February 28, 2024

Lukmaan IAS

A Blog for IAS Examination

TOPIC : INDIA AND GERMANY BILATERAL RELATIONS IN THE CONTEXT OF INDIA AND EU RELATIONS

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THE CONTEXT: German Chancellor Olaf Scholz arrived in New Delhi for a visit to India from February 25-26. Scholz is accompanied by senior officials and a high-powered business delegation. His visit to India is the first standalone by any German Chancellor since the commencement of the Intergovernmental Consultations (IGC) mechanism between the two nations in 2011.

INDIA GERMANY RELATIONSHIP

  • Germany is India’s largest trading partner in Europe with bilateral trade- $21.98 bn in 2017-18
  • Germany is 7th largest FDI in India with investments of $11.7 bn
  • India and Germany share a strong economic partnership. Germany is India’s largest trade partner in the European Union and has consistently been among India’s top 10 global trade partners. It is also one of the largest foreign direct investors in India.

The IGC is a whole-of-government framework under which Ministers from both countries hold discussions in their respective areas of responsibility and report on the outcome of discussions to the Prime Minister and Chancellor.

HISTORICAL PINNING’S

2000

India and Germany have a ‘Strategic Partnership’ since May 2000

2011

Relations have been further strengthened with the launch of Intergovernmental Consultations (IGC) in 2011 at the level of Heads of Government which allows for a comprehensive review of cooperation and identification of new areas of engagement.

2022

6th Inter-Governmental Consultations: Prime Minister visited Berlin on 2 May 2022 to co-chair the 6th IGC with Chancellor Olaf Scholz where he was accompanied by External Affairs Minister, Finance Minister, National Security Advisor and Minister of State (I/C) for Science & Technology. A total of 14 agreements were signed in diverse fields such as green partnership, development cooperation, renewable energy, migration and mobility, economic cooperation and agriculture. Prime Minister and Chancellor also signed a Joint Declaration of Intent on a Green and Sustainable Development Partnership.

OUTCOME OF THE RECENT VISIT

The changing geopolitical and geostrategic environment has led to the strengthening of the bilateral relations between two countries. The Ukraine crisis has led to shift its focus from Russia and China and treating India as a key partner in its foreign policy.

  • Defence: The meetings included discussions around co-development of military hardware and tech transfers, and a deal worth $5.2 billion where Germany would jointly build six conventional submarines in India could be underway.
  • Also first ever France-India-Germany military exercise drill is slated to take place in 2024 towards enhanced security and defence collaboration.
  • Indo-Pacific region: For Germany, the stability of supply chains and trade routes linking Asia to Europe assumes critical importance given its status as Europe’s economic powerhouse and its reliance on exports. Thus Germany intends to enhance its strategic involvement in the region through greater military deployment. Germany’s symbolic gesture of sending its frigate Bayern to the Indo-Pacific in 2021, with a stopover in Mumbai (January 2022), was a demonstration of this.
  • Clean energy and green technologies: Collaboration in clean energy and green technologies has emerged as the central pillar in the partnership, with the launch of a Green and Sustainable Development Partnership last year and cooperation in the area of green hydrogen.
  • Mobility and migration: The subject of mobility and migration was also under focus given Germany’s shortages of skilled manpower; where technically skilled Indians could help plug this gap.
  • Work visas : improving the legal framework so Germany becomes more attractive for software developers and those with IT development skills is a priority for his government
  • Values: the strong ties between India and Germany are based on shared democratic values of each other’s interests
  • People to people relationship: people-to-people relations between the two countries and the initiatives like ‘Make in India’ &Aatmanirbhar Bharat campaign.
  • Reform in the UN: India and Germany also cooperate in multilateral forums, as part of the G-4 grouping pushing for United Nations Security Council reform, and as evident in Germany’s invitation to Mr. Modi to attend last year’s G-7 summit.

EU BASIC FACTS

EUROPEAN PARLIAMENT

  • The European Parliament is the EU’s law-making body. It is directly elected by EU voters every 5 years. The last elections were in May 2019.
  • Role: Directly-elected EU body with legislative, supervisory, and budgetary responsibilities
  • Members: 705 MEPs (Members of the European Parliament)
  • Legislative role: Passing EU laws, together with the Council of the EU, based on European Commission proposals.

