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.



The importance of services in a potential EU–India FTA

Services contribute more than 70 per cent of the EU’s GDP and two-thirds of its total employment. For India, the sector accounts for half of India’s GDP and its importance as an employer has been growing over time, rising from 20 per cent of total employment in 1995 to 32 per cent in 2003. The same holds true of trade in services, which has also witnessed rapid growth in both economies. Services trade accounts for a fifth of all trade for the EU while for India this share is even higher. Table III.1 summarises these data. It demonstrates how important services are from the perspective of any FTA between the EU and India.


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