Cooperation flags. | Photo Credit: Ruskpp

The European Union wants binding commitments from India in government procurement as part of the India-EU free trade agreement (FTA) being negotiated, including on the principles of ‘non-discrimination’ and ‘dispute settlement’. But New Delhi has so far not agreed to show much flexibility on the two sensitive elements, sources have said.

“There is no agreement yet between the two sides in the crucial areas of non-discrimination and dispute settlement in government procurement as India doesn’t want to take on commitments here,” a person tracking the matter told businessline.

Procurement market

India, in all its FTAs implemented so far, apart from the one with the UAE, has not given commitments in government procurement as it doesn’t want to indiscriminately open up the government procurement market valued at $500 billion annually.

Even with the UAE, India has tried to protect interests of its MSME sector by keeping thresholds for goods, services and constructions services at a high level of over ₹200 crore. It has also kept State and local level procurements out of the pact.

India is also not part of the government procurement agreement (GPA) being worked out between some member countries at the WTO.

“The EU is right now highly ambitious and is insistent on covering sensitive aspects of government procurement in its FTA with India. In the next round of the negotiations, which is likely in March this year, the two sides need to work on some mutually acceptable solution,” the source added.

The principle of non-discrimination would obligate both partners to not discriminate between suppliers if goods and services are procured from the partner countries.

Dispute settlement

Dispute settlement refers to how disputes are to be settled if one government feels that the other government is violating the agreement.

The proposed India-EU FTA covers a large number of areas including trade in goods, rules of origin, services & investment, IPR, digital trade, government procurement, trade remedies, trade and sustainable development and anti-fraud.

The third round of EU-India FTA negotiations took place in New Delhi last month. There were also separate negotiations on investment protection agreement and geographical indications.

The EU also presented a new draft text on capital movements, payments and transfers and temporary safeguard measures.

The EU is India’s third largest trading partner, accounting for €88 billion worth of trade in goods in 2021 or 10.8 per cent of total Indian trade, per EU figures. India is the EU’s 10th largest trading partner, accounting for 2.1 per cent of EU total trade in goods. Trade in services between the EU and India reached €30.4 billion in 2020.

The EU relaunched negotiations with India for an FTA in June 2022, after talks were suspended in 2013, and launched separate negotiations for an investment protection agreement and an agreement on Geographical Indications. Both sides are hopeful of concluding the negotiations in all three areas in 2023.

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Published on January 13, 2023