India has maintained bilateral economic relations with European countries for long time, the relations with European Union on collective basis go back to the early 1960s. India was among the first countries to establish diplomatic relations with the European Economic Community, as the present European Union was known at that time. The European countries have played an important role in the development of India through their financial support under the Official Development Assistance (ODA). India still continues to receive considerable amount of ODA from the European countries. Though, India and European countries share many common values and principles like democracy, rule of law, respect for the fundamental freedoms of people, the political and strategic relations between India and European countries were not warm during the cold war, As India moved on the path of non-alignment, its policies of opposing colonialism and neo-colon- ialism as well as racialism directly went against the core interests of the European powers during the cold war. Since early 1970s, with the signing of the treaty of friendship with the Soviet Union, India was regarded as a natural ally of Soviet bloc. This perception also hindered the development of close strategic relations between the two sides. The peaceful nuclear explosion by India in 1974 further alienated India in the Western world as they were insisting on India to sign the Non-Proliferation Treaty, which India refused to sign as it was considered as discriminatory.
The Soviet intervention in Afghanistan and India’s reluctance to the same openly was not appreciated by European countries. Thus cold war politics marred the development of close relations particularly in political and strategic matters.
The end of cold war and the intensification of the process of globalization provided new opportunity for the development of close strategic and economic partnership. The ambitious liberal reforms undertaken by India in 1990s and the huge emerging Indian market held the promise for the mutually beneficial relationship. The nature of emerging relationship between the two sides in 21st century may be discussed under the following points:
- High Level Political and Strategic Dialogue—India and European Union signed in 1994 an agreement for cooperation in various areas. Both decided in 2000 to hold bilateral Summit meetings on annual basis to encourage high level exchange of views. The first bilateral annual Summit was held in 2000. This facilitated the exchange of views on regular basis at the highest level. As the relations exist today, both sides have put in place a three-tier mechanism for bilateral consultation and discussion.
First is the Summit level consultation. The summits are held each year at alternative places. This is the apex decision-making mechanism. All policy decisions regarding the nature of cooperation are taken at summit level meetings. It should be recalled that India has this type of regular Summit mechanism only with four other partners-ASEAN, Russia, China and Japan. This underlines the importance both have attached to their partnership.
Second is the Foreign Ministers Level Meeting. The foreign ministers of both sides hold regular meetings to make proposal for cooperation and joint action. The meeting of Foreign Ministers takes place before the Summit meeting to prepare the ground for the same. It should be noted that the European Union is represented by a single representative in such meetings. Till June 2010, 21 Ministerial meetings have been held so far.
The third level of consultative mechanism is the Senior Officials Meetings, which are held at regular basis. These meetings discuss the technical aspects of cooperation and undertake the implementation of the decisions taken by the higher bodies.
During the fifth India-EU Summit held at Hague in 2004, both decided to upgrade their bilateral relationship to the strategic level. The Strategic level partnership denotes that both share long term common goals and vision and they are determined to pursue the same. Accordingly, both agreed to A Joint Plan of Action, which was signed in 2005. This joint Plan of Action provides a long term framework for cooperation in various areas. It has identified five areas for strategic partnership between the two sides.
- Strengthening Dialogue and Consultation Mechanisms;
- Deepening Political Dialogue and Cooperation;
- Bringing together People and Cultures;
- Enhancing Economic Policy Dialogue and Cooperation; and
- Developing Trade and Investment.
These five areas provide the bedrock of India-EU strategic partnership. Both sides have decided to hold annual summits to expand and strengthen this strategic partnership. So far 13 EU-India Summits have been held. The last summit was held on March 30, 2016.
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UPKAR PRAKASHAN, AGRA-2
- Economic Relations—The EU,
as a collective entity of 27 countries, used to be India’s largest trading partner till 2009. However, the EU has been replaced by China as the largest trading partner of India. The financial crisis and the ongoing economic recession are the factors responsible for this development. Though the total bilateral trade between the two sides declined by 13.5 per cent to reach Euro 52-9 billion in 2009, it picked up again in 2010 to reach Euro 69 billion. India happened to be the ninth largest trading partner of European Union in 2009. The balance of trade in 2009 was marginally in favour of the EU as Indian exports accounted Euros 25-4 billion, while Indian imports accounted Euro 27.5 billion.