EUROPEAN COMMISSION

  • The European Commission is the EU’s politically independent executive arm. It is alone responsible for drawing up proposals for new European legislation, and it implements the decisions of the European Parliament and the Council of the EU.
  • Role: Promotes the general interest of the EU by proposing and enforcing legislation as well as by implementing policies and the EU budget.

COUNCIL OF THE EU

  • In the Council of the EU, informally also known as the Council, government ministers from each EU country meet to discuss, amend and adopt laws, and coordinate policies. The ministers have the authority to commit their governments to the actions agreed on in the meetings. Council meetings take place in Brussels, except for three months (April, June and October) when they are held in Luxembourg.
  • Together with the European Parliament, the Council is the main decision-making body of the EU.

EVOLUTION OF EU

History of the European Union 1945-59

5 May 1949 – The Council of Europe is established— 10 Western European countries create the Council of Europe to promote democracy and protect human rights and the rule of law.

9 May 1950 – A plan for new political cooperation in Europe.

18 April 1951 – European Coal and Steel Community—Based on the Schuman plan, six countries sign a treaty to run their coal and steel industries under a common management. The six are Germany, France, Italy, the Netherlands, Belgium and Luxembourg. The European Coal and Steel Community came into being in 1952.

1957 – Treaties of Rome

Building on the success of the Coal and Steel Treaty, the 6 founding countries expand their cooperation to other economic sectors. They formalise this by signing two treaties, creating the European Economic Community (EEC) and the European Atomic Energy Community (Euratom). These bodies come into being on 1 January 1958.

1958 – Birth of the European Parliament— It replaces the Common Assembly of the European Coal and Steel Community and changes its name to the European Parliament on 30 March 1962.

The ‘Swinging Sixties’ – a period of economic growth

1960 – European Free Trade Association created: The European Free Trade Association (EFTA) is created, to promote free trade and economic integration between certain countries not in the EEC.

1968 – beginning of the Customs Union: The 6 EEC member countries remove customs duties on goods imported from each other, allowing free cross-border trade for the first time.

1970-79

A growing Community – the first new members join

Denmark, Ireland and the United Kingdom join the European Communities on 1 January 1973, raising the number of member countries to 9.

1980-89

The changing face of Europe – the collapse of communism

1981 – Greece becomes the 10th country to join

Greece joins the European Communities. It has been eligible to do so since the military regime was overthrown and democracy restored in 1974.

1986 – Two new members – Spain and Portugal

1986 – Towards a single market

Although customs duties disappeared in 1968, trade is not flowing freely across the borders between member countries. The main obstacles are differences in national regulations. The Single European Act launches a vast 6-year programme to sort these out and thus create a single market.

1990-99

A Europe without frontiers

In 1993, the single market is launched with the ‘4 freedoms’ of free movement for people, goods, services and money.

The 1990s is also the decade of 2 treaties –

  1. the Treaty on European Union (Maastricht Treaty) in 1993 and
  2. the Treaty of Amsterdam in 1999. Austria, Finland and Sweden joined the EU in 1995, and a small village in Luxembourg gives its name to the Schengen agreement that will gradually allow people to travel to large parts of the EU without passport checks.

1992 – Maastricht Treaty: European Union’ is officially created by the treaty, which enters into force on 1 November 1993.

1994 – European Economic Area is created—The agreement establishing the European Economic Area (EEA) enters into force, extending the single market to countries in EFTA

1999 – The euro is born—The euro is introduced in 11 countries for commercial and financial transactions only.

2000-09

Further expansion

European Union developed from 2000 to 2009 with 12 new countries joining, the euro becoming legal tender and the signing of the Lisbon Treaty.

2010-19

A challenging decade

European Union developed from 2010 to 2019, responding to the financial crisis, Croatia joining the EU, and the UK voting to leave.

2020-today

A united and resilient EU

European Union has developed since 2020, responding to unprecedented challenges such as the COVID-19 pandemic, Russia’s war of aggression against Ukraine, and fighting climate change.

