Trade and technology at the core of India-EU strategic ties

The Trade and Technology Council should serve as a reality check for what is feasible for India and the European Union.

Gurjit Singh

Former Ambassador

THE India-EU Trade and Technology Council (TTC) held a virtual ministerial meeting on November 24. The formation of the TTC had been announced by PM Narendra Modi and European Commission President Ursula von der Leyen in April 2022. Its first ministerial meeting was held at Brussels in May this year. The next meeting is expected on the sidelines of the India-EU summit in 2024. The TTC is co-chaired by Indian ministers S Jaishankar, Piyush Goyal and Ashwini Vaishnaw, and European Commission Executive Vice-President Valdis Dombrovskis and Vice-President Vera Jourova.

In 2021-22, India-EU trade was worth 120 billion euros and the services trade was to the tune of 17 billion euros. The TTC is a forum designed to enhance the strategic dimension of the partnership by focusing on trade and technology. It stems from strategic challenges. The TTC is a framework agreement, parallel to the free trade agreement (FTA) negotiations, which remain stalled despite political intervention. The TTC brings technology, trade and climate change into focus. It provides a strategic and contemporary ambience, which seems to be missing from the FTA negotiations.

Powered By

The TTC has established three working groups (WGs). One deals with strategic technologies, digital governance and connectivity; it aims to foster a mutuality of interest in areas such as artificial intelligence, 6G, quantum computing, semiconductors, cybersecurity and digital skills. The second WG focuses on green technologies, including investment and standards, with an emphasis on research and innovation. It explores areas like clean energy, circular economy, waste management, plastic and ocean litter, waste-to-hydrogen technology and recycling of batteries for e-vehicles. Green hydrogen is the strategic focus of this WG, aiming to foster collaboration between Indian and EU small and medium enterprises (SMEs) and startups. The third WG deals with trade, investment and resilient value chains. It explores how critical components and raw materials can be protected and de-risked. As far as the FTA is concerned, this working group is tasked with defining the barriers to trade, both tariff and non-tariff, and how India-EU trade is impacted by emergent economic threats.

Prior to the virtual meeting, a Memorandum of Understanding (MoU) on semiconductors was signed. It aims to enhance the resilience of the semiconductor value chain. It provides opportunities for research and innovation, talent development, partnerships and market exchanges. This is a positive step that demonstrates how the TTC and its WGs can lead to facilitating frameworks between the EU and India.

The MoU is apparently aimed at decoupling from China and strengthening ties with India. The annual TTC is a vital element in the India-EU partnership, in which both sides had invested significantly before the Ukraine crisis caused disruptions. It is a complementary exercise and part of the EU strategy for cooperation in the Indo-Pacific and the growing India-EU partnership in a host of areas. Europe has had a TTC with the US since 2021.

While the TTC is not a substitute for the stalled FTA, it shows that India and the EU can actually agree on key issues and cooperate, guided by a strategic perspective. The WGs should produce more framework agreements, enabling technology transfers, investments and trade. These are, however, stifled by the absence of a bilateral investment protection agreement, which is submerged in the long-standing negotiations on the India-EU FTA. Without investment protection arrangements, European institutions find it difficult to provide guarantees for European companies. Therefore, besides the specifics of the TTC, it is also a substantive confidence-building measure which should provide political guidance to the FTA negotiators, who largely work at the behest of older sectoral interests.

The goal is to provide avenues for increasing returns on cooperation rather than succumbing to the diminishing mutuality of interest that the FTA has come to represent.

Some of these aspects were highlighted at a recent discussion organised by the Confederation of Swedish Enterprise (CSE), along with Indian partners. They expressed concern that the FTA had a disjointed negotiation process. The CSE is keen that the TTC should establish a framework of cooperation under which the private sector of both sides can be engaged.

The CSE has welcomed the MoU on semiconductors, but it wants that the WG on digital governance must ensure that the variations in EU’s general data protection regulation and India’s digital personal data protection make way for mutual coherence. How India’s and EU’s domestic AI and data protection legislation will impact each other needs to be assessed. The TTC should be the forum that finds a pathway for India and the EU to engage rather than create more non-tariff barriers (NTBs).

The WG on value chains must focus on how NTBs are to be handled by India and Europe because these are becoming bigger challenges than the tariffs which have been under discussion for almost two decades.

The new EU legislation on the Carbon Border Adjustment Mechanism and the Indian one on localisation are not likely to be discussed in the FTA. The TTC could be a better forum for such discussions because it comes as part of a strategic outlook. Similarly, the WG on clean energy should become a facilitator for co-financing of green projects and technology transfers.

The TTC should serve as a reality check for what is feasible for India and the EU. Despite the absence of an FTA, the private sector’s resilience remains salient in India and Europe. As geopolitical shifts occur and European companies contemplate decoupling from China, the TTC could offer the appropriate framework and direction for more European firms to view India as a significant destination for new technologies, investments and de-risked trade.

Another positive sign is the attempt to simplify and lower income thresholds for EU Blue Cards, which allow professionals to work in the EU. Each EU country applies varying rules, and now more of them are realising that qualified individuals who eye long-term employment in the EU need better facilitation. This is contributing to a significant improvement in the India-EU engagement.