The European Union was founded after World War II in 1992 through the Treaty of Maastricht. It is a supranational organization where members have unanimously agreed to surrender some part of their sovereignty to European institutions, which have been formed unilaterally by them representing the collective interests of Europe.

Membership: It is a political and economic alliance including 27 countries, which are Austria, Belgium, Bulgaria, Cyprus, Croatia, Czech Republic, Denmark, Finland,  Estonia, France, Greece, Hungary,  Germany, Ireland, Italy, Latvia, Lithuania, Luxembourg,  Netherland, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.

Note: United Kingdom, one of its founding members, exited the organization in 2020. This event is known as the Brexit in the EU’s history.

History of the European Union (EU):

The European Union traces its roots to the European Coal and Steel Community(ECSC), established in 1950 with six members, i.e., Belgium, France, Germany, Italy, Luxembourg, and the Netherlands.

The European Coal and Steel Community became the European Economic Community (EEC) in 1957 under the Treaty of Rome and was renamed the European Community. It establishes a common market.

Formation of EU

In 1992, the Maastricht treaty replaced the EC with the EU. The new currency, the Euro, was officially issued on January 1, 1999, under this treaty with 12 member countries of the European Community, creating an economic and monetary Union and corresponding common unit of Exchange.

In 2009, the Treaty of Lisbon was signed, which gave more powers to the EU. It gave the EU the legal authority to negotiate, sign international treaties, etc.

Structure of the European Union:

There are seven official European Institutions, which can be roughly categorized by Legislative, Executive, judicial and financial Functions.

Among those mentioned above, the EU is primarily governed by three main bodies: the EU Council, the EU Parliament, and the EU Commission.

European Council:

European Council is an apex body of the EU. It comprises of:

1. the council’s president,
2. the European Commission’s President, and
3. representatives from all the 27 member states.

All important policy decisions and proposals for legislation are initiated here. Its main responsibility is to execute the decisions taken by the Council of the European Union and the laws passed by the European parliament. It also provides political direction, settles disputes among member states, and negotiates treatise.

European Commission:

It is an executive arm that wields the most day-to-day authority. It proposes laws, issues regulations, manages the budget, implements decisions, issues regulations, and represents the EU around the world at summits, in negotiations, and in international organizations.

The EU Legislature

The EU has two legislatures – the European Parliament and the Council of European Union.

European Parliament

European Parliament is the only directly elected European Union body, with representatives from each member state’s population. It acts as the EU’s public forum, debating issues of public importance and raising questions for the council and the commission. It also negotiates and approves the EU budget and oversees the commission.

Council of the European Union (Council of Ministers):

It is the 2^nd legislative branch whose approval is needed to pass the legislation. Its decisions are binding throughout the EU territory and direct inter-governmental cooperation. It is comprised of government ministers from all EU members.

European Court of Auditors:

The European Court of Auditors audits the EU budget, verifying that funds are spent properly and reporting any fraud to parliament, the commission and the national governments.

There is also a Court Justice of the European Union, which is the European Union’s highest judicial authority, interpreting EU law and settling disputes.

European Central Bank

European Central Bank manages the euro for the 19 countries that use the currency, helps regulate the EU’s banking system and implements the EU’s monetary policy.

Functions of the European Union:

Economic Integration:

The EU was established primarily to facilitate trade and economic cooperation among member nations and liberalize world trade. A single market, Euro Zone, and customs union were created for this.

The EU shows the following forms of economic integration:

1. Market Union: free movement of goods, services, and factors of production across borders.
2. Customs Union: A customs union eliminates tariffs on trade between member countries and establishes a common external tariff on imports from non-members.
3. Monetary Union: A monetary union is when countries adopt a common currency and generally have a coordinated monetary policy to manage inflation and interest rates.
4. Economic Union: It is achieved by harmonizing economic policies, including fiscal, monetary, and industrial policies. Member countries maintain sovereignty but coordinate economic strategies for integrated development.

Eurozone or the European Monetary Union

The eurozone (EZ), is a currency union of 20 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal. Currently, only 19 of the 28 members use the Euro in the European Union.

Political cooperation:

The European Union, through its different arms, fosters peace and democracy through cooperation and dialogue among member states. For Instance, The Parliament negotiates all laws with the commission and council of ministers (Co-decision).

Foreign Policy:

The strives to coordinate the policies of member states to enhance their collective influence on the global stage and promote common values and interests.

The common foreign and security policy, as the European Union’s foreign policy is known, primarily concerns diplomacy, security, and defence cooperation.

• The EU establishes standard laws and regulations to be followed by member states to foster uniformity in the region.
• One of the arms of the EU, i.e., the European Commission, is responsible for negotiating an international agreement on behalf of member states.

