Future Prospects for India-EU Relations

National flag of India

Last July’s meeting between the leaders of the European Union and India is an indication of the possible deepening of bilateral relations between these two world powers. It demonstrates the realistic possibility of greater cooperation in several areas in the near future.

On 15 July 2020, the fifteenth summit between the European Union (EU) and India took place. This year’s meeting, unlike previous ones, was particularly significant as it was the first time in many years that the leaders of both powers had expressly sought substantial agreements to deepen and strengthen bilateral relations and embrace a long-term strategic perspective.

The main results of this summit were the adoption of the “EU-India Strategic Partnership: A Roadmap to 2025” to guide cooperation between India and the European Union over the next five years. Both parties also signed the Euratom-India Agreement for co-operation in research and development in the peaceful uses of nuclear energy. They agreed to continue their successful cooperation in the field of nuclear fission in the framework of the ITER project. Other agreements were made to strengthen the India-EU Clean Energy and Climate Partnership, the Coalition for Disaster Resilient Infrastructure (CDRI), and reaffirm their commitment and partnership in the International Solar Alliance and the International Platform on Sustainable Financing. 

These efforts can be understood as a strategic confluence from a mutual drive to counter China’s exponential rise. Both India and the European Union remain wary of Beijing’s expanding influence at positions and activities across the globe. It is precisely this mutual strategic shortcoming that imposes and will impose greater limitations on the deepening of bilateral relations between the two, and on counteracting Chinese influence in the future.

EU-India relations in the current Asian context

India China EU TradeJust as India is dealing with a major military crisis on the border with China, and the EU is coming to regard China as an aggressive power. The fact that the summit was held, given the pandemic and the internal concerns of both partners, is a sign of how far the relationship between the EU and India has come. As India seeks to devise a global response to China’s power by strengthening partnerships, economic decoupling and diversification, and as attitudes in Europe move decisively away from China, the EU can be a crucial partner for India on several fronts.

This meeting followed a tense summit between the EU and China, which did not even lead to the usual joint declaration but rather a one-off statement from Brussels on defending the EU’s interests and values in a “complex partnership” with China. In marked contrast, the meeting with India produced a new roadmap and a series of initiatives on security, trade and investment, the digital economy, infrastructure connectivity, response to the coronavirus crisis and climate change. This difference between the two summits is not a coincidence. 

Indeed, Europe’s perception of India has been changing as tensions with China have increased. In 2018 the EU published a new strategy for cooperation with India, describing the Asian country as “a geopolitical pillar in a multipolar Asia, which is crucial to maintaining the balance of power on the continent“. There are perennial misunderstandings about capabilities, in which Brussels can meet India’s interests, as opposed to areas in which Paris or Berlin would be better partners. But while India deals with the challenge of China, the EU can be a valuable partner in several strategic areas. For example, 5G technologies – while India is reconsidering Huawei’s access to its IT services market for security reasons, European companies such as Ericsson and Nokia will be important players. Also, while India is trying to curb Chinese investments in its technology sector, Europe will be an important alternative.

Similar concerns for India and the EU

Moreover, while India is facing growing Chinese influence in its neighbourhood, Belt and Road Initiative (BRI) investments and infrastructure connectivity, the European Union has its own connectivity strategy, providing some 414 billion euros in aid worldwide, and is already partnering with Japan and the US to offer alternatives to the BRI. This is a crucial opportunity where Brussels can offer what India needs. Institutions such as the European Investment Bank are working in India, investing in infrastructure projects. India should explore this partnership with the EU not only to meet national infrastructure needs but also as part of India’s neighbourhood diplomacy.

As for the pandemic and China’s response, India and the EU have similar concerns. There is great apprehension in Brussels about the Chinese-led disinformation campaign about the origin of and responses to the virus. There is also growing recognition of the need to counter Chinese influence in international organizations. The EU and Australia coordinated to push for an independent investigation into the origins of the virus at the World Health Assembly. When India takes over the chairmanship of the World Health Organization (WHO) Executive Board, the EU can be a powerful ally in testing Chinese influence at the WHO and beyond.

With the problems in EU-China relations, the debate on the Indo-Pacific is also intensifying in European capitals. The EU has several programmes to raise awareness of the maritime domain and exchange information in the Indian Ocean, which are being extended to include South and South-East Asia. The German navy has shown an active interest in contributing to the security of the Indian Ocean and working with its partners. India should actively defend its vision of the region and explore avenues of cooperation with the European Union, in particular, to test the capacity of the Chinese to be present in the Indian Ocean.

