Forty-one years after establishing diplomatic ties, India and the European Union (EU) formed a strategic partnership at The Hague Summit in 2004. From the international community’s point of view, this held great significance. India was one of only ten countries that the EU had chosen as its strategic partners. There was great potential for future growth and cooperation in the spheres of trade, connectivity, political and economic development policies, defence and regional security, building a rules based institutional architecture centred on multilateralism and a common vision of global governance that had shared values and principles. Fast forward to 2019 and this ‘strategic partnership’ has been a partnership that is described by many as one that is high on potential and loud in rhetoric, but sadly low on substance with little convergence on prickly issues. The EU-India strategic partnership has yet to realise a majority of the initial goals it set out for itself way back in 2004-05. It unfortunately remains a relationship that never found its momentum despite leaders from both India and the EU, ranging from all sides of the spectrum, calling each other ‘natural allies’ that have a common vision for shared prosperity. Since 2014, however, a fresh attempt has been made to renew and de-ice this partnership with new leaders at the helm of affairs in both India and the EU. With a new government in India under Prime Minister Modi, which presented a landmark shift in the way India conducted business abroad and a new President in the European Commission headquarters in Brussels that had a completely new team and organisational structure under President Jean-Claude Juncker, the EU-India partnership has a renewed outlook, dynamism and vigour to build this partnership into a real global strategic partnership. President Juncker is the first President of the Commission from the European Parliament and the Presidency now has significantly increased powers after the Lisbon Treaty of 2009. With respect to India, Prime Minister Modi has led the first majority government in India since the General Elections of 1984, ending years of policy paralysis under fractured and often at odds coalition governments of the past that simply lacked the numbers in Parliament to initiate meaningful reform and build lasting alliances.
The Need for a Strategic Partnership
The European continent has always been an important one for India, historically and culturally, the two have always been linked through trade and people to people exchanges. After the EU was formed in 1993, reconciling its political differences to form a new supranational organisation, different member states had varied attitudes as far as India was concerned. The recent liberalisation of the Indian economy in 1992 was seen by many EU member states as unstable and not far reaching. From the point of view of the Brussels diplomat, India was uncertain regarding its international role and its non aligned past was deemed a limiting factor. It would be another decade or so till all the EU member states acknowledged India as an important player in the global market. As a consequence, the EU-India relationship was left in a vacuum of uncertainty and mistrust. Thus, it became easier for India to build closer bilateral relationships with the larger EU member states than with the EU as a whole. From the Indian perspective, it was convenient for India to engage government with government; the EU institutions became an additional tier to deal with and the constant political flux of the EU, in which newer member states would join the EU or older ones would express dissatisfaction with the system became a concern for progressive Indian governments. Moreover, for all the simplicity that an economic and monetary union could possess, the EU from the point of view of the Indian policy maker remained a largely complicated organisation with ever evolving regulations and intra- governmental legislature.
Therefore, it took almost a decade after the first EU-India Cooperation Agreement in 1994 for both actors to realise the importance, need and potential of this partnership. India and the EU, by 2004 converged as ‘natural partners’ in international politics to recognise each other as strategic partners. Although, often driven by divergent geopolitical considerations, both India and the EU base their foreign policy on the aspirations of its electorate and share the values of democracy, human rights and fundamental freedoms centred on the principle of multilateralism. With a very diverse socio-economic profile, both actors face common issues of poverty, inequality, terrorism, climate change, international piracy and rogue states. Today, all 28 EU member states have permanent diplomatic missions in New Delhi and there is also a permanent EU Delegation in India. The global political order of the second decade of the 21st century has mandated that Europe starts looking East for all its complications with the USA and India is now not only open to the world for business, but acts as an important balancing link in connecting Europe to the rest of Southeast Asia.
Trade and Investment
As of 2018, balanced trade (goods and services) between India and the EU has grown to an estimated €115 billion and the EU is India’s largest trading partner amounting to 12.9% of total Indian trade, far ahead of trade with China and the USA. For the EU, India is its 9th largest trading partner. In the services sector, India is now the 4th largest service exporter to the EU and the 6th largest destination for EU services exports. Six thousand EU companies are present in India and have created 1.7 million direct employment opportunities with an additional 5 million indirect jobs in various sectors. Indian companies on the other hand have invested over €50 billion in Europe over the last 15 years. With the onset of Brexit, this number is likely to grow as a successful Brexit would mean that London would no longer be the gateway to Europe for Indian companies. For investment inflows, the European Investment Bank has invested around €2.5 billion in infrastructure, renewable energy and climate projects. At 18 percent, the EU is the largest foreign investor in India. With respect to Foreign Direct Investment (FDI), EU 28 FDI inflows account for nearly one-fourth of total Indian FDI, amounting to nearly €75 billion. Indian FDI into the EU is steadily growing and currently caps out at €5 billion.
The tables (top right) represent the EU’s trade in goods with India from 2008 to 2018 and the EU’s trade in services with India from 2014 to 2018:
EU-India Bilateral Trade and Investment Agreement (BTIA)
Probably the biggest criticism for the EU-India strategic partnership has been its inability to successfully negotiate the partnership’s single biggest initiative, the long pending EU- India Free Trade Agreement (FTA). Launched in 2007, the EU- India FTA is a comprehensive trade (goods, merchandise, agro commodities, pharmaceuticals and services) and investment agreement that encompasses key interests for both parties. As the above section illustrates, economic gains from such a partnership would significantly alter the already growing fortunes of both actors and give their economies a driving push in the Eurasian region. After 16 rounds of negotiations, talks stalled in 2013 and did not resume until the second half of 2018. During this time, annual EU-India summits too did not take place as per schedule as there was little consensus on the way forward regarding the FTA with no compromise in sight either. The EU-India FTA is today the biggest impediment to a robust economic and trade relationship between EU and India, especially because the EU is today India’s largest trading partner. Moreover, the absence of a well structured policy on bilateral trade has caused asymmetry in the market which has resulted in EU initiating cases against India in the World Trade Organisation (WTO) time and again over one issue or the other, particularly with respect to import duties and intellectual property rights.