Evolution of India-EU Relations

India traditionally has a multi-faceted relationship with the European Union, i.e., it is the largest trading partner, the biggest source of foreign direct investment, and home to a large number of Indian diaspora.

• In 1962, India was the first Asian and developing country to establish trade and economic relations with the European Economic Community of six west European nations, including Belgium, the federal Republic of Germany, France, Italy, Luxembourg and the Netherlands in 1962.
• In 1993, a joint political statement was signed, followed by a cooperation agreement on partnership and development.
• In 1994, relations between the two expanded from the pillar of trade and economic cooperation to political dialogue and annual ministerial meetings.
• In 2000, the first summit was held in Lisbon, Portugal, between the EU and India, followed by annual summits regularly.
• In 2004, the partnership was upgraded to “Strategic Partnership” during the 5^th summit at Hague.
• In 2016, the 13^th India EU summit in Brussels brought India and the EU Agenda for Action 2020, a roadmap with practical actions for the next five years covering security, human rights, Global issues( climate change, sustainable developmental agenda 2030, etc.
• In 2018, the EU’s Strategy on India entitled “A partnership for sustainable modernization and rule-based Global order” issued by the European Commission viewed India as an emerging global power that plays a pivotal role in the current multi-polar world and a factor of stability in a complex region.
• In 2020, the 15^th EU India summit was held virtually, giving greater attention to security issues. Two documents, namely, the EU-India joint declaration of 2020 and the EU-India strategic partnership: A roadmap to 2025.
• In 2022, for the first time, Ursula von der Leyen, the president of the European Commission, made an official visit to India and announced the establishment of India’s EU Trade and Technology Council.
• In July 2022, the two sides restarted negotiations on a Free Trade Agreement after a gap of 9 years. Both concluded the first round of negotiations for BTIA (Bilateral Trade and Investment).

Areas of Convergence:

There are several initiatives that act as catalysts for enhanced cooperation and collaboration between different countries, such as

1. Economic interest:

The EU is India’s second-largest trading partner after the US and investor, and it is also its main source of technology transfer. It is also the second-largest export destination for Indian exports. Bilateral trade between the two surpassed $135 Billion in 2022-23. India exports almost 14% of its global exports to the EU.

2. Investments:

• The India and European Free Trade Association signed a Trade and Economic Partnership Agreement (TEPA) for trade and investment of $100 Billion, committing to reduce tariffs with a group of European Nations, Switzerland, Norway, Iceland and Liechtenstein.
• India and the European Union signed an MOU on supplying semiconductors that will help in building a robust supply chain and support innovation.
• The India-Middle East Europe Economic Corridor (IMEC), a new economic corridor established connecting India, Europe, the US, Saudi Arabia, the UAE, France, Germany and Italy, was announced on the sideline of the G20 Summit.

3. Defence Cooperation:

The cooperation with the EU in the defence sector has also increased substantially.

• This is extremely critical for India, at this juncture, to narrow down its hardware dependency on Russia in the backdrop of the Ukraine conflict and seek diversification of its armament imports from other regions with the new technologies in the wake of its confrontation with China.
• Both countries conduct joint military exercises and naval exercises, which reflects the commitment to an inclusive, free, open, and rules-based order in the Indo-Pacific.
• The first maritime security dialogue held between the two countries in 2021 focused on cooperation in maritime domain awareness, capacity building, and joint naval activities.
• France’s timely delivery of Rafale fighter jets and willingness to provide Barracuda nuclear attack submarines to the Indian Navy shows the increasing trust level in their relationships.
• Leading European defence equipment manufacturers are willing to partner with India’s companies to develop defence projects in line with the “Make in India” programme.
• Both countries conducted their first joint naval exercise in the Gulf of Guinea in 2022-23.

4. Environmental cooperation:

There is deep cooperation in Countries like Norway, Sweden, the UK, France, Spain, Japan, Germany, Canada, Costa Rica, the US, Brazil, India and China, among others, which in the last few years came together to achieve net zero targets.

Further various other partnerships are being executed on individual levels:

• The “Green Strategic Partnership” between Denmark and India aims to address climate change, pollution and biodiversity loss.
• The India-Nordic summit focused more on green technologies and industry transformation, which are important for sustainable and inclusive growth.

5. Technological cooperation:

• Also, the Science and Technology Joint Steering Committee between India and the European Union focus on areas such as Artificial Intelligence, healthcare, and Earth Science.
• India and the European Union signed a new Trade and Technology Council (TTC), which is a strategic coordination mechanism that will allow both partners to deal with the challenges at the nexus of trade, trusted technology and security, and thus, enhance cooperation in these fields between India and the European Union.
• Start-up and employment generation: Another increasingly growing area of engagement is the startup and innovation ecosystem across India and Europe. There are 6000 European companies in the country that directly and indirectly create 6.7 million jobs.
• Research and development cooperation: Both countries collaborate in research and development on the peaceful use of nuclear energy between the government of India and the European Atomic Energy Community.

