Our most recent guest, Ursula von der Leyen, President of the European Commission, has done some plain speaking in New Delhi. In her inaugural remarks at the fourth edition of the Raisina Dialogue, organised by the Observer Research Foundation (ORF) and the Ministry of External Affairs, she has not hesitated to publicly hit out at Russia and China on account of the invasion of Ukraine.
Speaking on Monday evening, she spoke of her visit to Bucha, a suburb of Kyiv, where she had seen bodies and mass graves. She attacked Russia for “atrocious” crimes in Ukraine, severe violations of international law, targeting and killing innocent civilians, “redrawing borders by force”, and “subjugating the will of a free people”. As for China, she said it has forged “a seemingly unrestrained pact” with Russia and declared that the friendship between them has “no limits” and that there are “no forbidden areas of cooperation”.
A Sharp Uptick in Foreign Visitors
At first sight, it would appear that with its Russia-leaning neutrality, New Delhi seems to be in a geopolitical sweet spot of sorts. There has been a sharp uptick in foreign visitors, including the Foreign Minister of China and the Prime Minister of Japan in March. This month saw Prime Ministerial visits from the UK, Mauritius and Nepal, as well as the India-US “2+2” dialogue involving their respective foreign and defence ministers in Washington DC, which also featured a Modi-Biden virtual summit.
A hallmark of this year’s Raisina Dialogue between 25 April and 27 April has been the strong European contingent. Besides President von der Leyen, foreign ministers of eight European nations attended, along with senior officials of a number of other EU countries, as well as a heavy phalanx of think-tank personnel. New Delhi recently played host to the Prime Minister of a prominent former EU member, the UK, and signed a number of important agreements with it.
It does not take a genius to realise that the Europeans are calling because the outcome of the Ukraine war will, in von der Leyen’s words, “not only determine the future of Europe but also deeply affect the Indo-Pacific region and the rest of the world”.
The Europeans are looking at India with a rosier, new pair of spectacles. The EU, von der Leyen noted, was “taking steps to deepen our strategic ties with India, notably in respect of challenges posed by rival governance models [Russia and China]”.
India Is Aware of the Changed Reality
New Delhi may not be racing to assume the leadership of the non-aligned world, but it is not letting the grass grow under its feet either. This is evident from the report that Prime Minister Modi is headed to Europe for the India-Nordic countries summit in Copenhagen in early May. He is reportedly planning meetings with the newly re-elected French President, Emmanuel Macron, as well as the new German Chancellor, Olaf Scholz. Later in the month, he will participate in the in-person Quad summit in Tokyo. You can be sure the geopolitical churn unleashed in Ukraine will be the principal theme of discussions.
Over the years, the EU established close ties with China and had, in 2020, signed a Comprehensive Agreement on Investment (CAI) with Beijing. This was seen as a big win for China since it would ensure continued EU investment in China and would have deflected Washington’s efforts to check Beijing. Now, this agreement stands suspended, ties between the US and EU have become stronger and the events in Ukraine are deepening the fault lines that had already appeared between Brussels and Beijing on the issue of human rights. The difficulties between them were manifest in the virtual China-EU summit that took place at the beginning of this month, which EU foreign policy chief Joseph Borrell termed the “dialogue of the deaf”.
The EU remains China’s largest trading partner with two-way trade in goods and services worth $709 billion in 2021. But the EU has already been looking for ways to reduce its dependency on China.
Last May, the EU released an Industrial Strategy to cut its dependency on China in six strategic areas, such as raw materials, pharma ingredients and semiconductors. This was part of a larger post-COVID action to review its supply chains and source of raw materials.
Building ties with India, comparable in size and with the potential of matching China economically, is, no doubt, part of this strategy. But with two-way trade in goods and services amounting to just about $100 billion, we have some distance to go. However, India, the EU’s second-largest export destination and a major end-point of its investments, has obvious potential.
India's 'Restrictive' Trade Environment
Both parties have been keen to enhance trade ties, but the Europeans have long complained about India’s restrictive trade and investment environment. But things are changing. After having disdained FTAs, India is now on a signing spree; it has worked out new deals with Australia and the UAE and is advancing negotiations with the UK. New Delhi knows well that European investment, technologies and markets will be invaluable in our project to economically transform the country.
So, an important outcome of von der Leyen’s visit and her talks with Prime Minister Modi has been the decision to launch an EU-India Trade and Technology Council. According to a joint press release, this TTC “will provide the political steer and the necessary structure to operationalize political decisions, coordinate technical work, and report to the political level to ensure implementation and follow up in areas that are important….”
This is the first time India is setting up such a council and only the second time the EU has done so. Its first TTC was set up with the US. This is seen as a means of promoting closer cooperation on strategic aspects of emerging technologies and building trusted partnerships.
There Is No Going Back to the Old World
In May 2021, both sides indicated that they were serious in pushing their negotiations for a free trade agreement. Talks between the EU and Indian officials on Monday have indicated that the two sides will formally restart their stalled trade negotiations by June 2022, along with talks on an investment protection agreement, and an agreement on geographical indications.
But FTAs are only one part of the larger response that India must come up with if it is to benefit from this geopolitical moment. It needs to revise its foreign trade policy so as to enhance the incentives for its struggling micro, small and medium enterprises (MSMEs).
Besides, it needs to upgrade its industrial and export infrastructure in terms of ports and warehouses, and digitise export processes.
In many ways, the consequences of the poorly thought-out Russian action are already upon us. There is no going back to the old world. As of now, New Delhi may revel in its ability to exercise its “strategic autonomy”. But it should be warned, the world upon which this phrase rested has itself changed.
(The writer is a Distinguished Fellow, Observer Research Foundation, New Delhi. This is an opinion article and the views expressed are the author's own. The Quint neither endorses nor is responsible for them.)
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