+ Towards a New India-EU Economic Agreement - CII Blog

In its latest research paper “Towards a New India-EU Economic Agreement”, CII analyses and identifies Indian exports with high potential to the EU. This is based on the aim of restarting trade negotiations between India and the EU on the Broad-based Trade and Investment Agreement (BTIA), talks on which came to a halt after 2013. 

Many recent changes in the global trading environment and cataclysmic events such as Brexit and the Covid-19 pandemic have forced countries to rethink their trade strategies and consider diversifying their import sources. India can play an important role in the shifting global value chains by stressing on certain key products. In this context, the India-EU BTIA can prove to be a huge benefit to both sides.

The EU is among India’s top trading partners and a dynamic and growing market for India. Bilateral trade was close to $110 billion in 2018 and was evenly balanced with a slightly positive trade balance in favour of India. 

Employing the Export Specialization Index (ES), a modified version of the more conventional Revealed Comparative Advantage (RCA) index, products with the highest potential to the EU are identified. The advantage of this index is that it factors in characteristics of specific markets instead of just focussing on export shares of products (as done in RCA). 

A total of 30 Indian exports at the 4-digit HS code level with best prospects in the EU markets have been highlighted through a multi-filter approach. The products feature in the broad categories (HS 2-digit) of – articles of iron and steel (73); organic chemicals (29); vehicles (87); articles of apparel and clothing accessories (61), among others. The expansion of domestic production for these products have the potential to boost India-EU trade further.

At the 4-digit HS code level, products such as diamonds and jewellery (7102, 7113), seafood (0301), and medicaments (3004) are identified as top-potential Indian exports to the EU. Apparel and garments (6211, 6111, 6205) dominate India’s export basket to EU and are classified as products where more can be done. 

The paper also identifies possible exports to select top EU markets where India has the highest export potential such as France, Germany, Italy and Netherlands. 35 Indian products with high potential to France, 46 products to Germany, 20 products to Italy and 29 products to Netherlands have been brought out. 

The official departure of the UK from the EU has opened up several potential opportunities for India-UK bilateral ties and the possibility of a post-Brexit trade deal. Focussing on these aspects, an analysis is done of India-UK bilateral trade and India’s export products with good chances in the UK markets. 

Around 31 Indian manufactured goods with high potential for the India-UK bilateral pair are identified. These products fall in the broad categories of natural or cultured pearls (71); aluminium and articles thereof (76); and articles of apparel and clothing accessories (61, 62), among others. 

At the 4-digit level, products such as unwrought aluminium (7601) and apparel and garments (6105,6205, 6206, 6302), among others have been identified for the UK. Apparel and garment exports again form a significant portion of India’s export basket. 

Several contentious issues have been obstacles in the way of finalising the India-EU BTIA agreement. Outlining these, CII suggests various measures and a way forward to address these.

Taking stock of concern areas by holding regular summits to restart trade talks and addressing tariff and non-tariff barriers (NTBs) are recommended. Mutually acceptable duty cuts, for example in sectors such as automobiles, dairy, wine etc. and proactively pursuing talks to reduce the high NTBs, are areas to work upon. 

Promotion of the identified products with targeted strategies in EU markets and identifying champion sectors is suggested, along with drawing up of mini trade agreements with select markets. It is argued that signing of mini trade deals between India and EU that focus on short- and medium-term issues and concerns can pave the way for future long-term negotiations. 

Greater cooperation between India and the UK for negotiating a potential post-Brexit trade deal should be considered. With India’s high potential exports in UK comprising primarily of apparel and clothing accessories, this has the potential to boost India’s Make in India campaign as well. 

Signing of separate investment agreements focussing on aspects such as better investor protection is recommended, which would help restore investor confidence and spur greater trade and investments between the two sides. This would also promote dialogue and help in resolving issues such as Investor State Dispute Settlement (ISDS). 

Within a changing global economic environment, India and the EU as traditional and close trading partners can build a closer engagement by looking at specific goods to promoted.

Click here to read the full research paper