Daily Editorial Analysis

Sweden Council Presidency, The driving force behind the India-EU FTA (GS Paper 2, International Relation)

Context:

• 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.

Indo-European relation in recent years:

• 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.

India’s ties with Nordic Countries:

• 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.

India-Sweden:

• 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 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.

Rotating presidency of EU:

• 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.

Swedish Model:

• 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.

EU-India FTA:

• 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.
• 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.

Prospects for India:

• 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.

Way Forward:

• 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.
• 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.