Reviving free trade talks with the EU could push India towards a more open economy

Trucks loaded with wheat arrive at Deendayal Port Authority in Kandla, India’s Gujarat state, May 18, 2022. Photo: VCG

India and the European Union (EU) officially restarted talks for a free trade deal on Monday, ending a nearly decade-long freeze and aiming to reach a deal by the end of the day. end of 2023, according to the Nikkei. India’s Trade and Industry Minister Piyush Goyal reportedly said India’s trade deal with the EU can help unlock significant untapped potential.

There is no doubt that the conclusion of a free trade agreement is of great economic importance for India and the EU, but this negotiation is far from being as easy as it seems. India and the EU began trade talks in 2007, but stalled in 2013 as the two sides failed to reach agreement on key issues including auto tariffs and movement of professionals.

The two sides seek to have “broad, balanced and comprehensive” trade talks, Goyal said, Indian media reported. As the EU seeks to sell more products in India’s vast market, market access barriers that impede trade are expected to be a crucial part of the negotiating agenda. How far India will open its market will attract wide attention.

India’s economic development over the years has been in a dilemma. On the one hand, it protects the domestic industry from being further affected by foreign competition. On the other hand, without openness, it is impossible for India to improve the competitiveness of its own industries. The persistent contradiction is a serious problem that limits India’s development.

It is an economic dilemma faced by all developing countries in their growth process. Any country that develops at this stage has to bear some shocks on domestic industries by opening up its economy. While it is crucial for the Indian economy to find a balance, it is clear that opening up and promoting free trade at this stage can bring more benefits.

India has indeed become more open to lowering trade barriers in recent years and is negotiating agreements with several countries. India signed a major trade agreement with the United Arab Emirates in February and an interim free trade agreement with Australia in April. Furthermore, India is also in trade talks with the UK. Overall, these trade negotiations are conducive to further opening up the Indian economy.

However, India’s moves to expand trade agreements further show that the country seems only interested in building its own trade and industrial supply chains. For example, India has chosen not to join trade pacts that promote regional trade facilitation, such as RCEP.

A piecemeal approach to opening up, while beneficial to some extent for the Indian economy, also means that it will be more difficult to keep moving forward in the opening process. In fact, a higher level of openness will help it become a global manufacturing powerhouse and better position itself for cooperation with the industrial supply chains of Asian economies.

For India, integration into regional development does not conflict with upgrading its own manufacturing capacity. It is beneficial to both its foreign trade and its domestic industries if India chooses to integrate into the Asian industrial supply chain and deepen its cooperation with economies like China, Japan, South Korea South and ASEAN.

The author is an editor at the Global Times. [email protected]

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