The relations between India and the European Union are very significant in all its
political, economic and social aspects. The bilateral relations between the Republic of
India and the European Union can be traced back to the period of 1960s when the
Republic of India was among the first nations to create working relations with what is
now known as the European Union. India and the European Union signed a bilateral
agreement in the year 1973; this was the time when the United Kingdom also joined.
Both in 1994 signed the most recent cooperation pact and an action plan was drawn
and finally signed in 2005. Besides, it is stated that by 2007 the two entities were
pursuing a free trade area pact. Many studies and investigations have been done with
regard to India’s international relations. However, these studies have not paid much
attention to develop trade relations between India and the European Union.
This research study was undertaken to investigate the evolution of trade relations
between India and the European Union, especially with regard to both Europe and
the Asian continent. It looked into the events that led the two entities to cooperate
with each other. This would help bridge the gaps that were already left by the
previous studies that had attempted to study relationship between India and the
international community or foreign states.
Original Title
Evolution of India and the European Union Trade Relations: A Realistic Approach Towards Cooperation .pdf
The relations between India and the European Union are very significant in all its
political, economic and social aspects. The bilateral relations between the Republic of
India and the European Union can be traced back to the period of 1960s when the
Republic of India was among the first nations to create working relations with what is
now known as the European Union. India and the European Union signed a bilateral
agreement in the year 1973; this was the time when the United Kingdom also joined.
Both in 1994 signed the most recent cooperation pact and an action plan was drawn
and finally signed in 2005. Besides, it is stated that by 2007 the two entities were
pursuing a free trade area pact. Many studies and investigations have been done with
regard to India’s international relations. However, these studies have not paid much
attention to develop trade relations between India and the European Union.
This research study was undertaken to investigate the evolution of trade relations
between India and the European Union, especially with regard to both Europe and
the Asian continent. It looked into the events that led the two entities to cooperate
with each other. This would help bridge the gaps that were already left by the
previous studies that had attempted to study relationship between India and the
international community or foreign states.
The relations between India and the European Union are very significant in all its
political, economic and social aspects. The bilateral relations between the Republic of
India and the European Union can be traced back to the period of 1960s when the
Republic of India was among the first nations to create working relations with what is
now known as the European Union. India and the European Union signed a bilateral
agreement in the year 1973; this was the time when the United Kingdom also joined.
Both in 1994 signed the most recent cooperation pact and an action plan was drawn
and finally signed in 2005. Besides, it is stated that by 2007 the two entities were
pursuing a free trade area pact. Many studies and investigations have been done with
regard to India’s international relations. However, these studies have not paid much
attention to develop trade relations between India and the European Union.
This research study was undertaken to investigate the evolution of trade relations
between India and the European Union, especially with regard to both Europe and
the Asian continent. It looked into the events that led the two entities to cooperate
with each other. This would help bridge the gaps that were already left by the
previous studies that had attempted to study relationship between India and the
international community or foreign states.
Evolution of India and the European Union Trade Relations: A
Realistic Approach Towards Cooperation
Pradeep Kumar Vistula University Ul. Stokosy 3, Warsaw, Poland Phone: +48 785267536 Pradeepsaxena5@gmail.com
ABSTRACT The relations between India and the European Union are very significant in all its political, economic and social aspects. The bilateral relations between the Republic of India and the European Union can be traced back to the period of 1960s when the Republic of India was among the first nations to create working relations with what is now known as the European Union. India and the European Union signed a bilateral agreement in the year 1973; this was the time when the United Kingdom also joined. Both in 1994 signed the most recent cooperation pact and an action plan was drawn and finally signed in 2005. Besides, it is stated that by 2007 the two entities were pursuing a free trade area pact. Many studies and investigations have been done with regard to Indias international relations. However, these studies have not paid much attention to develop trade relations between India and the European Union.
This research study was undertaken to investigate the evolution of trade relations between India and the European Union, especially with regard to both Europe and the Asian continent. It looked into the events that led the two entities to cooperate with each other. This would help bridge the gaps that were already left by the previous studies that had attempted to study relationship between India and the international community or foreign states.
Keywords: Trade, India, European Union, Agreements, and Relations
Introduction
The main purpose of the study was to establish the evolution of India and the European Union trade relations and to determine the kind of obstacles for both the European Union and India faced during the process of their relations. The study was significant in the sense that it would provide more information to various stakeholders concerned with the relations between India and the European Union. The first importance of the study was that it would provide a clear understanding of how the relation between India and the European Union evolved right from the time India was colonized. It would provide knowledge with regard to the factors that strengthened the relations between the two entities. This would be crucial to other international community members who would be willing to establish some forms of relationships with the European Union.
