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With eye on China, EU reaches out to India for a mega trade deal

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Prime Minister Narendra Modi addressing the India-EU meeting where he was the Special Invitee (Pic: Courtesy PIB)

With an eye on China, India and the European Union (EU) have decided to restart negotiations on a new trade deal, which could massively expand commerce between the two big economies and untap a surge in European investments into India.

The talks, in case they succeed, can turn Europe into a powerful engine to bolster the  Aatmanirbhar Bharat strategy. The carefully timed initiative is meant to turn India into a global manufacturing hub, at a time when production costs in China are rising, and geopolitical tensions between Beijing and the West, as well as with its neighbouring countries, including India, continue to surge. India aspires to emerge as a $ 5 trillion in the next few years.

The EU’s outreach to India comes at a time when many European countries including France, Germany and Britain are entering the turbulent geopolitical waters of the Indo-Pacific region, which is fast becoming the globe’s geo-economic center, but where China is trying to muscle in.

Also Read: India-EU agree to strengthen strategic, bilateral cooperation

The decision to revive the trade dialogue, push connectivity and bolster investments  was taken on Saturday during a virtual summit of the 27 EU nations with India, led by the Prime Minister Narendra Modi.

"We've just concluded a historic and successful India-EU Leaders' meeting. It was an unprecedented occasion where the PM of India was a special invitee” said Vikas Swarup, secretary in the Ministry of External Affairs.

Prime Minister Narendra Modi at the virtual India-EU meeting (Pic: Courtesy PIB)

Charles Michel, the European Council President nailed the meeting as the start of a “new chapter” in the India-EU relations. "We are opening a new chapter in #EUIndia strategic partnership at the meeting of EU Leaders with PM @narendramodi,"  the EC head tweeted.

China was the obvious elephant in the room during the talks. The Financial Times is reporting that EU-China relations have become increasingly tense, raising questions over the future of an investment partnership that received political backing last year.

It added that in March, the EU had joined western partners in imposing sanctions against Chinese officials over human rights violations. Beijing responded with sanctions on European officials and politicians.  “Brussels believes that India’s decision to pull out of negotiations on a China-backed trade pact last year opened a window as New Delhi hunts for alternative partners,” the daily said.

On the geopolitical plane, given its high stakes in India and the broader Indo-Pacific region, the EU is exploring partnering the Indo-Pacifc Quad, comprising India, Australia, Japan and the United States. “The EU is not a traditional security player in the Indo-Pacific; however, as the region is particularly relevant to its trade, it has a strong interest in avoiding disruption of the sea lanes, says a EU Think Tank report.  It pointed out that France, Germany and the Netherlands have published strategies or guidelines for the Indo-Pacific region, which has stepped up expectations about the forthcoming strategy for the region by the EU as a whole.

Referring specifically to Quad, the report adds: “The first Quad summit took place in March 2021. The grouping has emphasised that its goal is to maintain the liberal rules-based international order, which China seeks to undermine through a revisionist challenge of the status quo. Its efforts are not focused on creating institutions or military alliances, but rather, on generating gradual convergence of cooperation on multiple issues, including Covid-19, climate change, critical and emerging technologies, counterterrorism, cybersecurity and disaster recovery.”

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