Cars, software, services threaten EU-India trade deal

Hopes of India and the European Union striking a free trade deal at a summit this week are fading fast, with differences over duties on cars and market access for software and service companies standing in the way of an accord.

At stake is an agreement that would create one of the world’s largest free-trade zones by population – covering 1.8 billion, or more than a quarter, of the world’s people.

Disagreement over duties on car imports, India’s tariff on European cars is nearly 10 times greater than Europe’s on Indian vehicles, and a dispute over access for Indian software companies to the EU market are set to scupper an agreement, with time running out on negotiations.

EU leaders will meet their Indian counterparts in New Delhi on Feb. 10, having declared at a summit last year that they hoped to sign a free-trade deal before the meeting.

Publicly, officials in both Brussels and New Delhi are remaining upbeat.

“We’re trying to wrap things up, see what you can close, see what you can’t close,” said one senior Indian government official, speaking on condition of anonymity. “Things are slowly but surely falling into place.”

But not everyone is hopeful. The EU ambassador to India suggested in January that the best that could be expected from the summit was a “political framework” for a deal further down the road, without a timeline being set.

With the Doha round of global trade talks effectively dead, the world’s major economies are looking more to bilateral trade agreements. The European Union, the world’s largest trading bloc by value, struck a deal with South Korea last year and is in negotiations with Japan, Canada, Malaysia and others.

For India, a Free Trade Agreement (FTA) would help its rapidly growing companies expand into the EU, the country’s biggest trade partner, the buyer of more than 40 billion euros ($52 billion) worth of Indian goods and services in 2010. Europe, large parts of which probably sank into another recession last quarter, wants access to a vast, young, vibrant market of 1.3 billion potential customers.

Trade between the two is growing – the total value of EU-India goods and services exchanged was 86 billion euros in 2010. While trade with India represented just 2.4 percent of the EU’s total, the percentage has been gradually increasing.

But while there are advantages to be gained on both sides from closer trade ties, the current economic fortunes of the two could not be more different.



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