Growing protectionism to make FTA with European Union tough, say experts

The total trade was close to $90 billion.
As India and the European Union agreed to resume negotiations for a free trade agreement (FTA), experts believe the road ahead may not be smooth, amid growing protectionism across countries caused by the outbreak of the pandemic. 

Experts said reducing tariffs and negotiations could be complex as the markets have changed over the past few years. Besides, growing protectionism around the world has resulted in countries, including India, imposing higher tariffs on items.

“When we are talking about market access issues in the goods sector, there will be some challenges. Since the talks remained in a stalemate, our tariffs have gone up. The government had announced the Aatmanirbhar policy, trying to protect the industry and to allow the manufacturing sector to grow here. In this situation, cutting tariffs could be one of the challenges,” said Biswajit Dhar, professor at Jawaharlal Nehru University.

Formal negotiations between India and the EU were stalled eight years ago over differences on a range of issues, as the bloc insisted on cutting import duty on automobiles and wine. The negotiations were launched in 2007.

“Since then (2013), average tariff has gone up by 3 per cent. And sentiment here is to protect the industry. Need to see how the government will accommodate the demand of cutting tariffs,” Dhar said. 

On Saturday, India and the EU agreed to resume negotiations for balanced and comprehensive free trade and investment agreements. Negotiations on both the trade and investment agreements will be pursued on parallel tracks to conclude them together at an early date. To diversify economic engagement, India and the EU also agreed to have dedicated dialogues on WTO issues, market access issues, and supply chain resilience.  The development assumes significance as EU nations collectively were India’s largest trading partner in goods 2019-20, ahead of China and the US. The total trade was close to $90 billion. Besides, resuming trade deal will give fresh impetus to the relationship between India and the EU, especially after Brexit.

Arpita Mukherjee, professor at Indian Council for Research on International Economic Relations (ICRIER), said while entering into a trade agreement with an export market such as the EU is a good move, it is very important for negotiators to have sound knowledge of the market as a lot has changed since 2013.

“FTAs are negotiated in terms of market access, regulatory transparency and consistency. In market access, you have tariff and non-tariff barriers, therefore, how do you negotiate and how much do you know about the market. The market has changed. That is very important for negotiators,” Mukherjee said.

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