5.2 India EU Relations

Que. Critically examine the nature of EU integration process. What are the challenges which come in the path of regional integration? Explain with reference to history of EU.
Que. Discuss the current strategic environment in Europe and the future prospects of EU.
Que. Discuss the changing trends in India-EU relations.
Que. Compare EU with ASEAN and SAARC.

EU is the most successful model of regional integration. EU has been a source of inspiration as well as a source of learning for other regional organizations like ASEAN.
EU has been successful in transforming the strategic environment in Europe, Europe has been the victim of continuous wars, EU has established the zone of peace, prosperity.

Features of EU as a model.
1_EU is a highly complicated model of integration.
2_EU is considered as a fortress. It is too complicated for an outsider to understand. EU institutions are mix of national, international and supranational principles.
3_EU has been a outward looking body. Now it has its own foreign and security policy.
4_Democracy and human rights have been the major objectives of EU’s foreign policy and EU has helped in expansion of democracy and human rights.

Reasons for emergence of EU

1_The devastation of the two world wars made these countries to find a serious alternative for avoiding wars. EU is seen as a brainchild of French foreign minister Robert Schuman and French statesman Jean Monnet.

2_EU also has its origin in USA’s policy to contain expansion of communism. The biggest push factor to EU was USA. EU was formed to maintain the liberal international economic order.

3_Vision of EU was inspired by Immanuel Kant who dreamt of the perpetual peace among European countries.

4_EU is also described as dream of Victor Hugo. It is believed that ‘Hugo has planted seed in his courtyard’. He believed that EU integration will flourish as the seed will grow. Hence there is a superstition that till the tree planted by Hugo remains, EU will remain.

5_Victor Hugo in one of his speech has mentioned that a day will come in Europe when arms will fall off the hand on the ground in Europe.

EU Organizations.

1_European council
The highest, summit level body. EU leaders meet many times a year.

2_Council of European Union.
Ministerial body. e.g. If EU has to make transport policy, transport ministers of different countries will come together.

3_European commission
It represents EU.

4_European Parliament
There are 791 seats, members are directly elected by proportional representation.

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Evolution of EU

Evolution of EU means
1_Expansion of EU 2_Deepening of EU.
Expansion creates challenges for deepening.

Milestones in EU

1_1952 European Coal and Steel Community. There were 6 original members. Benelux countries (Belgium, Netherland, Luxemburg) + France, Germany, Italy.
“The metals which are used to make the arms will be used to make permanent peace.”

2_1957 Treaty of Rome – foundation of European Economic Community.

3_By 1961, EEC emerged as single largest market for goods worldwide.
It became 2nd largest producer of steel after USA, surpassing Britain.

4_1973 – first expansion. Britain, Denmark, Ireland.
By this time EU had started challenging US hegemony in trade. USA brought pro-US countries in EU, especially Denmark and Britain. These countries have been closer to USA than to EU. Preferred to stay out from many EU treaties (opt out clauses).

In EU there are two categories of nations.
Europhobic vs Europhilic.

1981 – second expansion of EU. Greece joined.

1985 – Schengen agreement, EU became borderless. It allowed free movement of people including right to settle, buy property or seek employment. Irrespective of country of origin.

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1986 – Spain and Portugal joined. New faultlines emerged.
North vs South
Countries of south were not as economically sound. They are known as PIGS. Portugal, Ireland, Greece and Spain.
In these countries, there has been greater influence of socialism.

1987 – SEA – Single European Act.
It led to the establishment of common market. 4 freedoms.
1] Freedom of goods
2] Services
3] Capital
4] People.
Analysis. It was a major development after treaty of Rome, a gap of 30 years. It shows that integration process may take extraordinary long time.

1993 Maastricht treaty.
From now onwards it came to known as European Union. European Union denotes monetary union. Countries agreed to go for common currency.
As of now there are 19 countries.

Advantages of common currency
1_It makes business convenient.
2_It makes business competitive/cheap.
3_It is convenient even for other countries trading with EU.
4_It also denotes integration of market with the potential that Euro can also become a global currency.
5_Comparatively weak economies will be able to attract the foreign investment on the credit of stronger economies.

