EU commissioner for trade Valdis Dombrovskis also indicated the two sides may resolve their outstanding dispute. The two are involved in a dispute over tariffs imposed by New Delhi on information and communication technology goods outside the World Trade Organization.
Noting India’s ambition to become a manufacturing hub and integrate itself with the global value chains which requires a lot of investment, he said: “For this investment to come, there also needs to be proper investment protection and a proper mechanism to solve disputes as they arise.”
India and the EU are negotiating a trade pact, an investment protection agreement and an agreement on geographical indications.
The bloc has proposed the investment court system on the lines of agreements with other countries.
“We are awaiting India’s proposal on this,” said Dombrovskis, who is in India for the two-day G20 trade and investment ministers meeting that began Thursday.
“It’s a change of EU approach instead of relying on arbitrations where sometimes it was not transparent. We want a more streamlined, more transparent system, which is protecting investments and also protecting a country’s right to regulate,” he said.
The European Union is India’s second largest trading partner. India is EU’s tenth largest trading partner accounting for some 2% of EU trade in goods.
On the timeframe to conclude the talks, he said substance is more important than speed. “We need a political steer from both sides to get the right calibration,” he said.
Dombrovskis said not all trade irritants end up being disputes.
“This is one of those topics which we are having in our agenda…trade irritants on both sides and how to address them,” he said when asked about India and the EU settling their WTO disputes out-of-court, similar to what India and the US did recently.
On the EU resorting to the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), which is an alternative system to resolve WTO disputes, he said the union’s first choice would be a functioning WTO appeals system.
“But at the same time, we need to respect the right of the countries to appeal on the rulings and MPIA is serving this purpose,” he said.
Trade irritants
He said India’s quality control orders are a trade irritant and a non-tariff barrier.
“The increasing practice of setting India-specific standards and correspondingly quality control orders often end up with complicating the testing, assessment requirement and act as non-tariff barriers,” he said, emphasising on the need for international standards and cooperation to avoid a proliferation of such obstacles.
The EU has put in place the Carbon Border Adjustment Mechanism (CBAM), which industry expects will translate into a 20-35% tax on select imports into the EU from January 1, 2026. Dombrovskis said it is a non-discriminatory, WTO-compliant measure.