Author : Shairee Malhotra

Expert Speak Raisina Debates
Published on Dec 30, 2022
The Swedish presidency could prove to be favourable for India as it could provide fresh impetus to the India-EU FTA
Sweden’s Council Presidency: The driving force behind the India-EU FTA

Sweden will take over the Presidency of the Council of the European Union on 1 January 2023 at a transformational inflection point in European and global politics. The change of guard in the Council presidency has implications for the EU and its ties with other countries across the globe including India.

In recent years, India’s relations with Europe have qualitatively strengthened, with volatile international dynamics, including simultaneous tensions with China and the need for greater cooperation in the Indo-Pacific region, adding a renewed strategic element to the partnership. Despite differing positions on Russia’s war in Ukraine with India maintaining neutrality and Europe imposing nine packages of sanctions to punish Russia, differences are being well-managed through effective communication and a better understanding of each other’s strategic compulsions, without hijacking the entire relationship.

Beyond closer ties with the EU and traditional European powers like France, India has also creatively enhanced its ties with smaller European states with significant engagement to expand its presence throughout Europe. In this context, the Nordic region comprising Sweden, Denmark, Finland, Norway, and Iceland has emerged amongst the brightest spots in India’s ties with Europe. Two bilateral India-Nordic summits, with the United States being the only other country that has a summit-level collaboration with the region, have taken place resulting in continued collective engagement.

Amongst the Nordics, ties with Sweden are progressing most rapidly, with immense bilateral collaboration in the realms of trade, innovation, and energy transition. In 2018, Sweden hosted the first India-Nordic summit under PM Lufven’s leadership with PM Modi being the first Indian leader to visit Sweden in 30 years. In 2019, the Swedish King visited India. The momentum has carried forward towards the second India-Nordic summit in 2022 despite the backdrop of difficult global circumstances of post-pandemic economic recovery and the war in Ukraine. On the question of India’s increased oil purchases from Russia, Sweden’s Minister for International Development and Foreign Trade Johan Forssell referred to this as India’s ‘internal policy’, stating that Sweden would not interfere. Given how relations between the two countries are already progressing rapidly, the Swedish presidency comes at an favourable juncture for India.

The role of the rotating six-month presidency of the Council of the EU has often made a definitive and positive impact on Europe’s ties with India. During the French presidency in January 2022, France prioritised European cooperation in the Indo-Pacific region and held the Indo-Pacific Ministerial Forum in Paris, coinciding with India’s interest to ensure an equitable distribution of power in the region. The subsequent Czech presidency in mid-2022 put cooperation with Taiwan on the EU agenda, as European tensions with China coincided with increasing tensions in the Taiwan Strait tension, again aligning with India’s interest in balancing China. Most importantly, during the Portuguese presidency in January 2021, when relations with India were labelled a top priority, the historic EU-India Leaders Meeting was held in a 27+1 format previously extended only to the United States. This led to the much-needed relaunch of the India-EU Free Trade Agreement negotiations that were stalled for almost a decade since 2013. Thus, the efforts of the Portuguese put the India-EU FTA firmly back on the table, with three rounds of negotiations taking place since the revival of talks in June 2022.

As Europe battles soaring inflation and an energy crisis, the Swedish Council presidency could not have arrived at a better time.

As Europe battles soaring inflation and an energy crisis, the Swedish Council presidency could not have arrived at a better time.Given their successful state models that combine high levels of economic growth with social welfare, the wealthy Nordic nations, out of which Sweden has the highest GDP, exert sizeable sway at the EU level. Sweden is amongst the world’s most pro-free trade nations, largely depending on exports for its prosperity. Thus, it is no surprise that Sweden has highlighted the need to strengthen Europe’s economic competitiveness amongst its top priorities during the presidency, with progress on the EU’s impending trade deals with India, Australia, Indonesia, and Latin American countries high on the agenda. This is in refreshing contrast to the protectionist French presidency, which was good for India through a security lens, but where trade deals were frozen given their potential impact on farmers and other voter constituencies ahead of the French presidential election in April.

