EU-India trade talks face uphill battle

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Good morning and welcome to Europe Express! Today, we are unpacking news from Brussels that officials are gearing up for renewed trade talks with India, which collapsed eight years ago. This time, the EU hopes things will be different because of the ravages of the pandemic — and both sides’ desire to stand up to China. But many disagreements, such as Covid-19 vaccine patents, still divide the sides.

We will also stop in Poland, where the parliament is due to ratify the bloc’s expanded borrowing to fuel its €750bn recovery plan. Approval from Warsaw has not been a given, even though Poland stands to enjoy huge financial gains from the EU funds.

And we will examine the EU’s latest guidance on allowing vaccinated travellers from outside the bloc, and what it means for vacation planning.

Tough talks

European Commission president Ursula von der Leyen believes the stars have aligned for the reopening of long-stalled trade talks with India, writes FT EU correspondent Jim Brunsden. But veterans of previous dalliances with New Delhi know a hard road lies ahead. 

Von der Leyen is seeking to restart negotiations on a tariff-reduction deal. EU ambassadors are set to give their input tomorrow. The resumption of talks could be announced at the EU-India summit on Saturday

In the meantime, it is worth reflecting on why the talks ran aground previously.

Brussels and New Delhi slogged through more than a dozen negotiating rounds between 2007 and 2013 before the sides called it a day. 

The EU’s trade commissioner at the time, Karel De Gucht, said the breaking point was India’s refusal to grant enough market liberalisation for EU car parts, a crucial goal for the European side that could have unlocked a grand bargain on other outstanding issues. 

“We got pretty far in the negotiations,” De Gucht told Europe Express. “Where it really got stuck was parts and components for cars.” Other contentious issues ranged from Scotch whisky to data protection standards.

David O’Sullivan, a former director-general for trade policy at the commission, told Europe Express that it would be good for the EU to look at the bigger picture if talks resumed. 

“India is the world’s largest democracy, which we should never lose sight of,” he said. “It is an important global player that is destined to become economically more successful.”

Brussels’ assessment, according to a senior commission official, is that India’s decision to pull out of negotiations on a China-backed trade pact has opened a window as New Delhi seeks alternative partners.

The EU is also aware that post-Brexit Britain has prioritised trade negotiations with India — meaning there might be a need to work fast to earn a first-mover advantage. 

Chart du jour: Cranking up production

Line chart of  showing Europe’s factories boom on global trade rebound

Factories across the eurozone are producing at record rates, driven by a surge in global demand. All this despite growing supply chain problems that have pushed up prices of raw materials. (Find out more)

Polish oddity

Political battles over EU funding are usually fought in countries that are net contributors to the bloc’s common budget. But one of the fiercest fights this time has been in Poland — a main beneficiary of the EU’s landmark €750bn recovery fund, write Agata Majos and James Shotter in Warsaw.

Today, the country’s parliament is due to vote on a bill expanding the EU’s “own resources” to finance the recovery fund. The own resources increase must be ratified by all EU members states for the fund to be activated.

But there have been questions for weeks about the Polish government’s ability to ratify the bill after a junior party in the ruling coalition said it would vote against it. The law now looks set to pass after the opposition group, the Left, said it would back the plans after winning government concessions for greater social spending.

The fight was the latest in a series of clashes between the ruling Law and Justice party (PiS), and United Poland, its junior coalition partner. United Poland, led by hardline justice minister Zbigniew Ziobro, has threatened to vote down the EU’s plans. Its opposition stemmed from the fact that the EU mechanism would put Warsaw on the hook for the debts of other states — and would link access to funding to adherence to the rule of law.

PiS leader Jaroslaw Kaczynski had warned that the government could collapse if the own resources plan was voted down. But the deal with the Left should allow the government to paper over the deepening cracks between the coalition partners. It will also pave the way for PiS to present its Polish “New Deal”, a long-awaited multiyear programme to be financed partly by the EU funds.

The Left’s move has been fiercely criticised by the biggest opposition party. Civic Platform (PO) has been reluctant to back the own resources bill without guarantees that the government will spend the money fairly and transparently. The group’s leader Borys Budka said the Left was throwing “a lifeline to save the PiS government”. Civic Platform MEP Radoslaw Sikorski compared the agreement between PiS and the Left to the Molotov-Ribbentrop pact, the non-aggression treaty between Nazi Germany and the Soviet Union that led to the partition of Poland. 

But Adrian Zandberg, one of the Left’s leaders, said the money was not “for PiS, PO or the Left”, but “for 38m Poles” and to be “spent for many years to come”.

Open for the jabbed

Brussels wants member states to take a big step towards normalising travel from outside the continent as vaccination rates pick up and tourism-dependent economies scramble to open up shop, writes EU correspondent Mehreen Khan.

The commission yesterday proposed a substantive easing of travel restrictions to allow vaccinated non-EU citizens, and anyone else from a country with improving case rates, to head to Europe this summer for non-essential travel. 

The recommendations came hot on the heels of von der Leyen’s promise that vaccinated US citizens would be free to travel to Europe.

But as with many points during the pandemic, Brussels’ guidelines on borders could be thrown by the wayside. Governments are pursuing a patchwork of national rules, in defiance of commission pleas for co-ordination.

Germany announced it will lift restrictions for its vaccinated population this week.

Bar chart of Prices in euros showing Average cost of a Covid-19 test for travellers

The final decisions about who gets to travel and avoid quarantine measures will remain with member states. Each country can decide to impose quarantine measures if it wishes.

EU ambassadors will discuss the rules tomorrow. Officials hope they can decide on the scope of measures this month, in time for more open borders by June.

Two things to watch today

  1. Voters in Madrid go to the polls in a closely watched regional election

  2. EU foreign ministers gather virtually to discuss defence

Notable, Quotable

  • More than 30 of Europe’s largest banks are joining forces to create a payments giant capable of taking on the US-dominated “oligopoly”. Previous attempts have failed, however. (Find out why)

  • France’s centre-right is in turmoil after one of its leaders struck a deal with the rival party of President Emmanuel Macron for next month’s regional elections.

  • Denmark has scrapped Johnson & Johnson’s Covid-19 vaccine from its inoculation campaign.

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Today’s Europe Express team: [email protected], [email protected], [email protected], [email protected]. Follow us on Twitter: @JimBrunsden, @MehreenKhn, @Agata_Majos, @JamesShotter, @valentinapop.