The EU moves inward

Jayshree Sengupta

IT is not President Donald Trump alone who is scaring India about trade with the US, there are problems in Europe also regarding trade and investment. The EU is keen to negotiate the Bilateral Investment Treaty (BIT) between the EU and India before it starts negotiating the free trade treaty — the Broad-based Trade and Investment Agreement (BTIA) which has been lying in the cold storage for 10 years. Now there is an impasse in the BIT because India will not accept one of the clauses which allow EU investors to challenge the government in front of an international tribunal. For India, the various clauses regarding investment guarantee have been a bone of contention in the past. Recently in Davos, Commerce Minister Nirmala Sitharaman categorically said India would not allow investors to drag the government to a multilateral investment court. The proposed revised model of the BIT starts from March 31 in which various contentious clauses like government procurement, compulsory licensing, subsidies, taxation and national security will be excluded to preserve the regulatory authority of the Indian Government. This is likely to postpone the conclusion of the BTIA between the EU and India. Like America, the EU is another important destination for India’s exports (16 per cent of the total exports go to the EU) and it may become less accessible.

Currently, the EU itself is undergoing a turmoil which it has not witnessed before and its very cohesion is being threatened. Problems of unwanted immigration led to the unexpected Brexit vote which sent shockwaves throughout Europe. In a similar vein, many of the member- countries are seeing the rise of nationalist leaders who are talking like Trump. In Austria recently, most people expected the ultra-right wing forces to win which were gaining momentum, but unexpectedly such speculations proved wrong. Moderate and a liberal, Alexander Van der Bellen, defeated the strong right wing neo-fascist Freedom Party presidential contender, Norbert Hofer. It sprung a pleasant surprise for European liberals as Bellen was backed by Austria’s Greens, a Left-leaning pro-Europe party. 

Hofer promised to bring Austria back to its past glory (the Austro-Hungarian Empire). He has a broad-based appeal and 46 per cent of the people voted for him for his expressed anti-immigration sentiments. Parliamentary elections are due in 2018 in Austria and the Freedom Party is leading in opinion polls claiming support of one-third of the total votes. 

In Italy, the anti-establishment Gold Star movement and the right-wing Northern League, which wants to copy the Brexit vote in Italy, are gaining ground. PM Matteo Renzi from the Democratic Party resigned because he had proposed controversial constitutional changes and he agreed to step down when the referendum went against his proposal. He wanted to get a rescue package from the European Stability Mechanism to bail out some of Italy’s debt-ridden banks and in particular the third biggest lender, Banca Monte deiPaschi di Sienna, the oldest bank in the world. But since he has been ousted and replaced by his colleague Paolo Gentiloni, the banks could remain in trouble. Italy has one of the slowest growing economies in the EU. Both Italy and Austria are facing rising unemployment.  

 In France, Marine Le Pen, who is the leader of the National Front — a party founded by her father, Jean Marie Le Pen in1972, is a strong presidential candidate in the 2017 elections. She is anti-Muslim, anti-immigration and is pro-exit from the EU. If elected, she said she would stop free education for illegal immigrants’ children who are mostly Muslims from North Africa. France has faced two terrorist attacks and people are tense about future attacks. It has the biggest Muslim population in Europe comprising 11 per cent of the population. 

In the Netherlands, Geert Wilders is a populist leader from the Party of Freedom, who, like the rest of the rising stars in the EU political scene, is an Islamophobe, anti-immigrant and a Eurosceptic. He is riding a wave of support in the Netherlands and the Dutch elections are due in March 2017 in which he is likely to win according to a recent poll, and his party was shown gaining 33 out of 150 seats in Parliament.  

The entire EU has experienced prosperity since World War II and the member-countries have been cooperating with one another which led to the birth of the 28-member EU and the European Monetary Union. Borders were abolished and the euro became the common currency for 11 Eurozone members in 2002. 

 The US and the stronger members from Europe — Germany, France, Italy, the UK — became members of G7 which has dominated the world order since 1975. But today, most EU members with colonial pasts have turned anti-immigrant. They already have a substantial immigrant population like the UK, France, Holland and Germany.  All EU citizens are used to a welfare system that looks after them from cradle to grave regarding education, housing, health and old-age security.

 This equilibrium has been upset by the new wave of refugees arriving from the Middle East in large numbers. Illegal immigration from Africa and Asia, including India, into the EU has been going on for a long time and news about the tragic death of boat-laden immigrants have hit the headlines often enough. 

Thus in a few years, the EU might become a formidable fortress in the future. There will be more racist attacks and their view of globalisation and inclusion of the third world in their trade and investment pattern may fade fast. Their long-term growth rate may however be compromised with this isolationist behaviour.

The EU’s policy of hiring software workers from India may also change and their mobility across the EU could be affected with more right-wing racist parties gaining strength. There are many hurdles that Indian exporters face as they have to adhere to laws and rules of the EU like the phyto-sanitary regulations for agricultural products. The EU-India FTA could have helped the ease of entry but there remain many sticking points.

 The EU wants India to open up its wines and spirits market and allow freer imports of new and second-hand cars. It wants India to open up the retail sector and India wants ‘data secure’ status. With a change of governments in important member-states that are clearly anti-immigration and protectionist, there may be more snags in signing the EU-India BTIA.