Badi Soch: Is the U.S.-EU free trade plan a threat to India and China?

Negotiations about a free trade agreement between the EU and the U.S. kicked off at the 38th G8 summit in Northern Ireland. The Transatlantic Trade and Investment Partnership that has been hailed by President of the European Commission José Manuel Barroso and President Obama, is expected to result in a 90% growth in EU-U.S. trade. The U.S. stands to gain the most with an expected long-term GDP growth of over 13%, with the U.K. close behind at 10% and the other EU countries would see an average long-term GDP growth of 5%. India and China have reasons to be worried.

The EU is the biggest trading partner for India and China and the latter is the EU’s second biggest trading partner. Were this partnership to come into effect, BRICS countries would see a 10% decline of trade from Germany (with similar levels of decline across the EU) and a 30% drop in trade with the U.S. Talks about an India-EU free trade agreement have been derailed and delayed for six years by disagreements over intellectual property, market access for Indian IT companies, data secure nation status for India etc. A European-Chinese free trade agreement is also a distant possibility. For now, India and China must rally the other BRICS states and/or its Asian neighbours. The first step could be for the two countries to take the much-discussed ‘drastic step forward’ in economic relations.

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