Disadvantages
1_In case a country faces the balance of payment crisis, it cannot devalue its currency to promote exports
2_Every country cannot be a member of Eurozone, they have to fulfill ‘convergence criteria’. They have to keep their fiscal deficit, inflation, debt to GDP ratio low, within defined limits.
3_As per EU norms, public debt could not go beyond 60% of GDP. Greece public debt was more than 300%. Greece was providing wrong data, hence Eurozone crisis is also seen as a regulatory crisis.

Greek Crisis

1] When Greece joined Eurozone, it was actually not fit for it. However to show the world, the unity and solidarity, EU countries overlooked the status of Greece

2] According to Germany, the Greek social security policies based on socialist principles has reduced Greek’s competitiveness. However Greece considers Germany’s approach wrong. Germany kept on keeping the labour laws weak to gain advantage. Germany behaved like China. It didn’t let scope for export of other countries.

3] The biggest problem was that EU was a monetary union but EU was not a fiscal union, nor economic union. Hence the countries expenditure policies have been different. Now EU is trying to align even the economic policies.

4] We can say that US also played the role. The crisis in Eurozone has its origin in the sub prime crisis in USA. It is also seen as the crisis because of lack of adequate regulation of financial institutions. There was no oversight over banks in USA. The banks are linked hence when banks of USA started collapsing, they demanded money from the banks in Europe. European banks have lended money to the governments in Europe like Greece. Greece was a net importer. Greece was able to borrow on credit of Germany. Hence when banks wanted their money back, the govt. didn’t have money.

Later developments

European union proposed the concept of ‘Ever Closer Union’.
Germany and France favoured ever closer union, which means integration of economic and fiscal policies (Keep track of new terminologies coming in EU.) Germany proposed ‘six pack’ strategy. (More strict austerity measures).

Then came the concept of European Semester. Countries will submit their domestic budget for approval by EU.

Difference in Germany and France – In France, there have been more left leaning presidents. France did not favour austerity approach because it will increase the unemployment crisis. France favoured stimulus to economic growth (employment generation tasks).

There has also been difference between the approach of USA and Germany. Approach of USA: USA has closer relations with countries of Southern Europe like Italy, Greece.
USA wants Germany to increase the wages. There is a disagreement between USA and Germany even on geostrategic issues.
Germany has economic interdependence with Russia.

Germany has mentioned that China is biggest strategic threat to EU at present. Why? China is strengthening its partnership with the countries of South and Eastern Europe (16+1 framework). China’s belt and road initiative extends to Southern and Eastern Europe also. What is the problem? China can influence the countries of Southern and Eastern Europe to divide EU’s consensus on economic policies.

What is the strategic scenario in EU at present? EU is facing multiple crisis. Internal and external. What is the background of the crisis? The US-China rivalry. What is China doing? China at present not only challenges US hegemony, it aims to establish Sino-centric world. What is the basis of power of China? China’s economic growth. China has emerged the world supplier or world factory. How China reached to this position? By following unfair trade practices. China also took the advantage of liberalization of other countries. What is China’s compulsion? China has to keep its wages low hence China cannot have economy based on domestic demand. China’s competitiveness will go if it increases wages. Hence China does not liberalize itself and formed a new basis for increasing its influence. How? BRI project. Providing investment to the countries and supporting the authoritarian regimes. China’s strategic ambitions are growing as China aims to acquire naval bases also, even in Adriatic sea.

Thus at present Europe is facing 4 external threats.
1] Russia (nobody likes the hug of the bear)
2] China – China has a policy of land grabbing. Even China’s soft power is increasing.

3] USA – Since US invasion in Afghanistan, USA’s policies are creating huge problems for Europe. There has been a big difference between countries of Europe and USA
_ Wrt to the US war on Iraq in 2003
_ The approach of Trump administration wrt Iran’s nuclear crisis and scrapping of JCPOA deal.
_ The crisis in Syria (crisis in Syria not only increases the fear of terrorist attacks, it also increases the disputes between EU and Turkey). (It has revived Kurdish issue – presently Turkey is strengthening its relationship with Russia.

