EU`s aggressive environmental regulations hurdles in negotiations for proposed trade pact with India: GTRI
The Global Trade Research Initiative (GTRI) in its report has said that the European Union's (EU) aggressive environmental regulations, particularly the carbon tax, deforestation rules, and supply chain due diligence laws are one of the biggest hurdles in the negotiations for a proposed trade pact with India. It added that these regulations could impose additional costs on Indian exports. GTRI indicated that Indian exports of steel, aluminum and cement to the EU could face tariffs of 20 to 35 per cent under the Carbon Border Adjustment Mechanism (CBAM). It added that such scenario raises concerns that while EU goods would enter India duty-free, Indian exports would still face these indirect barriers in Europe. GTRI Founder Ajay Srivastava has said that India is pressing for clear exemptions or compensatory measures within the FTA to neutralize the impact of CBAM and related environmental rules.
Talking about service sector, the report said that the EU's restrictions on remote online service delivery (Mode 1) undermines the very purpose of digital trade, making it more difficult for Indian IT firms to offer their services remotely as Indian companies are required to establish local offices and maintain high minimum salary thresholds for Indian professionals working in Europe. It added that long-standing demand from India is for the EU to recognize it as a 'data secure country' under the General Data Protection Regulation (GDPR) cause without this status, Indian companies handling EU citizens' data face additional compliance costs and legal barriers, unlike firms from countries like Japan or South Korea, which enjoy seamless data transfers. GTRI added that European firms are seeking greater access to India's banking, legal, accountancy, auditing, and financial services sectors, while India is seeking the recognition of professional qualifications through Mutual Recognition Agreements (MRAs) which would allow Indian professionals in areas like medicine, engineering, and accountancy to work more easily in EU countries.
On bilateral investment between the both parties, GTRI has said that while India has proposed its Model Bilateral Investment Treaty (BIT) as the framework, the EU wants India to relax its investment protection clauses to align with European expectations. Further, EU wants stronger enforcement mechanisms, extended data exclusivity for pharmaceutical companies, tougher patent protection rules and also insisting India to align its labor laws with international standards, particularly in areas like collective bargaining, workplace safety, and wages. The India-EU agreement has the potential to significantly boost trade and investment between the two partners. The EU, with a GDP of $18.4 trillion and a population of 448 million, is a major global trade player, exporting over $2.9 trillion and importing more than $2.6 trillion annually. India, with a $3.9 trillion economy and a population of 1.4 billion, exported $437 billion in goods and imported $678 billion in FY'2024.
