The Brief – Time for an India free trade agreement

Even before the presidential jet of China’s leader, Xi Jinping, touched down in Paris on Monday (6 May), the usual intense level of anxiety and neurosis was triggered among EU leaders about how to deal with the Asian giant. Could a free trade agreement (FTA) with India be the answer to its Chinese conundrum?

In his meeting with French President Emmanuel Macron and European Commission President Ursula von der Leyen, who wanted to show Europe meant business, Xi Jinping was confronted on trade dispute issues and support for Russia’s military capabilities.

But in a classic move of Xiangqi, the Chinese version of chess, he outsmarted them by visiting Hungarian Prime Minister Viktor Orban and Serbian President Aleksander Vučić, both welcoming him as ‘Brother Xi’, quickly undermining any message of EU strength.

The conundrum for the EU is how it can continue to trade with the country while balancing its geo-strategic aims and still confronting them about their trade practices of dumping goods and subsidies.

Not to mention China’s increasingly aggressive behaviour towards its neighbours especially Taiwan, and the demise of human rights, seen by the persecution of the Uyghurs.

But, at the same time, it needs to work with Beijing to deal with global challenges such as climate change, future pandemics, and the future of Artificial Intelligence.

This balancing act is causing major headaches in the various western capital cities.

However fear not, maybe the antidote for the EU’s China problem comes in the form of another growing Asian giant, India.

While the EU is gearing up for its European Elections for 448 million people, India is in the middle of its ‘Festival of Democracy’, an election involving 1.4 billion people.

The country is already the fifth biggest economy in the world, with annual economic growth rates above Japan and Germany. At this level of growth it could well move to being the third biggest economy in less than five years.

Though average individual wages are still below China’s, India’s population is much younger- a huge potential market of current and future consumers for all those lovely European products.

Following Enrico Letta’s report on the future of the single market, and Mario Draghi’s report on the future of European competitiveness, there is little doubt that economic growth and job creation will take centre stage in the next EU political term.

What better way to set off this growth than quickly sign a Free Trade Agreement (FTA) with India, where negotiations have made little progress?

Of course, there are still numerous challenges and the devil is in the details, but there will be political impetus from both sides.

India is keen to produce jobs for its young population from possible European investments. Also, they can send skilled people to fill the shortfall of workers Europe suffers.

Additionally, it will send a strong message to China that Europe means business, and not only that it has access to a huge alternative market. It also shows that India can help Europe de-couple from its over-reliance on Chinese supply chains that von der Leyen has been pushing.

However, the ruling BJP party and Prime Minister Narendra Modi, the most likely winner of this year’s elections, worries Brussels for its perceived Hindu nationalism, undermining of democratic standards and human rights, and pressure on the media.

But they need to be realistic: India’s political culture will never be like Sweden’s.

Like an Indian wedding, politics is noisy, passionate, robust, and at times chaotic, but in the end, the people want to participate, and the voters will always have the final say.

Unlike their Chinese counterparts who could face jail, if they voice their concerns too loudly.

Therefore maybe Brussels should take a leaf out of the Chinese playbook, and not think merely in terms of election cycles, but in terms of decades, and start pivoting toward India with an FTA

The Roundup

EU Commissioner for Agriculture Janusz Wojciechowski told Euractiv he is grateful for the recent wave of farmers’ protests

Almost 40% of Slovaks believe European Union institutions are at risk of interfering in the upcoming European Parliament elections in the country

Bulgarian President Rumen Radev, emerging as one of the key future players in Bulgarian party politics, personally attended the banned pro-Russian “Immortal Regiment”.

How do you envisage the creation of a product that you ideally don’t want to use? That was the focal point of the Belgian presidency’s high-level meeting on how the EU should coordinate its response to antimicrobial resistance (AMR) from 6-8 May.

While all eyes were on Xi Jinping’s visit to Europe earlier this week – with China’s state subsidies to green industries particularly in the spotlight

For more policy news, don’t miss this week’s Tech Brief, Agrifood Brief, and the Economy Brief.

Look out for…

• Eurogroup meeting on Monday.
• Economic and Financial Affairs Council (Ecofin) on Tuesday.
• Commissioner Paolo Gentiloni meets with Bulgarian Deputy PM Lyudmila Petkova on Monday.

Views are the author’s

[Edited by Alice Taylor]