Without going into the specifics of the FTA and reasons why there is a gap in the way both parties approach the FTA, there is no doubt that a comprehensive, exhaustive and balanced FTA between India and the EU would result in a more meaningful agenda and a stronger partnership in all areas of cooperation. The EU and Indian leadership at the 14th EU-India Summit in New Delhi in October 2017 decided that negotiations on the FTA must continue in the right circumstances that addresses all trade and investment irritants, which would help maximise business and economic opportunities. Moreover, any hindrance in negotiating the FTA must not come in the way of building a deeper partnership in all other areas of mutual interest.
“History is increasingly leading us to a world where the border between Europe and Asia would disappear.”- Bruno Maçães
Prior to the 12th Asia-Europe Meeting held in Brussels in October 2018, the European External Action Service (EEAS) in September 2018 presented a joint communiqué to the European Parliament, Council and the European Investment Bank (EIB) on the first building blocks for an EU strategy on connecting Europe and Asia. Connectivity in this context, applies primarily to physical connectivity but also includes the paradigm of digital, energy and human networks. The EU argues that Asia and Europe together account for 60 percent of the world’s population, 55 percent of global trade, amounting to €1.5 trillion annually; 65 percent of global GDP and 75 percent of global tourism. This new global EU strategy takes centrestage at a time when China is spending trillions of dollars on its ambitious Belt and Road Initiative (BRI) that invariably favours Chinese businesses and interests.
EU member states have at best been divided over joining this reimagined 21st century silk route. Apart from the already vibrant human network that exists between India and the EU, which includes about 55 thousand Indian students that go to the EU for higher education annually, Europe now sees India as an important link in physically connecting the two continents, particularly so in connecting Central Asia to Southeast Asia, wherein any other alternate route would be commercially untenable. Ideally situated at the centre of key European and Asian trade routes, India occupies an important place in this complex geo-strategic space. As a stabilising regional power, India’s diplomatic and security outreach towards its neighbours have important consequences for the EU. The 7200 km North South Transport Corridor, meant to transport freight between India, Iran, Afghanistan, Armenia, Azerbaijan, Central Asia, Russia and Europe is an extremely important project in this regard. The EU hopes that this project would ultimately lead to the creation of a larger cross border network that would be based on a system of fair and transparent rules which would help European companies expand their presence in Asia Pacific and help in planning for long term, sustainable and high return investments for European businesses.
Convergence on defence and security related issues is another important paradigm of the EU-India relationship. Although there is plenty of evidence to suggest that India and the EU are doing enough in this regard with various dialogues and joint working groups, this convergence or the lack of, comes across in the public domain in three prominent areas: Afghanistan, Counter TerrorismCoordination and Maritime Security.
In Afghanistan, many EU member states, as part of their NATO commitments, have been militarily engaged for upwards of 10 years. India, being a geographical stakeholder and an important contributor to Afghanistan’s post war reconstruction has not seen much acknowledgement from the EU as being a dominant global player that has an important stake in the region’s stability and prosperity. This is all the more heightened because of its troubled relationship with Pakistan. Moreover, the EU has not made any substantive effort to consult with or include India in the process of political reconciliation with the Afghan Taliban.The EU and India must join forces in Afghanistan for a more harmonious military partnership.
On the front of counter terrorism and intelligence sharing, there has again been too much common rhetoric and little cooperation between the two sides. This is not without taking into account the Enrica Lexie case in which two Italian marines were taken into custody by Indian authorities for accidentally killing two fishermen off the coast of South India in 2012. That said, from Indian perspective, the EU is viewed as a supranational organisation that is struggling to form a common front on military and defence activities. In such a setup, it would be impractical for India to develop a deeper defence cooperation mechanism with the EU. However, coordination between Europol and the Indian Police needs to be improved to develop better strategies to tackle global terror financing and coordinated anti terror strategies. Maritime security on the other hand is an area where the EU and India have managed to form a common consensus. Post the 14th EU-India Summit, both militaries held a maiden dialogue to expand their network for a strong maritime security partnership in the Indian Ocean Region. Future activities, training and joint exercises have been planned under the aegis of the Indian Navy and the EU’s EU NAVFOR.
Any government to government partnership, more so, any strategic partnership between two major global powers should engage all the stakeholders. It must be based on a quadruple helix that includes the government, academia, industry and last but not the least, civil society. If India and the EU join forces on issues such as sustainability, environment, climate change, energy, science & technology, mobility, development, skill development, education and cultural exchanges, both sides will get recognition as important and responsible global power blocs. The key to achieving this, apart from building on existing trade relations and celebrating common democratic values, is to deepen the political dimension of this partnership. Summits at the ministerial and heads of state level must be held at regular intervals with no breaks for any reason whatsoever. Further, government backed meetings of academics, think tanks, and business houses must be encouraged and fostered.
The EU-India strategic partnership is a significant partnership, if not yet a fully ‘strategic partnership’. Furthermore, there is widespread faith that there is potential in the said partnership to grow into a robust arrangement through new ideas and multifaceted engagements to achieve strategic convergence that fulfils its utmost potential.
Mr. Praket Arya is a Senior Research Fellow at India Foundation. An economist by education, he is an alumnus of The University of Edinburgh, Scotland, and St. Xavier’s College, Mumbai. His research interests include Development Economics and the International Political Economy of the European Union and the Greater Eurasian Space. This article was first published in the India Foundation Journal May June 2019.