India-EU FTA: Commerce Department Engages Domestic Industry on Rules of Origin

India and the European Union (EU) are working to accelerate negotiations for a Free Trade Agreement (FTA), with the central government’s Department of Commerce reaching out to domestic industries to ensure favorable terms under rules of origin (ROO).

India’s Department of Commerce, which comes under the Ministry of Commerce and Industry, has reportedly engaged with domestic industries to ensure they secure the best possible flexibility regarding rules of origin (ROO)—criteria that define a product’s national source and its eligibility for tariff reductions or exemptions. This comes amid ongoing India-EU talks to accelerate Free Trade Agreement (FTA) negotiations. 

ROO determine the national source of a product and its eligibility for tariff reductions. Indian industry associations have been tasked with examining the EU’s ROO under its FTAs with countries like Vietnam, Canada, Singapore, and the UK, and comparing them to the terms proposed for the India-EU FTA.

Indian industries urged to assess EU’s flexible rules of origin

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Experts note that the ROOs in the EU’s FTAs are highly detailed, offering various product-specific flexibility. The central government’s Department of Commerce has encouraged Indian industries to study these closely to evaluate how the EU’s proposed terms align with India’s interests.

ROOs play a crucial role in trade agreements, determining a product’s origin and ensuring that imported goods have undergone sufficient transformation in a partner country to qualify as originating from there. While earlier Indian FTAs employed simpler ROOs, focusing on wholly obtained products, value addition, or changes in tariff classification, newer agreements feature more sophisticated and flexible rules for specific products.

In addition, industry groups have been asked to submit product-specific suggestions to help shape India’s stance in the next round of negotiations.

India-EU FTA talks face slow progress amid regulatory concerns and differing priorities

Despite a shared commitment to advancing FTA discussions, India and the EU have seen slower-than-expected progress. The EU Ambassador to India Hervé Delphin recently acknowledged that negotiations have been incremental, with fundamental differences still needing resolution. Commerce and Industry Minister Piyush Goyal stressed that the EU must decide whether to prioritize expanding trade or address issues that fall under the purview of international organizations.

Indian businesses are also worried about the impact of new EU regulations, such as the carbon tax and supply chain rules, which could limit the advantages of an FTA. Both Goyal and Delphin emphasized the importance of mutual cooperation to move the negotiations forward.

Speaking at an event for the Federation of European Business in India (FEBI) on October 11, 2024, Goyal urged the EU to focus on business-related matters within the FTA. Delphin echoed the need for recalibration, proposing mutual concessions to overcome existing gaps and urging both parties to explore new areas of trade policy to make the agreement meaningful.

Since formal FTA talks resumed in June 2022 after a nine-year break, nine negotiation rounds have been held, with the next scheduled for early next year. Both Goyal and Delphin also stressed the need to address regulatory barriers faced by businesses in both regions. European firms have raised concerns about quality control orders, import licensing, and investment protection in India, while Goyal criticized the EU’s “unfair” trade measures, such as the Carbon Border Adjustment Mechanism (CBAM), which he claims violate World Trade Organization (WTO) rules.

Limited progress in India-EU FTA talks, next round slated for early 2025

The next round of India-EU FTA negotiations is anticipated in the first quarter of 2025. The ninth round of talks, held from September 23-27, 2024, made only limited headway on key issues, such as rules of origin and government procurement.

Key unresolved matters in government procurement include the role of state-owned enterprises, the application of the “Make in India” initiative to EU bidders, and the treatment of EU goods. However, some progress was reported on sanitary and phyto-sanitary measures, dispute resolution, and good regulatory practices.

After a nine-year hiatus, India and the EU resumed FTA talks in June 2022, alongside separate discussions on an Investment Protection Agreement and a Geographical Indications Agreement.

Negotiators also revealed that the EU is seeking more clarity on India’s rejection of certain foreign direct investment proposals, a concern for New Delhi. Additionally, the two sides hold differing views on rules of origin—essential for preventing FTA circumvention and curbing cheap imports. Discussions have included origin rules for products such as textiles, wood and paper, chemicals, precious metals, machinery, and electronics.

On the positive side, discussions on market access for goods, sectoral agreements on cars and pharmaceuticals, financial services regulations, and the recognition of professional qualifications were constructive. The ninth round was restricted, with the focus being on advancing central issues and clarifying the positions of both parties. The two sides also continued discussions on investment liberalization, excluding services, based on a joint text.

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