Finally, while India is trying to shore up its internal capacity and strengthen its economy, it cannot afford to ignore the free trade agreement with Europe, which is languishing after many rounds of failed negotiations. The EU is India’s largest trading partner and second-largest export destination. As Europe seeks to diversify supply chains and move away from China, India should not miss the opportunity to attract investment and deepen its relationship with the world’s largest trading bloc, which has already negotiated FTAs with Vietnam, Japan and Singapore.

A Renewed Strategic Partnership?

In 2004, India and the European Union signed a strategic partnership based on shared values and principles of democracy, the rule of law, human rights and promotion of peace and stability. Today, however, free trade negotiations are stalled, and the two sides have yet to find common ground to move forward on key issues ranging from digital regulation to climate change. 

The 2020 summit has been seen as the maturity of the 2004 strategic partnership and a way of transforming common values into common interests. The space for opportunities and cooperation is truly vast. But it is time to move on from listing the possibilities and concentrate efforts on achievable goals, against which the partnership can be assessed. A fuller appreciation of expectations and responsibility is also essential. Instilling a greater sense of shared responsibility can also help the EU and India to progress more rapidly towards their shared goal.

The Question of Free Trade

Negotiations for an EU-India free trade agreement were launched in 2007 and suspended in 2013, although the European Commission’s mandate for these negotiations was never withdrawn. However, the uncertainty surrounding EU-India trade relations after the UK departs from the Union, coupled with the changing role of multilateralism in trade relations, means that the appetite for a free trade agreement may be rekindled. On the EU front, the relevance of the agreement is clearer to all businesses wishing to enter the Indian market. On the other hand, large Indian companies are showing increasing interest in entering the European market. 

In this respect, and although the Indian and EU leaders affirmed the need for “balanced” trade and investment agreements and established a new dialogue trade, there are still no signs that talks on a free trade and investment protection agreement will be resumed after the summit. The issue of trade is of vital importance to the relationship, as the EU is India’s largest trading partner even after Brexit. The European Union is also India’s largest source of foreign investment, with over $91 billion.

When talks of FTA restart is unknown, Indian Foreign Ministry spokesman Vikas Swarup told reporters: “There is no set deadline for the conclusion of the Bilateral Trade and Investment Agreement, but both parties have agreed that the two ministers responsible for taking the talks forward should meet as soon as possible“. He referred to the establishment of a new mechanism for dialogue at ministerial level with a mandate to provide guidance to bilateral trade and investment relations and to address multilateral issues of mutual interest.

FTAs and Human Rights 

However, even if the FTA negotiations can finally succeed, support for an agreement could be an unsmooth ride on the EU’s front. Beyond the ever-present general criticism of FTAs, human rights clauses are probably particularly problematic here. Human rights are undoubtedly one of the most controversial and mediatised issues in EU-India relations (as the recent trip of MEPs to Kashmir shows). Still, nevertheless, the issue needs to be addressed.

Recent events in Kashmir, as well as the launch of the National Citizens Registry in Assam (the measure has stripped over 2 million people of their Indian citizenship), shows the current Modi-led Indian government is not deterred in pursuing controversial measures that may not be in the best interests of minorities.

Any discussion of a free trade agreement will include a human rights clause; however, there are no ongoing discussions on human rights at the appropriate institutional level. The official human rights dialogue has not met for some time, and free trade agreement negotiations are frozen. If the EU wants to take its role as a global player in the implementation of human rights seriously, it should learn to harness its economic power and update its tools to achieve these ends. Above all, it should establish a strong institutional dialogue to address problems and, why not, develop an implementation mechanism for more robust human rights monitoring.

Security and Defence Cooperation

Now that the EU has been investing in building its capabilities, defence industry cooperation must be put on the table. India is the world’s largest arms importer, while its largest arms supplier is the EU’s geopolitical competitor, Russia.

The EU could decide to allow Indian companies to participate in European Defence Fund projects. The granting of access to the European defence market should be balanced with equal access to the Indian defence market, whose procurement rules remain challenging to apply. France is asserting its influence in this area, but an EU that can back its companies politically could be a real change.

Moreover, the Indo-Pacific is increasingly becoming the “hottest” region in the world. The intensified maritime cooperation recently established in the Indian Ocean could provide the EU with the opportunity to project a truly global role. Both partners could also play an essential role in the global governance of cyberspace by reducing polarisation between China, Russia and the United States, while increased bilateral cooperation on cybersecurity would be of mutual benefit in the fight against cybercrime.