4] Refugee crisis
_ Security issue
_ Economic burden
_ Rise of neo rightist parties which are also Eurosceptic
_ It even puts a big question mark on EU values of democracy, human rights.

One of the fallout of crisis in middle east is Brexit. Brexit impacts the soft power of EU, it also impacts EU’s security.

Internal issues

EU has not been a harmonious block. There have been many fault lines. As EU is expanding, integration is weakening. EU countries can be divided into following faultlines.

1] Europhobic vs Europhilic countries (even in Europhilic countries, there is a rise of rightist parties).

2] Old Europe vs New Europe. There is big difference in their value system. The new countries do not have similar commitments towards democracy and human rights. Most of them are semi-authoritarian and highly nationalist.

3] Core and Peripheries. Core denote strong economies like Germany, Austria, France, Belgium. Peripheries denote weak economies. Their approach on economic policies vary.

4] North Europe and South Europe. A new faultline has emerged on refugee issue. Southern countries, economically poor, facing economic crisis and are more vulnerable to refugee crisis. They are first point of arrivals. On the other hand, northern countries like Germany favour liberal refugee policy as it looks towards refugees as source of cheap labour. (However now the rightist parties in Germany are opposing this stand).

What is Europe’s approach to deal with the crisis? Europe wants stability in middle east, reduction of tensions with Russia, resolution of crisis in Ukraine, strengthening of multilateralism (France is esp interested) and how to reduce tensions between US and China. What is the current scenario? The recent APEC (Asia Pacific Economic Cooperation) summit, for the first time in the history of APEC, no communique emerged because of the differences between USA and China. Hence EU is also making ‘strategic bet’ on India.

Lisbon treaty 2007. (Reform Treaty)
Why Lisbon treaty? EU works with number of treaties. Hence EU is too complicated, both for EU members as well as outsiders. Hence the idea was to create EU constitution to streamline EU laws. The proposal was rejected in France, Denmark. Hence EU had to be satisfied with a new treaty to streamline its laws rather than EU charter at par with ASEAN.

Lisbon treaty
1] Increases the power of EU parliament
2] It added the charter on human rights.
3] EU will have its own foreign and defence policy.
4] The post of high representative was created.
5] The most important development in Lisbon treaty was the introduction of qualified majority. Initially EU decisions were taken by consensus however later on consensus became problematic. Hence EU started segmenting the subjects. At present only few subjects require consensus, majority of the subjects can now be passed by majority.
6] To address the democratic deficit, EU has introduced ‘qualified majority.’ Suppose a matter has to be passed by 3/ 4 majority in EU, then these 3/4 countries should also be representing the 3/4 of EU’s population.

What is the present development?
After long negotiations, EU and Britain have agreed for the terms and conditions of Brexit. Initially EU had no provision for withdrawal, Lisbon treaty introduced Article 50 which allows countries to exit. Still there is no exit clause from Eurozone. The exit is like a divorce and hence there are terms and conditions. The approach of EU is to impose heavy penalties to deter the countries from exit. The present deal contains
1) 585 page withdrawal agreement. It is a legally binding text which defines terms and conditions.
2) The terms and conditions are favourable to EU.
1_UK will give 39 bn pounds to EU.
2_EU citizens will continue to live in UK and UK citizens will continue to live in EU as before. 
3_Extremely complicated solution for Northern Ireland – 1-No hard borders.  2-No checks on the product of Northern Ireland. 3-New checks on the products of Britain, coming through Northern Ireland.  4-Customs law of EU will apply (UK has no freedom to determine the tariffs with outside world).
4_There is 26 page document on future relations in trade, defence and security. Britain will leave EU on 31st Oct 2019. Britain can negotiate its own trade deals except customs.

