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India and the EU want to create one of the largest free trade areas

2021-05-11T19:06:11.422Z


India is of great interest to German companies. So far, however, tariffs and other trade restrictions have hampered economic relations.


India is of great interest to German companies.

So far, however, tariffs and other trade restrictions have hampered economic relations.

Porto - The EU and India are making a fresh attempt to create one of the largest free trade areas in the world. It was agreed to resume the negotiations on a trade agreement that had been halted in 2013, it said in a statement published on Saturday after the top talks. Negotiations on an investment protection agreement and the protection of geographical indications should also begin. Chancellor Angela Merkel (CDU) spoke of renewed momentum and expressed the expectation that the work will now be "continued at a much faster pace". EU Commission President Ursula von der Leyen commented that the video conference of the heads of state and government of the EU states with India's Prime Minister Narendra Modi was a milestone.

According to the joint statement, improved trade and investment relationships should also help recover from the consequences of the corona pandemic.

The situation in India has recently been dramatic.

In absolute terms, the country behind the US is hardest hit by the pandemic.

EU and India: discussions on a broad trade and investment agreement

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 discussing a broader trade and investment agreement that also included more market access and fewer tariffs. However, 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 an end 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. Germany is the EU member state in which the greatest increase in both imports and exports can be expected, with exports likely to increase faster than imports.

A study published by the Bertelsmann Foundation in 2017 even came to the conclusion that Germany could calculate with an annual gross domestic product of 4.98 billion US dollars (around 4.1 billion euros).

The big winners are likely to be manufacturers of motor vehicles as well as of machines and equipment, which could each increase their added value by more than 1.5 billion US dollars a year.

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.


Free trade agreement between the EU and India: The automotive and pharmaceutical sectors are seen as hurdles

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 barriers in the long term. However, India saw this as a threat to domestic production right up to the end, also from foreign companies, which - 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 for less after the patent protection of original products has expired, is protected by very strict laws. For example, Indian courts can order that foreign corporations must issue licenses to Indian generics manufacturers. The Federation of Industry and Employers' Associations in Europe called on both sides to take the opportunity. Both sides would benefit from a stronger cooperation, commented BusinessEurope General Director Markus Beyrer.

The largest free trade pact in the world is currently an agreement concluded last year between China and 14 other Asia-Pacific countries. The “regional, comprehensive economic partnership” or RCEP, as the pact is abbreviated, comprises 2.2 billion people and around a third of global economic output. India and the EU together would have around 1.8 billion people and more than a fifth of global economic output.

(dpa / aka)

Source: merkur

All news articles on 2021-05-11

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