The trade deal provides the building blocks for future advances on investment, technologies and policies
This week’s EU-India summit may be the most significant bilateral meeting that either party has this year.
Other bilateral summits with other partners will generate headlines, but this summit has delivered substantive breakthrough deals in many areas, from trade to security. It has also delivered real progress in co-operation on the clean economy.
The high-level public statements agreed at summits fall into two categories. We have all seen summit texts that use polite rhetoric to temporarily put a Band-Aid on a hollow relationship.
Alternatively, in the best case, a summit text can be the summary of a strong agenda: the visible tip of the iceberg that indicates a much larger subsurface object. This EU-India summit is clearly the second type.
A strong agenda does not mean there has been easy agreement, or that all issues are resolved. Europe and India have important differences of perspective. The key, indeed, crucial sign of a substantial outcome is the clear intention to move forward to next steps.
On the clean economy — on investment, technologies and policies — the summit results are the free trade agreement, which establishes a foundation, and some smaller but very interesting commitments.
The FTA is incomplete in key respects, notably on investment. This matters because the geopolitical significance of the EU-India trade relationship will depend on its capacity to be transformative in economic terms, in particular by facilitating investment flows for decarbonisation and by establishing partnerships to build alternatives to China-dominated clean tech value chains.
That desirable geopolitical outcome requires ongoing negotiations on investment facilitation, as well as on investment protection. It also requires solutions to address areas of friction.
This is where three of the summit’s smaller commitments are interesting, particularly as elements that can help towards constructive compromises on the EU Carbon Border Adjustment Mechanism.
First, the summit has issued a statement of intent to collaborate on efforts to decarbonise heavy, hard-to-abate, energy-intensive industries.
This includes an exchange of best practices on the highly technical but important question of “taxonomy” definitions of low-carbon materials such as steel and cement. It will enable efforts to minimise interoperability problems.
Second, it announces a dialogue on carbon market design, a much-needed information and consultation process that will help each side to understand how far India’s carbon credit trading scheme and the EU’s emissions trading system are, or are not, equivalents or necessarily very different.
Third, the EU statement unveils a memorandum of understanding to establish an EU-India platform for co-operation and support on climate action.
The platform will be launched later this year, with €500mn in EU support to help India reduce greenhouse gas emissions and accelerate its long-term sustainable industrial transformation.
These three actions amount to sensible discussions and a one-off funding amount — and we know that new approaches to big challenges and new modes of collaboration often start with small steps.
We now have building blocks with which to work towards a bigger deal at the next summit.
This could combine all three elements of funding, technology partnership and policy co-operation into a joint EU-India vehicle for industrial decarbonisation, based on the bloc making a structural commitment to ongoing funding until at least 2030, perhaps linked to CBAM revenues from tariffs collected at either the EU or the Indian border.
Watch this space: the summit is over, but the work to prepare deeper agreements has already begun.
This commentary originally appeared in Sustainable Views.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Professor Jesse Scott is a Senior Fellow at the Observer Research Foundation, as well as adjunct faculty at the Hertie School in Berlin since 2019. ...
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