French president Nicolas Sarkozy flew to India to take the seat as principalforeign guest at the country’s Republic Day pageantry on January 26. It wasmore than an opportunity to soak in the sun amidst a burst of colors. It was asign that after years of fascination with China, European Union governments arewaking up to India’s economic potential and growing global clout. Following inthe footsteps of their US counterparts, European leaders and businesses beat apath to Delhi in search of new opportunities - and to woo Indian companiesseeking to invest in the EU.
The Sarkozy visit follows a November 2007 summit held in the Indian capital, atwhich leaders from both sides vowed to clinch a free-trade agreement by the endof 2008, tackle climate change and strengthen an ambitious "strategicpartnership" pact signed in 2004.
Transforming the upbeat rhetoric in Delhi into a robust and effective EU-Indiarelationship will take time, effort and persistence.
For one, both sides must make up for years of mutual neglect. Used to viewingIndia as a plodding economic elephant and mesmerized by the stronger lure ofChina, EU policymakers and businesses have been late in recognizing thecountry’s newfound economic dynamism, including the success of the Indianinformation-technology sector, the rise of India’s computer-servicesoutsourcing industry and the emergence of Indian world-class industrial giants,eager to scour Europe for markets and acquisitions. EU investments in thecountry totaled a modest €1.6 billion in 2006, compared to €3.7 billion inChina.
Admiration for India’s economic performance and dynamic new entrepreneurs suchas Tata, whose $12 billion acquisition of Anglo-Dutch steelmaker Corus hitheadlines across the 27-nation bloc in early 2007, is tainted, however, byanti-globalization sentiments across the EU. Although the debate on outsourcinghas been less fierce in Europe than in the US, a majority of Europeans fear therise of India--and even more of China--as a threat to European jobs and wagesrather than an opportunity for expanded business.
In Delhi, policymakers are trying to bring EU-India ties out of the shadow castby their growing relationship with the US. Successive EU enlargements, theEU’s growing reputation as a global defense and security actor as well ascontinued strong EU economic performance are key reasons for India’s increasedinterest in Europe.
Mutual interest has resulted in increasing interaction between the two sideswithin the United Nations framework and on a bilateral level. Ties havestrengthened since the first EU-India Summit in Lisbon in 2000, with cooperationon political, geopolitical and multilateral issues as well as economic and tradeones. Significantly, India has shed earlier inhibitions about engaging indialogue with the EU on developments in Nepal, Sri Lanka and Bangladesh.
Still, both sides struggle to give substance to their strategic partnership andhave different views on what this means in practice.
The EU’s first-ever Security Strategy published in December 2003, identifiedIndia--along with the US, Russia, Japan, China and Canada--as a country withwhich the Union should seek to develop a strategic partnership to build an"effective multilateral system leading to a fairer, safer and more unitedworld." The EU wants to use its strategic partnerships to share globalresponsibilities and meet 21st century challenges, including terrorism,proliferation of weapons of mass destruction, state failure and regionalconflicts.
As an emerging power, India’s immediate concerns are understandably verydifferent from those of the EU and its member states. As it aspires to play amore forceful global role, as illustrated by its demand for a seat on the UNSecurity Council and participation in international peacekeeping operations,India views a strategic partnership with the EU and the US as a vehicle forensuring greater worldwide prestige and political clout.
While developing a strategic partnership with the EU is a goal, Delhi’sprimary focus, however, is on its troubled neighborhood. Rivalry with China andtensions with Pakistan as well as political turmoil in Bangladesh, Nepal and SriLanka dominate the country’s foreign-policy agenda.
Not surprisingly, there is a significant mismatch of aspirations. The EU hasmade no secret of its disappointment at India’s failure to stand up fordemocracy and human rights during Burma’s recent military crackdown ondissidents. EU policymakers have argued that as the world’s largestdemocracy--and given its growing economic ties with Burma--India must use itsconsiderable leverage to put pressure on the military junta in Rangoon. Indiahas responded that it does not believe that sanctions work.
The EU-Indian strategic partnership has failed to soften India’s tough line inthe World Trade Organization’s Doha trade talks, where Delhi continues toresist US and EU demands for further cuts in industrial tariffs. India hasrefused to accept Western calls for stricter binding commitments to reducegreenhouse-gas emissions to combat climate change, arguing that a developingcountry cannot be expected to slow the pace of industrialization.
Differences also emerged on the US-India nuclear agreement, which--if it entersinto force--will give energy-hungry India access to US civil nuclear technology.The EU has no common position on the deal. Sarkozy used his visit to India tosign a framework accord paving the way for nuclear-power cooperation, includingthe supply of reactors, once Delhi clears hurdles with the UN's nuclear watchdogand the 45-member Nuclear Suppliers Group. However, other EU states fear thatIndia could use imported nuclear fuel to feed its civilian energy program whilediverting its own nuclear fuel to weapons production.
Despite such divergences, however, India and the EU cooperate in many sectorsand Delhi views Europe as an important source of high technology. In addition,negotiations on a first-ever EU-India free-trade agreement were launched in June2007, with India hoping the accord will be ready for implementation later thisyear. Discussions focus on slashing tariffs on trade in manufactured goods,removing non-tariff barriers as well as liberalizing trade in services, easinginvestment flows and trade facilitation.
Trade between the EU and India currently has grown from €4.4 billion in 1980to over €46 billion in 2006, but still accounts for only 1.8 percent of totalEU trade.
While ties are improving, building a sustainable EU-India partnership requiresfurther action on a number of fronts, including increased contacts betweenpolicymakers, think tanks and the media. For many Indians, the focus remains onthe EU as an economic rather than a political partner.
The EU meanwhile must ensure a better balance between its aid programs geared tomeet India’s development needs and more modern EU aid instruments aimed atencouraging economic reforms and modernization, ensuring regulatory cooperationand joint projects in the renewable-energy sector.
The road ahead will not be easy. The EU is not in a position at the moment torespond positively to India’s demands for nuclear cooperation, moredecision-making rights in the Galileo project or increased security cooperation.India, for its part, will not accept the EU stance on climate change, the Doharound or demands that it take on more responsibility for resolving regionalhotspots like Burma.
Such differences, however, need not become an insurmountable obstacle to acloser relationship. Political will, combined with steady, practical stepsleading to more cooperation, will be crucial in forging a real EU-Indiastrategic partnership.
Advertisement
Shada Islam is a senior program executive at the European Policy Centre.She writes for YaleGlobal Online in a personal capacity. Rights: © 2008Yale Center for the Study of Globalization. YaleGlobalOnline
