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India-EU trade pact headed for cold storage

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SummaryInsurance bill unlikely to assuage EU concerns.

The India-EU bilateral trade and investment agreement (BTIA) — the ambitious free trade pact that India has been negotiating with its biggest trading partner since June 2007 — is headed for the deep freeze.

Having already kick-started trade negotiations with the US and with talks on a pact with Japan on the cards, the shift in priorities for Brussels is exemplified by the fact that Ignacio Garcia Bercero, the chief negotiator for the India pact, has now moved on to the Transatlantic Trade and Investment Partnership (TTIP) — an ambitious trade pact between the EU and the US. Bercero, a director at the Directorate General for Trade of the European Commission, has now been appointed the EU’s chief negotiator for the TTIP.

Besides, last ditch effort by the government to shepherd the insurance legislation through Parliament in the upcoming winter session in a bid to partially fulfill its side of the commitments under the India-EU bilateral trade and investment agreement (BTIA) may simply not be enough to salvage the ambitious free trade pact that India has been negotiating with its biggest trading partner since June 2007.

Brussels is evidently unwilling to accede to a changes in a provision in the insurance bill being worked out by the UPA government that it hopes will garner the opposition’s support. Under this, a hike in the FDI cap to 49 per cent from 26 per cent has been proposed without a commensurate increase in voting rights for the foreign partner.

“The negotiations are going to be put on ice in about two months. It’s a fairly gloomy outlook. I don’t see it happening in the next 3-4 years,” Fredrik Erixon, director of European Centre for International Political Economy, said.

The EU-India negotiations would be suspended in the wake of the impending general elections in India and the elections to the European Parliament next year.

From the EU’s perspective, the three key outstanding issues that need to be sufficiently addressed include a resolution on services such as banking and insurance, tariffs on items such as spirits and cars, along with the issue of inconsistencies in public procurement.

Even if the government were to walk the talk on steering the insurance legislation through Parliament in the upcoming winter session, a resolution appears elusive.

“There is no question of agreeing to a hike in (FDI) limits without an increase in voting rights,” an EU official said.

Of the 23 private life insurance firms operating in India, 11 are joint ventures with European insurers. Of the 21 private general insurance firms here, seven are joint ventures with European firms.

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