Our objective is to have a comprehensive free trade agreement with India: EU Commissioner

Our objective is to have a comprehensive free trade agreement with India: EU Commissioner

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Johannes Hahn, European Commissioner for Budget and Administration was in Mumbai this week as part of a global roadshow for creating investor interest for EU-Bond. businessline spoke to Hahn on wide-ranging issues including India’s concerns around EU deforestation regulation, the Carbon Border Adjustment Mechanism and the status of the free trade agreement with India.  

The EU-India free trade agreement has been in discussion for a while. What are the hurdles that you are seeing, and do you expect the agreement to be done soon?

It is a good coincidence that there is now a new parliamentary cycle both in India and in Europe that allows us to focus on these negotiations. The EU already has several free trade agreements and we always aim for ambitious and comprehensive. The EU-India Free Trade Agreement is now indeed the subject of negotiations. There are a lot of new dynamics and potential in it. Prime Minister Modi was very clear that he’s very interested in advancing with these talks as rapidly as possibly, and we share this ambition. We hope to have a kind of positive stocktaking in the course of the next India-EU Summit, which is expected to take place in the first half of next year. Our objective is to have a free trade agreement, which is as comprehensive as possible. India is by far the biggest democracy in the world and we have a lot of mutual interest in a global world order that is based on rules, robust dispute settlement procedures, and territorial integrity, among others. And the more bilateral contacts we have with India, India with others, and Europe with others, the closer we move to a web of solid and mutually beneficial arrangements which protect this rule-based global world order.

EU has said that it will go ahead with the implementation of its controversial EU deforestation regulation (EUDR) from December 30 this year as planned despite strong protests from countries including India. Do you see any resolution to address these concerns?

EU and India are both committed to addressing the consequences of climate change, we are both trying to spearhead developments. We agree that (the) consequences of climate change don’t know any physical borders. Europe is a rather small geographical continent, but we believe that we can lead by example in addressing the very serious challenges brought about by climate change. In this context, we consider it to be imperative to work on preserving forests and ensuring robust forest management practices. Rainforests, but also traditional forests, play a critical role in absorbing emissions that directly impact climate change. Our measures concern sustainable forest management, which should be a matter of mutual concern globally.

Another major issue is the EU CBAM (carbon border adjustment mechanism) which hurts Indian businesses who see it as a non-tariff trade barrier that increases cost of exports.

Let me highlight first of all that the action we are taking here aims to help decarbonize our economies in a way that is fully compatible with rules of the WTO. That’s why we are also adopting robust measures when it comes to our own industry. CBAM is accompanied by a gradual phasing-in period and focuses on the import of certain products that are produced with technology where we believe improvements are necessary. I think a very good example of our cooperation in this field is the European Investment Bank`s granting of a Euro 1 billion loan for the production of green hydrogen in India. These loans will play a major role in helping cut carbon emissions in producing hydrogen, and ultimately contributing to India`s green transition.

Clearly, the issue is about having enough capital to invest in sustainable technologies. So would you be considering grants or funding to Indian industries?

We have several other ongoing projects in India which help drive the country`s green transition. Our European Investment Bank has provided several billions of euros in the past years for sustainable transport projects, financing urban railway and metro projects across several Indian cities. We also invest in water management systems and smart cities in India, to give a few examples. Importantly, Everything we are doing in the area of what we call green transition is also about creating business opportunities. Investing in the transition should not be seen as a financial burden. Those who are the first movers in this area can also expect to be the first to benefit from their transition to green technologies in the form a return on investment.

Do you see any resolution to the prolonged discussion between European Securities and Markets Authority (ESMA) and the Reserve Bank of India on disagreement over the Clearing Corporation of India?

My understanding is that there has been a lot of progress in the exchanges lately, and I’m quite confident that we can soon settle this issue in a positive way because it’s in the interest of both European and Indian banks.

How concerned are you about a global slow down amid rising inflation?

What I am more concerned about are growing protectionist tendencies in an effort to shield national economies. And this is the opposite of what we would like to see. And this is something we are very much aware of in Europe. The EU is working towards a world with ample opportunities for free trade and business while also managing and diversifying risks. Risk diversification can only be achieved if many partners are working together on an equal level. And that’s why I think this tendency to protect the economy is not a very future-oriented approach. We have to act local but think global.

India has been trying to become a global manufacturing hub to diversify the global supply chain instead of everything centered around China. Do you see India emerging as a credible manufacturing alternative?

The pandemic and Russia’s war of aggression against Ukraine forced us to understand that we have to move towards what we call strategic autonomy. I don’t believe that strategic economy means that everything has to be produced from A to Z in Europe. It’s quite the opposite. Strategic autonomy means diversification of suppliers and customers. In that respect, India shows a great example because this country is not dependent on any (one) partner. The more we are diversified, interlinked and interconnected, the better it is, because it contributes to peace and stability.

So, are European companies looking at India as an investment destination?

The EU is already India`s number one trade partner and also the largest source of FDI. 6000 EU companies are present in India, employing nearly 2 million people directly, and 5 indirectly. Yet, much more can be done. In this respect, it is critical to have a conducive investment climate and I think India understands this very well. This is why we have now this re-energized talks in several areas besides the trade agreement, as we are also negotiating, for example, a separate agreement the protection of investors 

You have undertaken a global roadshow to invite investors for Eurobond. How has been the response so far?

So far we have raised over 550 Billion Euro, of which 65 billions Euro via green bonds. And we will not stop there. Our objective is to raise up to Euro 200 billions in green bonds, which puts us, as European Union, on track to be the largest green bond issuer in the world. However, our bonds have so far mainly captured the interests of European investors, with the proportion of investors from outside Europe standing below 20 per cent. My objective is therefore to raise awareness and attract more investors from outside Europe, including from India. This is also an opportunity to further reinforce our already extensive bilateral relationship with an additional financial dimension through EU bonds.

Globally, lot of sovereigns are issuing bonds, So how do you convince an investor to invest in EU bonds specifically?

It’s a very solid product, triple-A rated with an attractive yield in the current market context. And investing in Europe means also to invest in stability. This is why we are reaching out beyond Europe. We are offering our partners the opportunity to diversify their portfolios in terms of currencies but also geographical origin. We are the fifth largest issuer in European capital markets, with highly liquid assets which collectively make us an attractive issuer in the capital markets.

So as you move towards the end of your long career at EU, are you happy with what you’ve achieved so far, and any regrets at all that you may have missed out on something that you wanted to do?

I have had the pleasure to look after 3 separate policy areas as European Commissioner in the past 15 years. But what I have learned over this period is that we have to care about our home by reaching out globally. And this, again, brings us to the starting point of our conversation: why we are here, why we are promoting EU bonds in an unprecedented magnitude. We would like to involve more investors in this project and promote the Euro as a major global currency. I am convinced that India and its investors can also find their interests served by these ambitions of ours.

Published on October 2, 2024



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