The study was done qualitatively by utilizing a historical case-study approach to research. The method used in data collection and analysis was textual reviews, comparison and establishments of facts and implications. The findings of the study included 1) The relations between India and Europe began during the pre-colonial period when Europeans started arriving in India for trade purposes 2) India was colonized by the British. The British greatly influenced the lifestyle governance in the subcontinent India 3) The relations between India and the European Union are majorly related to trade, economy and commerce with little cooperation in the area of security 4) There are substantial obstacles to effective relations between the European Union and India 5) The European Union and India have substantial grounds to cooperation in the global economy and politics.
The relations between Europe and India (colonial subcontinent India)
Historically, the relations between Europe and the sub-continental India can be discussed within the framework of two successive eras. The first era is the colonial period that ended with the declaration of Indias independence in 1947. The second era is the period following Indias independence. The findings indicated that the relations between European and India began during the period between 327 and 326 BC; this was the period during which India first came into contact with the Europe. This happened when the army of Alexander the Great first came to India during the period, and later followed by various other European nations who arrived in India for various purposes, especially to conduct trade with Indians. The relationship between the European Union and India was fundamentally based on trade and commerce; this was the case even during the colonial-India subcontinent. Therefore, the commercial and trade ties between the European Union and India did not just commenced from after Indias independence in 1947, but was a heritage that had moved on right from the first time Europeans got into contact with the Indian people.
The first trade contact between the European Union and India involved trade in spices. It was the trade between the two entities that had to open the way for the colonization of the sub-continental India. The colonial Indian subcontinent commenced in 1502, when the Portuguese Empire created its first European commercial center at a place known as Kollam.
The relations between the European Union and India was facilitated by the British East India Company. It was the company that actually facilitated the presence of British imperial rule in India. The company arrived in India for trading purposes but later was turned into a political tool by which the imperial British government representatives took full control of the sub-continental India. Later, the company was to be dissolved and the British take full control of the territory.
The relations between the European and post-independent India
The official relations between the European Union and the post-colonial India had evolved over a long period of time, beginning from 1963. The relations were have been established with the EEC (European Economic Community). The European Economic Community had since transformed into the current European Union (from 6 members to 27 member states) from the year 1992.
It was realized that the European Economic Community and India signed a cooperation agreement in 1973 in improve enhance the trade links between them. This might have been the first officially signed cooperation agreement between the two entities since the beginning period of the independent India. The agreement of 1973 was later advanced in 1981 to include economic cooperation. The study was able to establish that the first summit between the European Union and India was held on June 28, 2000 in Lisbon. The summit marked a turning point in the relations between the European Union and India as the two entities declared that both of them would establish a new strategic partnership grounded on shared values and ambitions and characterized by improved and complex cooperation. Comparing the progress of economic and political relations, both entities have achieved more in trade and economic cooperation than what they have achieved in political cooperation. The European Union and India did not achieve much because the European Union might have viewed India, as an entity did not have much ability to influence the politics of the world. In this case, India had to prove to the European Union the reasons it was a significant political player in the world.
Trade between the European Union an India
The European Union had been a major trading partner to India. India was both exporting and importing goods from the European Union countries. According to statistics obtained, the European Union was accounted 25 per cent all Indias international and global trade. The bulk of products exported by India to the European Union were mainly composed of semi-manufactured and manufactured products in the segments of leather products, textile concentrated with the United Kingdom, Germany and Belgium. The study also investigated how India traded with accession nations; it found out that Indias exports to accession countries were concentrated within Poland and the Czech Republic. However, it was established that the amount of Indias exports to other accession nations was very limited. It was observed that, among the accession nations, Indias imports majorly came from the Czech Republic at 37 per cent. Generally, it was observed that India had insufficient trade and commercial arrangements with the accession nations thereby making their cooperation in trade and commerce to remain potentially low. The figure below shows the trade between India and the European Union nations of the period of 2002-2003.
