India-EU FTA: EU seeks ambitious commitments in government procurement, India resists

The EU wants binding commitments from India in government procurement as part of the India-EU Free Trade Agreement (FTA) being negotiated, including principles of “non-discrimination” and “dispute settlement”. But sources said New Delhi has not yet agreed to show much flexibility on the two sensitive elements.

“There is no agreement yet between the two sides in the critical areas of non-discrimination and dispute resolution in government procurement because India does not want to take on obligations here,” said a person who has been following the matter. Business line.

procurement market

India, in all the free trade agreements it has implemented so far, except the one with the UAE, has not made commitments in government procurement because it does not want to indiscriminately open up the government procurement market worth $500 billion annually.

Even with the UAE, India has tried to protect the interests of the MSME sector by maintaining caps for goods, services and construction services at a high level of over Rs 200 crore. It also kept state and local purchases out of the agreement.

Also, India is not a part of the Government Procurement Agreement (GPA) that is drawn up between some of the member countries of the World Trade Organization.

“The EU is now very ambitious and insists on covering sensitive aspects of government procurement in the free trade agreement with India. In the next round of negotiations, which is likely to be held in March this year, the source added, the two sides need to work on a mutually acceptable solution.

The principle of non-discrimination obliges both partners not to discriminate between suppliers if goods and services are purchased from partner countries.

Settlement of Disputes

Dispute settlement refers to how disputes are settled if one government feels that the other government is violating the agreement.

The proposed free trade agreement between India and the European Union covers a plethora of areas including trade in goods, rules of origin, services, investment, intellectual property rights, digital trade, government procurement, trade remedies, trade, sustainable development and anti-fraud.

The third round of FTA negotiations between the EU and India was held in New Delhi last month. There were also separate negotiations on an investment protection agreement and geographical indications.

The EU also introduced a new draft text on capital movements, payments, transfers and temporary protection measures.

The European Union is India’s third largest trading partner, with trade in goods reaching 88 billion euros in 2021 or 10.8 percent of India’s total trade, according to EU figures. India is the EU’s tenth largest trading partner, accounting for 2.1 percent of the EU’s total goods trade. The trade volume in services between the EU and India reached €30.4 billion in 2020.

The EU resumed negotiations with India on a free trade agreement in June 2022, after suspending talks in 2013, and launched separate negotiations for an investment protection agreement and an agreement on geographical indications. Both sides hope to conclude negotiations in all three areas in 2023.