EU and India agree on new trade talks

Next attempt: The EU and India have decided to resume talks on a free trade agreement that were interrupted eight years ago. The auto and pharmaceutical sectors in particular are likely to cause controversy.

EU Commission President Ursula von der Leyen

Dhe EU and India have decided to resume talks on a free trade agreement that have been suspended for eight years. The 27 heads of state and government of the EU announced this in a joint statement after a switching conference with India’s Prime Minister Narendra Modi. A spokesman for India’s Foreign Ministry said the EU and India were planning joint investments in infrastructure in Asia and Africa.

The background to the projects is the common concern about a further strengthening of China. “We agreed that the EU and India, as the two largest democracies in the world, have a common interest in ensuring security, prosperity and sustainable development in a multipolar world,” the statement said. They also want to work more closely together in the fight against climate change.

Chancellor Angela Merkel was relieved that the negotiations on a free trade agreement, which had stalled several times, are now being resumed. The Chancellor also referred to the German-Indian government consultations at the end of the month. It also discusses issues relating to vaccine production.

Advantages for German car manufacturers, disadvantages for clothing manufacturers

With more than 1.3 billion inhabitants, India is the second most populous country in the world after China, but has recently only been the tenth largest trading partner for the EU. In 2007, both sides began discussions on a broad trade and investment agreement that also included more market access and fewer tariffs. But several disagreements such as Indian tariffs on cars and wine as well as labor market restrictions for Indians by the EU brought the negotiations to a standstill in 2013.

According to studies, the German economy in particular would benefit greatly from a free trade agreement between the EU and India. According to figures published by the European Parliament last year, the Federal Republic alone could expect a welfare gain of around 2.2 billion euros. According to the calculations, Germany is the EU member state in which the greatest increase in both imports and exports can be expected, with exports likely to rise faster than imports, but these will be made before the UK finally leaves the EU were created.

A study published by the Bertelsmann Foundation in 2017 even came to the result that Germany could calculate with an annual gross domestic product of 4.1 billion euros. The big winners are likely to be manufacturers of motor vehicles as well as machines and equipment. On the other hand, service providers as well as the textile and clothing industry are seen as losers, each with an expected minus of several hundred million dollars a year. India has a clear competitive advantage in these areas – mainly due to lower wages.

Dispute over pharmaceutical patents

The automotive and pharmaceuticals sectors are seen as major hurdles to concluding a free trade agreement. Those who import fully assembled cars into India paid a surcharge of 60 to 100 percent of the new price, depending on the size of the vehicle. The EU would like to remove these hurdles in the long term. However, India saw this as a threat to domestic production right up to the end, also from foreign companies that – partly deterred by the high tariffs – have set up Indian locations.

In the pharmaceutical industry, there is a particular problem with intellectual property. India’s important industry for generics, i.e. imitation drugs that come onto the market at a lower price after the patent protection of original products has expired, is protected by very strict laws. Despite patent protection, Indian courts can order that foreign corporations must issue compulsory licenses to Indian generics manufacturers. Another law makes it difficult to extend patent protection for a drug even though the manufacturer has improved it in the meantime.