INDIA EU RELATIONSHIP

  • India-EU bilateral relations date back to the early 1960s with India being amongst the first countries to establish diplomatic relations with the European Economic Community in 1962. The Joint Political Statement signed in 1993, coupled with the Cooperation Agreement signed in 1994 opened the way for strengthening the bilateral ties.
  • A multi-tiered institutional architecture of cooperation has since been created, presided over by the India-EU Summit since 2000.The first India-EU Summit took place in Lisbon in June 2000 and marked a watershed in the evolution of the relationship.
  • India -EU relationship was upgraded to “strategic partnership” during the 5th India-EU Summit held in 2004 in The Hague. As on date, 15 Summits have been held between India and the EU.
  • In 2018 , the EU came out with strategy on india that viewed India as an emerging global power that plays a key role in the current multipolar world and a factor of stability in a complex region and calls for greater India – EU political, security and defence cooperation.
  • 15th India-EU Summit: The 15th India-EU summit was held in virtual mode on 15 July 2020. It saw the adoption of a wide-ranging joint statement and also an India-EU Strategic Partnership Roadmap for 2025. An Agreement on Civil Nuclear Energy Cooperation was signed and another Agreement on S&T Cooperation was extended for a further period of 5 years. Both sides also issued a Joint Declaration on Resource Efficiency and Circular Economy.
  • India-EU Leaders’ Meeting: In continuation of the highly successful 15th India-EU Summit, the first ever India-EU Leaders’ Meeting was held on 08 May 2021 in hybrid mode. In thus it was decided to launch an ambitious and comprehensive ‘Connectivity Partnership’ which is focused on enhancing digital, energy, transport and people-to-people connectivity; and reiterated their commitment to achieving the goals of the Paris Agreement and agreed to strengthen joint efforts for mitigation, adaptation and resilience to the impacts of climate change.
    • many analysts have called the summit as a “turning point.”
    • Relaunched FTA talks suspended since 2013
    • Apart from the US, India is the only country with which EU has had summit in this format, showing india’s growing salience in EU’s geopolitical calculations
    • India welcomed the EU’s decision to join CDRI. India and the EU also agreed to enhance bilateral cooperation on digital and emerging technologies such as 5G, AI,etc

Areas of cooperation

Economic Cooperation

●  EU is India’s third largest trading partner accounting for €88 billion worth of trade in goods in 2021 or 10.8% of total Indian trade. India is the EU’s 10th largest trading partner, accounting for 2.1% of EU total trade in goods. Trade in services between the EU and India reached €30.4 billion in 2020.

●  Investment: The EU’s share in foreign investment inflows to India more than doubled from 8% to 18% in the last decade making the EU India’s largest source of FDI.

●  BTIA: The negotiations for a Broad-based Bilateral Trade and Investment Agreement (BTIA) were held between 2007 to 2013 but remained dormant till 2021.

●  india-Europe trade and technology council was launched. EU has this mechanism only with the US

Strategic Cooperation

●  Both EU and India have a common interest in avoiding a bipolar world and sustaining a rules-based multilateral system with the UN and WTO at its core

●  Defence– Information Fusion Centre-IOR linked to Maritime Security Centre-Horn of Africa (MSC-HOA) established by EU naval force.

●  EU in Indo-Pacific: EU has released its “ EU strategy for cooperation in the Indo pacific” that highlights “china’s expansionism as threat to european security and prosperity” and focuses on “centrality of ASEAN” in the indo-pacific.

●  India is looking at EU countries as a natural partner in forging a durable Balance of power in the indo pacific region. As it confronts a rising China, India needs both the United States and Europe to construct a multipolar Asia.

Sectoral Cooperation:

India and the EU have cooperation in various sectors, including Agriculture & Marine, Energy, Environment, Water, Pharmaceuticals, Biotechnology & Medical Devices, Science & Technology, Science and Technology, Infrastructure, Information & Communications Technology and aviation.

Development Partnership

●  European Investment Bank: European Investment Bank’s (EIB) is providing loans for Lucknow, Bangalore, Bhopal, Kanpur and Pune Metro Projects. EIB opened its first office for the South Asian Region headquartered in New Delhi on 30 March 2017.

