 1.4 billion people offers immense potential, estimating that bilateral trade could surge to one trillion Euros if both sides reach a balanced trade agreement.

On the EU’s side, EU Ambassador Hervé Delphin acknowledged that despite nine rounds of negotiations, progress on the FTA has been limited. He emphasized that the path forward would require both parties to recalibrate their expectations and explore potential packages of mutual concessions. Delphin remarked that while both India and the EU are committed to advancing trade relations, any significant breakthrough in the FTA will likely depend on political decisions by the new European Commission, which is set to convene by the end of 2024.

In addition to the FTA, the EU is also working on an Investment Protection Agreement and a Trade and Technology Commission (TTC) with India. The TTC, which is only the EU's second such commission after its one with the United States, is expected to focus on collaboration in research, technology, innovation, and clean technology. These meetings are planned for the end of 2024, offering both sides the opportunity to enhance bilateral cooperation beyond just trade.

Goyal, for his part, expressed optimism about meeting with the new EU Commissioner to resolve ongoing issues under the TTC framework. However, he reiterated that the EU should not expect India to adopt an FTA similar to those it has with developed nations. India requires a transitional period to progress from a low to high per capita income country, and any agreement should reflect this developmental phase.

Moreover, Goyal stressed the importance of recognizing the high-quality standards of Indian companies and urged the EU not to introduce irrelevant issues into the FTA discussions. This is crucial for successful FTA negotiations that respect the nuances of India's unique economic landscape.

Key Concerns Raised by Indian Companies:

Unfair trade barriers: Many Indian companies face challenges due to the EU's complex regulatory environment, which hampers their ability to operate efficiently in the European market.

Retrospective taxation: Indian companies had previously expressed concerns about retrospective taxation policies imposed by the government, which discouraged investment. Goyal reassured that such policies have been reversed.

Labor laws: Indian companies have faced difficulties in closing unviable operations in the EU due to restrictive labor laws, contrasting with India's more business-friendly environment.

For European businesses, India represents an untapped market with significant growth potential. However, challenges such as bureaucratic hurdles, compliance issues, and differing trade standards remain stumbling blocks in strengthening trade ties.

India’s appeal to the EU for a fair and balanced FTA comes at a time when global trade dynamics are shifting. With the prospect of a trade deal that benefits both sides, the groundwork is being laid for long-term economic collaboration.

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