An analysis of India-EU bilateral trade: Analyzing the roadblocks of ongoing negotiations

Abstract

The relationship between India and the European Union dates back almost half a century to 1962, when India became one of the first countries to formally enter into diplomatic relations with the then European Economic Community. However, formalized trade relationships started in 1973, when the first Framework Agreement was signed by both parties. The trade and economic cooperation agreement which was signed in 1981, took this one step further1. However, it was post liberalization and opening up of the Indian economy in the 1990s that trade between them really kicked off. At this point of time, the EU had decided to shift its focus to obtaining and maintaining a global footprint. The boom and rise of the Asian economies during this decade prompted the European Commission to come up with its “New Asia Strategy” in 1994. The focus of this strategy was to establish new relationships and build on existing relationships in order to strengthen the presence of the EU in the booming Asian economies, a feat in which it was severely lagging behind other developed economies such as the USA. The first formal bilateral summit occurred in the year 2000 in Lisbon, where the two entities started talking about a broader strategic partnership. The fifth bilateral summit in Hague in 2004, saw the EU formally upgrading its relationship with India from a purely economic one into a “Strategic Partnership”. India was then only the sixth country to be formally recognized as a strategic partner after Japan, USA, Russia, China and Canada. It was during the sixth summit in 2005, that a Joint Action Plan was crafted to draw a comprehensive roadmap of the EU-India strategic partnership2. The focus of the plan was to broadly improve bilateral trade and investment by stimulating economic and political dialogues to remove the existing barriers. This was followed by the establishment of a High Level Trade Group (HLTG) to facilitate the establishment of this objective while also focussing on broader environmental and social issues2. The submission of the HLTG report in 2006, which recommended an expanded and comprehensive trade agreement between India and the EU, set the context for the negotiations of the proposed FTA between the two trade entities in Brussels in 2007.