●  Indian students avail Erasmus+ scholarship for studies in EU countries.

Bilateral Dialogues

India and EU have institutionalized political dialogues, inter alia, on Counter-Terrorism, Cyber Security, Migration and Mobility, Maritime Security, Human Rights, Non-Proliferation and Disarmament. The two sides meet regularly to discuss bilateral cooperation and international developments in these areas.

ISSUES IN INDIA EU RELATIONSHIP WITH RESPECT TO THE BTIA

Negotiations on free trade agreement has been started in 2007 , but it has been suspended due to “gap in ambitions” of both parties

Various issues in this include:

  • Opposition from Indian dairy sector
  • Opposition from farmers especially in wines and spirit
  • EU has not given India the status of data secure nation hence posing restrictions for its IT companies
  • EU’s emphasis on strong IPR regimes
  • EU reluctant to liberalise its service sector and movement of persons
  • The EU’s insistence on labour and environmental standards, access to government procurement, stricter intellectual property rules and cross-border data flow will not be easy for India to meet. With India’s move towards data localization, negotiations could be acrimonious. While India will seek to have zero duty access for textiles, garments and leather products, UK and EU will seek market access in automobiles, wines and Scotch whisky.
  • India accounts for only 2% of the EU’s external trade while china stands at 14% thus it has more strong relations with China.
  • Time and again EU’s calls for alleged HR violations in Kashmir and on recent CAA act create diplomatic mistrust between the two entities
  • India’s excessive focus on select countries like France,UK and Germany

HOW WILL INDIA AND GERMANY RELATIONS STRENGTHEN INDIA-EU RELATIONSHIP?

  • With a population of 83.1 million, Germany is the most populous member state of the European Union.
  • Germany is India’s largest economic partner in the European Union (EU). Thus, trade naturally figured high on the agenda boosted by the relaunch of the India-EU free-trade agreement negotiations where the Chancellor, travelling with his high-powered business delegation, stated he would “get personally involved”.
  • Germany has now been sceptical about Russia and China axis and now searching for other partners to balance the relationship. Strong EU and India relation will be strategically important for balancing the China’s aggression and assertiveness. Thus Germany will make efforts to conclude the BTIA.

THE WAY FORWARD:

  • The is a need for strong political will to conclude the BTIA for strengthening the rule based world order.
  • Need for regular consultation and negotiation for its early conclusion.
  • All the commitments should be strictly adhered to build mutual trust.
  • There is need to have strategic calculations rather than only focusing on the economic interests in the context of rising aggressive China.

THE CONCLUSION: To establish rule based world order and respect multilateralism with multipolar world order, India and the EU can play an important role. Thus India and Germany should work together to strengthen the India and EU relationship and conclude the free trade agreement BTIA.

Additional information:

Brexit and impact on India:

  • Britain left the EU under article 50 of the Lisbon Treaty.
  • After losing access to the EU single market, the UK would want to develop trade relations with emerging markets around the world. India, with strong economic fundamentals and a large domestic market, is in a better position to gain that opportunity.
  • India is a significant Foreign Direct Investment (FDI) source for the UK because many Indian firms have used it as a gateway to the EU single market. Initially, after divorcing from the EU, the UK wouldn’t like to miss Indian investment. It will attract Indian firms by offering more incentives such as tax breaks, relaxed regulations and opening up markets.
  • The depreciation in the pound would help Indian companies to import items from their UK subsidiaries and will create incentive for Indian investment in the region. It would make the UK an attractive destination for higher studies.
  • UK might sign an FTA with India before India finalises BTIA with EU.
  • Automobile and steel sector may face adverse impact of slowdown of British Economy.

Windsor Framework:

The Windsor Framework is a proposed post-Brexit legal agreement between the European Union and the United Kingdom which was announced on 27 February 2023. It is designed to address the problem of the movement of goods between the European Single Market and the United Kingdom in the current Northern Ireland Protocol.

Mains Question

  1. In the changing geostrategic scenario, it is imperative for the EU and India to cooperate together. Critically analyse.
  2. Critically examine whether strong India and Germany relations will help strengthen the India -EU relationship.
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