Trade
Finding a way forward on EU–India trade negotiations
Authors: Hosuk Lee-Makiyama, ECIPE and Shada Islam, College of Europe
Indian Prime Minister Narendra Modi cancelled most of his full-packed summit agenda with other world leaders to tend to the devastating COVID-19 crisis at home. Nonetheless, the EU–India summit in Porto went ahead on 8 May — albeit via video — at the insistence of the European Union. Some EU leaders are anxious to cultivate India as a counterweight to China’s growing political and economic influence in Asia and beyond, and willing to gloss over criticism of Modi on fundamental rights.
At first sight, the summit conclusions did not disappoint. To start, Europe is jumping on to the ‘connectivity’ bandwagon with a new EU–India infrastructure partnership that promises to bring the European Investment Bank into projects in India. The European Union and India also promise to cooperate on building resilient medical supply chains, vaccines and their ingredients.
Both Brussels and Delhi have been intensely criticised for mismanagement of the COVID-19 emergency and inclined towards blaming external and foreign powers. India has demanded a waiver on pharmaceutical patents and other intellectual property, while EU leaders like German Chancellor Angela Merkel voiced clear disapproval of any such move, citing concerns of impeding innovation.
What has caught attention is the decision to restart EU–India negotiations for a free trade agreement. After an eight-year ‘stocktaking exercise’ (a diplomatic euphemism for failure), the talks have long been deemed a lost cause. Critics are querying EU wisdom in starting trade negotiations with India at a time when the government faces growing criticism at home.
While both the European Union and India agree on the merits of a free trade deal, they have very different ideas about its content and how to proceed. India wants the European Union to immediately slash tariffs and increase purchases of Indian farm produce and other goods in an ‘early harvest’ as a token of good faith. By contrast, the European Union has proposed an investment deal as a stepping stone and reforms to protect geographical indicators like Champagne, Parma, and Assam tea.
What the European Union is asking for is essentially the package of concessions it recently negotiated with Beijing. EU demands are unsurprising given India’s restrictions on foreign investments are similar to China’s, especially in key EU export sectors.
For Brussels, a lot has changed since 2013. To start, the European Union has signed a string of high-quality trade agreements, and India is Europe’s last stop. After opening negotiations with South Korea, Canada, Japan, Mercosur (the Southern common market in South America), Australia and most ASEAN countries, EU exporters have very few markets left to negotiate with. Aside from India, only duty-free access to China or the United States could make a tangible impact on Europe’s macroeconomic growth prospects.
Meanwhile, much less has changed in New Delhi. India has adopted a policy to localise manufacturing through its Make in India program. Its Ministry of Commerce has some of the world’s most skilful or hard-nosed negotiators. They have no qualms about walking out of decade-long negotiations, as they did when India left the Regional Comprehensive Economic Partnership in its final rounds. India has even turned down a trade and security pact offered by the United States, objects to other countries liberalising and has challenged the legality of voluntary agreements in areas like e-commerce within the World Trade Organization.
India and Europe may disagree about who ought to be making the first down payment to move the process, but they also share some similarities. Both are complex and federalised democracies, consisting of states with vital vested interests. The European Union is well known across Asia for its defensive position on steel, cars, textiles, the digital economy and agricultural commodities. Meanwhile, Indian states have vested interests across farm goods, beverages, retail, textiles, services, pharmaceuticals and industrial machinery. In the EU–India talks, the domestic vested interests that overlap on one side match almost perfectly with the market access demands on the other.
The similarities between India and the European Union don’t end there. Both sides are also entrenched by their convictions about the justness of their cause. India is a champion of developing countries who rightly expect an equitable share of the world’s wealth and respect for its democracy and…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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