Another facet of economic partnership is the level of bilateral investment. The EU is one of the largest sources of FDI for India. The total investment from the EU to India was Euro 3.27 billion in 2008. It marginaly declined in the following years due to global financial crisis. India’s total investment in EU countries was Euro 3.69 billion in 2008. Most of the investment of the EU originated from Germany, UK, Netherlands, and France.
Europe has been the important source for development assistance and advanced technology. India still receives substantial amount of development assistance in the form of ODA from EU countries. The development assistance from Scandinavian countries has been significant.
Both sides have strengthened the functioning of the India-EU Joint Commission, which promotes cooperation between India and EU. It has three sub-commissions on trade, economic cooperation and development. The Commission meets annually. Besides, there are many Joint Working Groups on various areas like anti-terrorism, energy and environment and so on.
It should be noted that the proposed Broad based Trade and Investment (BTIA) is being delayed due to differences between the two sides. The negotiations commenced in 2007 and so far 12 rounds of negotiations have been conducted but it is not concluded yet. In India some
political parties and farmers’ unions are opposed to this agreement as the EU is not willing to eliminate subsidy given to farmers in Europe. This subsidy has negative impact on the competitiveness of Indian farm products. The BTIA covers trade in goods, sanitary and phyto-sanitary measures and technical barriers on trade, trade irl services, investment, intellectual property rights and, competition policy, customs and trade facilitation, trade defence dispute settlement.
- Bilateral Agreements—India and the EU have signed many bilateral agreements to facilitate cooperation in various fields of common interest. These agreements provide legal and institutional framework for cooperation. Some of these agreements are : Science & Technology agreement signed in 2001 and renewed in 2007; Joint Vision Statement for promoting cooperation in the field of information and communications technology, 2001; customs cooperation agreement, 2004; Memorandum of Understanding on Cooperation on Employment and Social Affairs, 2006; Horizontal Civil Aviation Agreement, 2008; Joint Declaration in field of Education, 2008; Joint Declaration on Multilingualism, 2009 and Agreement on nuclear fusion energy research, 2009 and Joint Declaration on Culture, 2010; Joint Declaration on Terrorism, 2010; and Memorandum of Understanding on Statistics.
The above discussion on the bilateral relationship between India and the EU shows that both have strengthened their relationship on diverse fields ranging from economic partnership to anti-terrorism and strategic matters in last one decade or so. The globalization provides positive background for developing mutually beneficial relationship. The common values of democracy and rule of law shared by both also work for their advantage. However, the economic partnership, especially trade between the two has not realized it full potential. For example, India accounts for just 2.5 per cent in the total exports and just 2.1 per cent of total imports of EU. Due to practice of protectionism followed in European countries with respect to farm subsidy, the BTIA has not been
concluded so far. The European countries have been imposing noneconomic conditions on the imports from India, which need to be relaxed for the promotion of bilateral trade. They also require to promote the level of bilateral investment. The ongoing financial crisis has slowed down the economic activities in European countries. As the signs of economic recovery are visible now economic relations are likely to improve in the present decade. The framework laid down for strategic cooperation in the last decade is satisfactory. The 13th Summit held on March 30, 2016 has given a fresh opportunity to sort out mutual differences and consolidate the mutually beneficial partnership. Europe is also gradually coming out from the long spell of global financial crisis since 2008, which also holds a new promise for promoting close ties between them.
regional states like Kuwait, UAE, Egypt and others. The focus on close ties with Saudi Arabia is the logical conclusion of India’s emerging Look West Policy. Both countries have close economic, trade and cultural relations, which need to be strengthened further to strategic partnership, which was announced in 2010. Saudi Arabia is the largest supplier of the crude oil to India and holds crucial importance in the energy security of India. In view of rising phenomenon of terrorism in the region, both have urgent need to strengthen cooperation in the field of defence and security. And this was given the due focus during Modi’s visit to Saudi Arabia.