Turkey Issue

Turkey always wanted to be part of EU

Germany never wanted entry of Turkey – That time Turkey was closer to US, so they didn’t want another Britain. Turkey is a buffer zone between EU and Islamic zone. Turkey’s population: It will be 2nd largest country after Germany, with qualified voting, Germany’s advantage will go. To prevent Turkey, EU inducted Cyprus in EU. Cyprus and Greece are against Turkey.

/ Art. WHAT DOES THE NEXT 25 YEARS HOLD FOR EU, MINT , NARAYAN RAMCHANDRAN. 

/ Art.  IS NON ALIGNMENT STILL WORKING FOR INDIA? FINANCIAL EXPRESS 27 NOV 2018 BY MARTAND JHA.

Future of EU Challenges and Opportunities
/ Future of EU – Uncertain because of challenges.
/ Regarding EU it is said that EU is a moving bicycle, which should continue to move otherwise it will fall. i.e. More integration is required. ‘ever closer union’.
/ As EU expanded, differences has grown more, hence it was suggested that EU should go for ‘multi speed model’.
/ Presently it is said that EU is now forced to move on multitrack.

India EU Relations

What is current state of India-EU relations? Officially India and EU are strategic partners. Since the year 2000, India EU annual summits have started. In 2004, they entered into strategic partnership. (War on Iraq and the importance of multipolar world). To give substance to the strategic partnership, they also agreed to ‘Joint Action Plan’ in 2005. Since EU is primarily an economic block, India EU bilateral free trade agreement was seen as a major move towards strengthening strategic partnership. Talks are going on since 2007. There has been no breakthrough in these talks. Hence it was realized that India EU strategic partnership has failed to achieve the promise. Among the academic community, strategic partnership came to be called as ‘loveless arranged marriage’. Present situation. The uncertainties created to the world order because of US-China rivalry has compelled the two partners to give the fresh look. What has been India’s approach? Considering the uncertainty with the future of EU, India is changing its policies. As India’s ambitions are also growing and India is lagging behind China, India has also tailing China, be it Africa, Latin America and now Europe also.

What India is doing?
Strengthening bilateral relations with prominent countries.

France – According to the commentators, France can be new Russia. Why? 1) India is no more assured of Russia’s support on Kashmir, France is a permanent member in UNSC.  2) France not only has commercial interest in India ocean, it has strategic presence. They do share the vision of open and peaceful Indo-Pacific.  3) France has island territories in Indian ocean, it has naval base in Djibouti.  4) France is also supplier of Nuclear reactors like Russia.  5) India and France has shared perspective on climate change and multilateralism.

Britain – Because of Brexit, Britain is reviving the commonwealth. Britain is most important for India’s commercial interest in service sector. Britain is also a permanent member in UNSC. Britain is looking at India for economic and strategic reasons and same is with India. After long time, India has shown the interest in commonwealth.

India is strengthening its strategic partnership with Germany, Belgium, for long Nordic countries have been neglected.
India is again reviving its relations with the countries of South and Central Europe. Recently many high level exchanges took place.

EU’s approach towards India

Recently EU has brought a India strategy. The strategy paper recognized 1) India is a global growth engine (fastest growing among emerging economies). 2) India is also a huge market and hence huge scope for job creation in Europe.  3) EU has balanced trade with India. Bilateral trade has gone up to Euro 115 billion in 2017.  4) India is Europe’s partner in Paris Agreement.  5) India and EU have overlapping interest in regional security and stability.  6) There is a huge compatibility of interest in fighting against terrorism, In the field of cyber security, huge scope in working for disarmament, achievement of SDG 2030.

EU is a largest investor in India Euro 73 billion.
EU is India’s largest trading partner.
India is EU’s 9th largest trading partner.

What are sticking points in India EU FTA?
Opposition from India dairy sector (Amul).
Opposition from the farmers especially in wine and spirit sector.

Pharmaceuticals – There is opposition from EU on Indian pharmaceuticals. IPR issue.
EU does not give India the status of data secure country.
EU is reluctant to liberalize service sector, movement of natural persons.
They do have investment related disputes.

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