Spice Route to Europe? Prospects for an India-EU Free Trade Area

A briefing paper just published by the foreign policy think-tank, Chatham House, assesses the prospects for an India-EU Free Trade Area. Negotiations for the agreement began in June 2007, pursuing a bilateral route against a backdrop of faltering multilateral negotiations. While prospects for an agreement appear good, there are also potential obstacles.

With its rapidly growing economy, India is an increasingly important target for EU exports. However India still has a relatively low share of global trade compared to the EU which is the world’s largest exporter. The EU is India’s largest trading partner and remains an important provider of services and foreign direct investment for India.

In the case of goods, there is little overlap in trade structures or comparative advantage between India and the EU. On services, both sides are anxious to increase their market access across all modes of provision, while neither side is likely to press each other on the sensitive issues of agricultural liberalization.

Despite substantial common ground, significant hurdles remain, including general suspicion of trade liberalization outside the Indian government; possible offence taken at EU insistence on including social, environmental and human rights clauses; and the sheer complexity of the negotiations which might mean they are overtaken by the next Indian general election campaign.

To find out more, read the Chatham House briefing here.

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