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India and the European Union: a stagnating relationship

By Narendra Modi (PM Modi with Belgian PM Charles Michel) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

The Indian Prime Minister Narendra Modi has finally made it to Brussels two months ago. With the EU-India Summit of 30th March, Modi remains loyal to his policy of a more ascertained outreach to the world. Since coming into office, he has given the world, especially the wider regional neighbourhood, a clear signal that India wishes to engage again and more forcefully in international affairs, but no longer along the traditional lines of the Non-Aligned and Third World solidarity, as developed by Nehru and his Congress Party successors. PM Modi has engaged in redefining how India should pursue its strategic interests without any ideological consideration and free from old strategic patterns. The meeting in Brussels has been upgraded to a summit, where “our strategic partnership has been put back on track”, as Kozlowski, EU Ambassador to India, put it. This hides that the real thing, however, would have been real efforts and effective work on a bilateral free trade deal. The EU and India had, more than six years ago, engaged in negotiations on such a deal known as the BTIA (Broad-based Trade and Investment Agreement). Once achieved, it would give both sides the necessary push for mutually relevant and beneficial conditions for enhancing economic relations. As, in Europe, it would give an advantage to EU member nations, the Europeans staying outside, organised in the surviving EFTA (European Free Trade Association), launched their own negotiation process with India with a less ambitious objective, just covering the basic conditions for mutually fair economic exchanges. For a moment, a few years ago, it looked as if the two very unequal European institutions were competing not primarily to get a better deal, but to strike a deal first at all. This competitive impetus has vanished; both European camps are waiting until the Indian leadership will understand that free trade and mutually comparable fair competition rules are a“conditio sine qua non” for genuine growth of trade on both sides. The current Indian leadership, however, does not understand this yet. The topic of the BTIA was completely marginalised at the summit talks and in the final India-EU Joint Statement of 31st March. Where then are, according to the Indian leadership, the substantial interests lying? It is everything that pertains to India’s two fundamental traumas and obsessions. The official trauma and obsession is Pakistan, the hidden one is China. India has fought wars against both of them, inconclusive all. Now, India is more and more scared by China’s strategic outreach in the region, which creates the impression that the Chinese objective is the establishment of a “string of pearls”, that is a series of positions with which India can not only be circumvented, but, if need be, encircled. The most obvious cornerstones are the ports built by Chinese in Myanmar, Sri Lanka and Pakistan. The port being built in Gwardar, Pakistan, is of particular sensitivity, since it symbolises and even incarnates something like an alliance between India’s two arch enemies. India seemed to lack not only the means, but also the political determination to act against this growing threat. With PM Modi, such a determination seems to be back at the helm of the nation.  Less than two months after Brussels, PM Modi arrived in Tehran, Iran, full of enthusiasm for setting a new agenda in the region. India and Iran, together with Afghanistan, a future beneficiary, struck a deal which will change a lot in the region. India will contribute to the development of the port of Chabahar in Iran’s Southeast. Chabahar with its port and a free trade zone is set to develop a new trade and transport line linking Central Asia, Afghanistan and India via Iran, thus circumventing Pakistan, hated and feared by India, mistrusted by Iran. Chabahar has the potential to trigger a new economic dynamics for the Iran-India relations. Another agreement signed at the same occasion lays the foundation for enhanced Indian investment in the Iranian oil sector. India has been a traditional buyer of Iranian crude oil for its own energy needs, and a seller of refined petrochemical products, partly also to Iran. So the growth prospects between the two regional powers are genuine. But it is limited in scope. Iran is not in need, and therefore not keen of buying Indian industrial goods. It has had its share in Chinese industrial goods during the toughest years of isolation and is dreaming now of getting away from China or India as industrial suppliers. This puts a limit to possible Indian dreams of increasing its exports to Iran. Where India aims at competing with Chinese exports, it has, apart from improving its production quality-wise, to turn to the only two large markets on the globe. And these are America and Europe. Building the Iranian port of Chabahar is a good idea, restarting free trade negotiations with Europe would be a better one.

27th May 2016 / Philippe Welti

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