Finally, India’s current border tensions with China were addressed at the July summit. Before his comments saying that the relationship between the EU and China is “complex”, Charles Michel said:

Prime Minister Modi also had the opportunity to inform us about the latest developments related to this incident with China and we support all efforts to maintain a channel of dialogue in order to find peaceful solutions“.

India and China have been in a military confrontation in eastern Ladakh since the beginning of May. Following the deadliest conflict on the Line of Control in 45 years, both sides have engaged in military and diplomatic talks to de-escalate the situation. Greater EU involvement in or support for these initiatives could strengthen the EU’s image as a global player and increase both its presence and influence in South Asian politics.

Digital Agenda

Particular attention should be paid to the digital transformation. Both India and the EU reject Chinese censorship or Russian or Arab-style controls on the Internet, considering that their shared democratic values are the basis for governing cyberspace.

India’s export-oriented outsourcing industry is booming in cities like Bangalore and Gurgaon. With only connectivity in 2014, India is now the second most connected nation in the world, with 560 million Internet users, second only to China. It has become a hub for digital services, from IT software and finance to consulting. However, India seems ready to impose digital regulation that runs counter to its interests and could complicate relations with the EU. In the summer of 2019, India imposed new protectionist e-commerce investment rules that imposed restrictions on foreign retailers. The draft of a new data protection proposal, which was tabled in December 2019, required the location of data, which requires companies to store all critical data within India. A separate proposal increased the responsibility of platforms that host content and data online. This complicates key negotiations on data protection and transfer between the EU and India. The EU wants to ensure that India’s privacy rules are adequate to ensure the free flow of data between India and the EU. But India cannot insist on the location of the data and expect to benefit from that provision. 

India and the EU share similar concerns about holding major digital players accountable for their activities. As democracies committed to free markets and freedom of expression should be natural allies in finding the right balance between unrestricted freedom and responsible freedom on the Internet. However, India’s legislative measures and plans threaten to undermine this potentially crucial digital alliance.

Climate Change

Also in line with the priorities of the new Commission and the prominent role given to the Green Deal, and the EU’s Connectivity Strategy for Asia adopted in 2018, a partnership on low-carbon is possible.

Such a step would become a clear alternative to the Belt and Road Initiative, which risks promoting high-carbon infrastructure. It could be based on a high-level political declaration backed by several concrete projects, for example, support for India’s fight to clean up the environment, cooperation to prepare a significant ‘Global Reserve’ under the Paris Agreement of 2015 or cooperation to improve the use of India’s biomass potential. Lessons from the EU’s experience could help streamline India’s energy pricing and integrate solar, wind energy into the Asian country’s electricity grid.

Conclusions

The EU reference to the Indo-Pacific in the Joint Declaration is significant because, although there is no European mandate on the use of the phrase, its inclusion demonstrates recognition of the growing importance of the region. New Delhi must now make bilateral efforts so that an inclusive Indo-Pacific can be realized. The EU has also agreed to work with India to strengthen maritime security in the Indian Ocean. Furthermore, the continued reference to China as a systemic rival is significant, as there is a growing consensus in Europe on the varied nature of the challenges and threats posed by Beijing.

However, the EU must also address certain dichotomies in their approach to Asia. For example, while China has been labelled a systemic rival, it is also referred to as a cooperative partner. While President von der Leyen warned that China “is at great risk” of imposing national security law on Hong Kong, the EU, and more specifically the High Representative for Foreign Policy, Josep Borrell, commented on 29 May that the decision did not jeopardise “investment business“.

On 30 July, the European Union imposed its first cyber-sanctions on the Chinese company Haitai Technology Development for supporting Operation Grasshopper, a cyber-attack aimed at stealing commercially sensitive data from multinationals around the world. However, unlike the United States, the European Union has so far been cautious about China, choosing the middle ground and defining the relationship with Beijing as “complex”. This is predictable, given the trade, investment and technological interdependence between the two. However, over the past year, the European Commission and several Member States have begun to address Beijing’s assertive movements. 

Meanwhile, this year’s India-EU summit has given the bilateral relationship a much-needed boost. Shared democratic values, respect for human rights and the rule of law provide a stable basis for progress in the discussions on trade, investment and security. Both sides must now maintain the momentum and build on the EU Council President’s statement that “we have converging interests”.

India’s attention must be focused on securing greater flows of technology and investment from Europe and on building, in the words of Prime Minister Modi, “a globalisation centred on people and humanity“. India must also work bilaterally with the European States to engage them as stakeholders in the Indo-Pacific as part of the EU’s desire to have a stronger strategic relationship with India in the future.

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