Figure 1: Exports from India to EU in 2002-2003 !"# $"# %!"# %$"# &!"# &$"# '(# )*+,-./0.# 12/30*4# 5264.-7# 806/.69# 8-.6:2# ;2-4.<# ;-22:2# =-2/.69# =,./<# >*?24# @2,A2-/.69+# BC-,*3./# DE.06# DF2926# !"#$%&'(" ) * " + , - & + . " /+01,2."#$%&'(."(&")*"+,-&+." 3',0#"4#(5##+" Source: Jean-Joseph Boillot, Europe After Enlargement: Economic Challenges for EU And India (New Delhi: Academic Foundation, 2006), 154. 1
In relation to Indias imports from the European Union nations during the same period, the following figure 2 shows the distributions among the nations; Figure 2: India's imports from the EU distributions for the period 2002-2003 Source: Jean-Joseph Boillot, Europe After Enlargement: Economic Challenges for EU and India (New Delhi: Academic Foundation, 2006), 154. 2
The European Union had progressed as a major destination for agricultural products from India, the total Indias agricultural exports to the European Union amounted to approximately $255 million in the period of 2002-2003 while a similar amount of exports to the United States was approximated at $200 million. The trade in goods between the European Union and India was found to have reached a peak in the year of 2010. This came after the trade had recorded a reduction in 2009, which was an interruption of steady growth since the beginning of 2001. It was further noted that exports from the European Union nations to India reduced from 31.3 billion units in
1 Jean-Joseph Boillot, Europe After Enlargement: Economic Challenges for EU And India (UK: Academic Foundation, 2006), 154. 2 Jean-Joseph Boillot, Europe After Enlargement: Economic Challenges for EU and India (New Delhi: Academic Foundation, 2006), 154 2008 to 27.4 billion units in 2009 then rose to 34.8 billion units in 2010. Moreover, imports reduced from approximately 29.5 billion units in 2008 to approximately 25.4 billion units in 2009. In 2010 the units increased to 33.2 billion. This scenario is captured in the graph below:
More statistics from 2011 revealed that the largest surpluses realized in the European Unions trade with India were realized in Germany and Belgium while the highest levels of deficits were realized in Italy, Spain and the Netherland. The figure below gives a summary of these scenarios;
Figure 4: Surplus realized in trade between EU and India 0 2 4 !"#$%&'( )"*+,-$( 3.2 1.9 LU countr|es Largest surp|ues |n LU's trade w|th Ind|a Surp|us |n Source: Eurostat News Release, EU-India Summit (EU: Eurostat Press Office, 2011), 1-4. 4
The following graph provides a summary of deficits realized during the same period;
Figure 5: Largest deficits arising from EU's trade with India -1.6 -1.4 -1.2 -1 -0.8 -0.6 -0.4 -0.2 0 !"#$"%&'()*+ ,-'.(+ LU nanons LU's dehc|ts from trade w|th Ind|a |n 2011 /"01.#*+.(+2.&&.3(*+ Source: Eurostat News Release, EU-India Summit (EU: Eurostat Press Office, 2011), 1-4. 5
During the same period, machinery and motor vehicles plus other manufactured goods were found to have accounted for approximately 80 per cent of European Unions exports to India. This was recorded in the first ten months of the year 2011. Nonetheless, other manufactured goods were found to have represented about 50% of the imports. Overall, the study analyzed various statistics arising from trading activities between the European Union and India. The results were aggregated in the form of exports and imports trades from 2000 to 2010. The following figure gives statistical summaries of how the European Union and India had traded with each other right from the 2000 to 2010. These statistics were selected because the represented the most current figures showing the true picture of the level and trend of trade between the European Union and India. It is important to note that the statistics included Indias trade with twenty seven member states of the European Union.
Looking at the results in the figure above, it is evident that the export to the European Union declined together its imports from the same region in 2009 before taking an upward trend in 2010. These statistics show that the Indias trade with the European Union from 2000 had been on an increasing trend up to the year 2010. However, due to the scope of the study, the factors that led to the decline could not be established. The statistics were obtained from Eurostat news release.
Other statistics also showed that the European Unions Foreign Direct Investment flows in India reduced from 4.2 billion Euros in 2007 to 3.4 billion Euros in the year 2008. The statistics further indicated that the flow remained relatively constant in the year 2009 before increasing 4.7 billion Euros in the year 2010. Otherwise, Indias Foreign Direct Investments into the European Union nations reduced sharply from about 10.1 billion Euros in the year 2007 to 2.6 billion Euros in 2008 and continued to decrease to 0.9 billion Euros in 2009 and finally to 0.5 billion Euros in 2010. These statistics were summarized as follows
The FDIs between the European Union and India tended to favor only the European Union nations. Comparing the two, India seemed to have benefitted much from the European Union nations in terms of foreign direct investments; however, it is also important to note that even though the European Unions FDIs in India tended to rise, the investments rose at a slow rate. Once again, the scope of the study could not establish the causes of the trend.
In terms of tariffs, it was found out that tariff rates in India are higher than those in the European Union. According to statistics of 2007 comparing, Indian tariffs on beverages and tobacco sector was the highest at 88.0 per cent and lowest in the mineral fuel and lubricant sector at 11.9 per cent. In the European Unions corresponding sector, the tariff in the beverage and tobacco sector was the highest at 15.2% and lowest in the raw materials sector at 0.7%.
