Agricultural aspects of the India–EU FTA negotiations
08 December 2013
The European Parliament has posted two background papers and a summary of proceedings of a workshop that took place in September 2013 to discuss the negotiations on the EU–India FTA. In terms of agricultural trade, a presentation from the Indian Council for Research on International Economic Relations (ICRIER) maintained that Indian producers “faced challenges” in dealing with EU standards, with Indian agriculture deemed “not competitive”.
The presentation noted that both India and the EU “have relatively closed agricultural markets”, with India having largely excluded agricultural products from the negotiations, given the importance of agriculture to Indian livelihoods. Dairy and wheat products were seen as being particularly sensitive.
Applied MFN tariff rates of India and EU by product group
| Average applied MFN rate (%) | Percentage of duty-free tariff lines | Maximum applied MFN tariff (%) | ||||
| India 2010 | EU27 2011 | India 2010 | EU27 2011 | India 2010 | EU27 2011 |
|
| Dairy | 33.7 | 55.2 | 0 | 0 | 60 | 205 |
| Fruit, vegetables | 30.3 | 11.5 | 1.3 | 18.8 | 100 | 170 |
| Coffee, tea | 56.1 | 6.2 | 0 | 27.1 | 100 | 25 |
| Cereals and preparations | 30.7 | 16.3 | 11.9 | 12.0 | 150 | 167 |
| Oilseed, fats | 18.8 | 7.1 | 16.9 | 43.5 | 100 | 171 |
| Sugars and confectionery | 34.4 | 29.1 | 0 | 0 | 60 | 131 |
| Beverages and tobacco | 70.8 | 19.2 | 0 | 19.8 | 150 | 162 |
| Other agricultural products | 21.5 | 4.8 | 11.2 | 65.1 | 70 | 131 |
Source: Compiled from WTO (2012) cited in European Parliament, October 2013 (see below), Table 1, p. 32.
Apart from high tariffs, India maintains restrictions, quotas and quantitative limits on imports of agricultural products. There are fears that any India–EU FTA that included food and agricultural products would bring into question the use of these trade policy tools. The absence of safeguards or similar mechanisms to ensure fair trading practice was also highlighted, making India “hesitate to liberalise these areas”.
The Indian authorities remain concerned over the production and trade effects of EU agricultural support programmes. At present, Indian food and agricultural exports to the EU are five times the value of imports from the EU, and India fears that any FTA which included food and agricultural products would see this situation reversed. The workshop report noted the “slow process of reforms” in India, compared to those in the EU’s agricultural sector.
The chair of the workshop noted that “India is not ready to move on some of the key issues, especially on tariffs.” In export sectors such as wines and spirits, the EU is looking for India to reduce its tariffs to levels equivalent to those in advanced developed countries. India, however, already has one of the biggest wines and spirits industries in the world and any tariff reductions would increase competition for Indian producers. This is seen not as the primary concern, but rather in terms of the revenue implications of tariff elimination.
The EU is also seeking progress in eliminating SPS and technical barriers to trade.
Editorial comment
Prospects for an India–EU FTA were rated poor by the chair of the European Parliament workshop, with any likely agreement considered to have only a limited overall impact on the agro-food sector. The macro-economic assessments reviewed at the workshop, however, neglect potentially important impacts in sectors of export interest to the ACP. For example, an ambitious export strategy is being prepared for the Indian banana sector, in a context where India is the biggest banana producer in the world. However, this will require major investments along the supply chain and critical upgrades to India’s cold-chain infrastructure (see Agritrade article ‘ India preparing a major banana export programme’, 1 March 2013).
Against the background of the FTA negotiations with the EU, the Indian government is also looking to develop “clusters of growers who will be trained in producing high-quality, export-standard vegetables” (see Agritrade article ‘ Indian government prepares to capitalise on new EU preferences’, 15 April 2012). If such proactive programmes are launched, then – given the potential scale of Indian production – this could pose major challenges to ACP exporters in the targeted sectors following the conclusion of an agreement. Assessing the scale of the challenge facing ACP suppliers will require detailed assessment once the EU’s agricultural tariff liberalisation offer is known.
