Innocent Bystanders

Implications of an EU–India Free Trade Agreement for Excluded Countries

image of Innocent Bystanders
The European Union, under its ‘Global Europe’ initiative, has since 2006 been pursuing trade agreements with its major global trading partners. An EU–India Free Trade Agreement is currently under negotiation; if successfully concluded it is likely to have knock-on effects on other countries’ trade with both India and the EU, the trade of the ‘innocent bystanders’ excluded from the agreement.

The authors consider the implications of the EU–India Free Trade Agreement for various groups of other countries, including the ACP countries and those in South Asia, the latter group being most strongly impacted. The analysis considers not only trade in goods but also trade in services, and focuses not only on quantities but also on the prices at which trade is conducted.

The authors then consider how excluded countries might respond to the Free Trade Agreement, both at an individual level and at a systemic level.



Specific case studies from EU–India

To assess the impact of a possible EU–India services agreement on excluded low-income developing countries, one would also have to examine the competition that India faces from such countries in sectors of its strategic interests with the EU, exactly as we did above for the goods markets. It is important to note here that services are a more skill-intensive sector compared to agriculture and industry and the nature of any competition that India faces from other low-income developing countries would be governed by the ability of such countries to compete with India’s relatively more-skilled and cheap English-speaking work force. The services sector in India has also been witness to rapid growth, especially since the 1990s, which has now led to India becoming an ‘outlier’ in terms of its services sector performance in the years since the turn of this century (Shingal, forthcoming). As noted above, services now contribute more than half of the country’s GDP, which is higher than the share for countries at a comparable level of per capita income as India. Amongst the top 20 services exporters in 2003, India had the fastest growth of services exports over 1994–2003 and services trade now accounts for a quarter of the country’s total trade.


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