However, it was realized that, in all the selected sectors, India had higher tariffs that those of the European Union. This was shown by 2007 statistics on some representative sectors as follows:
Figure 8: Comparison between 2007 tariff statistics in EU and India
!"#$%&%'()*+'%&(,,-+%.."&/(01+'"+*-*.'"&+(0+23+%0/+40/(% 56557 856557 956557 :56557 ;56557 <556557 <856557 =""/+%0/+>()*-'".? @*)*&%1*+%0/+>()*-'".? A%B+#%'*&(%>- C(0*&%>+,D*>+%0/+>DE&(.%0'- !F*#(.%>+$&"/D'- C%0D,%.'D&*/+1""/- C%.F(0*&(*- G * > * . ' * / + - * . ' " & - H*&.*0'%1*+'%&(,,-+(#$"-*/ 23+ 40/(% Source: Trade Hot Topics. An EU-India Free Trade Agreement: Reflections on the Implications for Excluded Countries Commonwealth, no. 54 (2008): 3
European Union-India Free Trade Area
The search for a Free Trade Area between the European Union and India began in 2007. However, due to hard issues, the agreement has taken longer than it was expected to materialize. The relations between the European Union and India were set to go a notch higher after the meeting that took place in New Delhi in February 2012. A free trade pact between the European Union and India was expected enhance the bilateral trade relations between the two entities. The pact was also to enhance, between the two entities, economic and investment cooperation and was also expected to set the momentum for growth of the two entities.
Even though the ambitious Free Trade Area planned agreement had been pursued for five years between the European Union and India, it was evident that there were some significant obstacles. That threatened its materialization. It was noted that India still had imposed high tariffs in some sectors of its economy while at the same time demanded more access to the European market for its goods and services. This was viewed by the European Union representatives as being unfair to economic and commercial cooperation the two entities. Besides, there was the issue of the European Union demanding that India reduce tariffs on products such as wine, motor vehicles and milk and dairy products. According to the views of scholars and students of economics, the products from the European Union region were heavily subsidized and hence would sell cheaper in India than the local similar products. The potential consequence was found to be a possible death to the local industry producing similar products, especially dairy sector.
It was also noted that all car manufacturers in India were also found to be concerned about reduction of tariff being implemented on finished automobiles otherwise referred to as Completely Built Units. The study exposed the fact that there was a significant concern that lowering tariffs on Completely Build Units would harm the local industry of car manufacturers. Further possible consequences noted with respect to lowering of tariffs on such cars included reduced investment in automobile industry by the local Indians and loss of employment opportunities. Moreover, India would increasing become dependent on foreign manufactured cars from the European Union countries. It is important to note that if the reduction in tariffs on imported cars would not be managed appropriately, it could result in the reduction in domestic output, massive loss of jobs, substantial revenue tariffs and negative implications on trade balance.
Another issue that would contribute as an obstacle was related to opening up of the Indian banking sector; according to the finding of the study, the European Union wanted India to do away with restriction on its banking licenses and foreign ownership of financial institutions as part of the Free Trade Area deal. The European Union had also requested India to do away with priority sector lending on locally incorporated European Union-based banks and other financial institutions. All these requests were viewed as suspicious by India.
Factors enhancing cooperation between the European Union and India
The study was eager to find out the factors that contributed to successful cooperation between the European Union and India. On economic front, the study found out that immediately after independence, India pursued a socialist model of economy. In that case, it was not easy for the European Union to pursue substantial economic cooperation between it and India. However, the study found out that most scholars were in a common agreement that India had increasingly come up with liberal policies for its economy. The liberal economic policies were viewed to be some of the factors that were facilitating economic cooperation between the European Union and India.
Another area in which it was easy for the European Union to easily establish cooperation with India was Indias increasing democratic space. Even though India experienced internal civil strife, it was clear that it respected human rights and also upheld a democracy. This was a significant factor in enhancing the relationship between the two entities.
Again, numerous scholars were found to have agreed on the fact that there were strategic and geographical issues that contributed to the relations between the European Union and India. On political grounds, the European Union and India were found to have a common interest in realizing a democratic, multicultural and a multi- polar world order.
Conclusion
This study took the approach of a case study and was conducted by utilizing historical content analysis to establish the evolution and status of the relations between the European Union and India. In conducting this study, various literature texts were sampled to provide the data and information that were analyzed during the study process. The texts that were analyzed were selected from among the scholarly materials, journals and peer reviewed textual materials. Besides, the study utilized texts that were mostly produced from 200 to 2012. The choice for these texts was informed by the fact that the relations between the European Union and India was a continuing process and only the most recent texts would provide appropriate most current data that could provide a true picture of the evolution and status of trade relations between the European Union and India.
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