Swedish companies and technologies like Ericsson, Skype, Bluetooth, and Spotify are household names in India. Yet, bilateral trade between the nations, which stood at US$2.1 billion in 2018-19 but at US $1.7 billion in 2020-21 out of the overall US$13 billion India-Nordic trade, has been declining. And despite India’s emergence as the world’s fifth largest economy and Sweden’s third largest trading partner in Asia after China and Japan, the gap with China is colossal with overall China-Nordic trade at US$70 billion.

Sweden, the wider Nordic region, and indeed the EU as a whole, view India as a huge market with immense opportunity and potential for advancing economic engagement.

Sweden, the wider Nordic region, and indeed the EU as a whole, view India as a huge market with immense opportunity and potential for advancing economic engagement. Thus, pushing forward on the EU-India Free Trade Agreement negotiations and gaining some deliverables on this is firmly on the agenda for Sweden’s EU presidency. Within India too, there has been a renewed impetus towards trade deals as evident in its recently signed deals with the United Arab Emirates and Australia.

Over the years, several mechanisms to promote two-way business linkages such as the Sweden India Business Council, and trade promotion campaigns such as ‘Time For India’, have been established. At the upcoming Uttar Pradesh Global Investors Summit in early 2023, the Uttar Pradesh state government has invited many Swedish businesses given the community’s interest in investments worth INR 15,000 crore there.

Yet, it is through the FTA that the greatest trade potential can be unlocked, with India-EU bilateral trade expected to double from the existing US$110 billion. Therefore, it is in the area of trade that Sweden’s presidency would be most beneficial for India, where Sweden’s active support could push the envelope on the negotiations and iron out some of the differences. Indeed, just before taking over the presidency, Forsell visited India and met with Indian Commerce & Industry Minister Piyush Goyal, where he said that Sweden would act as an “honest broker” on the negotiations and the lowering of trade tariffs would be a “fantastic deliverable” during the presidency.

Besides, the EU-China Comprehensive Agreement on Investment still awaits approval in the European Parliament, the Transatlantic Trade and Investment Partnership remains frozen in time, and the new US Inflation Reduction Act sparks has sparked trade rows with the EU. As tensions with Europe’s top trading partners China and the US increase, these present an opening for India to expand its trade with the continent. In fact, the deterioration of Sweden’s own bilateral ties with China can be traced further back to the sentencing of Swedish bookseller Gui Minhai in China.

The pandemic and the war in Ukraine have compelled the EU to revisit its trade strategies through the prism of geopolitics. Europe’s experience of Russia and China’s respective weaponisation of energy and markets is leading to a resurgence in values-based relationships for the EU, with a preference to deepen free trade with likeminded democratic countries that abide by the rules based order, and where there is less likelihood of supply chains being weaponised for geopolitical ends. With its unmatched penchant for free trade, Sweden is leading this charge, with a particular focus on India. As Swedish Foreign Minister Tobias Billström reiterated, “It is a fatal environment for democracies, especially for smaller ones”. For India, economist Arvind Panagariya recommends that rather than responding to China’s border transgressions by limiting trade ties which would ultimately hurt India’s growth, India should expand its trade with the EU and UK through FTAs.

It would be useful for New Delhi and Stockholm to capitalise on the strength of their substantial bilateral relationship as the foundation for greater collaboration at the Brussels level to push through common goals, focusing first and foremost on trade. Through their presidency of the Council, the pragmatic and innovative Swedes aim to provide fresh impetus to the FTA negotiations. With complex longstanding issues on alcohol, agriculture, and automobiles still waiting to be resolved, the road ahead will continue to be bumpy and the prize elusive, with the agreement unlikely to be concluded even in 2023. Yet, with so much political will, there is valid optimism for the talks to considerably progress.

While there is much cause to celebrate the increasing “strategic” dimension in the India-EU partnership, the greatest potential still lies in the area of trade where the relationship can yield the most benefits and tangible outcomes to the world’s fastest-growing economy and largest single market, through the removal of trade barriers and ease of market access. Thus, the best way to consolidate and fortify India-EU ties remains through the conclusion of the FTA. Until this is achieved, the shadow of the FTA will continue to loom over ties and affect other areas of cooperation as well.

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Shairee Malhotra

Shairee Malhotra

Shairee Malhotra is Associate Fellow, Europe with ORF’s Strategic Studies Programme. Her areas of work include Indian foreign policy with a focus on EU-India relations, ...

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