Concerns

However, India suffers on many fronts against the EU. Conversely, the EU has many issues with India.

Export barriers:

India has high tariffs and restrictions on FDI in various sectors, including insurance and trade.

• Tariffs on several products, such as cars, wine, and spirits, remain at between 60 and 100%.
• EU has sought huge cuts in India’s tariffs on automobiles and auto components. Completely Assembled cars attract a 60% import duty, rising to 75% for cars with free on-board value over $40,000.

Market Access Barrier:

• The pharmaceutical sector faces the barrier of registration. The registration of drugs is taking time in the EU because of the influence of Multinational drug companies.
• Electrical field: the standards different from what is globally followed are imposed
• In agriculture, issues with phytosanitary standards and traceability are significant hurdles.
• In agriculture, India’s agri export faces challenges in meeting the stringent sanitary and phytosanitary measures imposed by the EU.
• Problems related to the Visa Regime: India pushes for the liberalization of the visa regime for Indian professionals, although the EU has some restrictions.

Schengen Visa For Indians

The Schengen area is made up of 26 European countries that share a common legal framework and have no border checks between them. A Schengen visa for Indians allows them to travel freely within the Schengen Area (a group of European countries) for short stays of up to 90 days within any 180-day period, for purposes like tourism, business, or visiting family, and can be obtained by applying to the embassy of the Schengen country they plan to visit first; Recently, the EU has introduced a “cascade” system where Indians who have used two Schengen visas within the last three years can be eligible for a two-year multiple-entry visa.

Differences related to Trade:

• Difference on Tariffs: India and the EU have different views on issues such as tariffs on Wine, cars and dairy products imported from the EU.
• Trade dispute: Both countries have a trade dispute over wine, spirits, and pharmaceuticals.
• Intellectual property rights (IPR): the European Union demands to strengthen the IPR in India because existing laws in India do not allow the evergreening of patents or data exclusivity, preventing various drugs and chemicals from being sold in India.

Inconclusive Free Trade Agreement:

The negotiation for the free trade agreement started in 2005 but has not reached to any conclusion yet, which is of utmost importance to India as the European Union is India’s second-largest trading partner after the US (United States) and India also has a trade surplus with the European Union.

• Dairy: The EU has non-tariff barriers on Indian goods, has a surplus of dairy products, and wants India to reduce tariffs.
• Automobiles: Indian companies are against tariff liberalization, which will impact job prospects, investments and the Make in India programme.
• India’s rice exports have suffered due to the imposition of maximum residue level limits, which is the highest level of pesticide remnant that is legally acceptable in or on food or feed when pesticides are applied following agricultural practices. India’s agricultural exports to the EU have declined to $3.12 billion in FY 2023 from $3.36 billion in FY 2018.
• Imbalance in the proportion of trade: there is a need to increase the proportion of trade in the case of value-added exports, including gems and jewellery, power generation and transmission, information technology and biotechnology.

Political Issues

• Silence on China’s influence: India’s political, economic, and demographic weight could be skilfully leveraged by the European Union to offset China’s influence across the region, but there is uncertainty about tackling China’s rise. For instance, during the Galwan clash, Europe was silent.
• Increasing Economic Cooperation with Russia: India’s increasing economic cooperation with Russia and not condemning Russia’s intervention in Ukraine led to tension between the two.
• Rationalizing Legal Hurdles: The reforms that entrepreneurs need to consider, such as online form submissions, appeals, and adjudication. Legal hurdles also need to be removed by simplifying and rationalizing the corporate and civil laws of the EU and India.
• Lack of Data Secure status: India is not considered data secure under EU legislation, despite India mending its Information Technology Act in 2000 and issuing new information technology rules in 2011, aligning “safe harbour” principles adopted by the US. It impedes the cross-border supply of sensitive data, which is essential for services like telemedicine, Clinical research, etc.
• Redtapism: Cutting the red tape with respect to policy dialogue between the two countries is also a major challenge.
• Stalled BTIA (Broad-based bilateral trade and investment Agreement), which began in 2007 but stalled in 2013 due to a lack of agreement on various issues, such as tariff barriers and Intellectual Property rights.

Way forward:

• Tariffs Reduction: tariffs can be reduced for items like wine and also application of stringent SPS measures on agricultural products through collaborative work between farmers and civil society organizations
• Implementation of data protection legislation in India would go a long way in cementing India’s role in the global digital scene.
• A relaxed Visa policy can be introduced for talent-driven migration for Indian professionals.
• Both can cooperate better by investing in clear and greener technologies in India than by taxing exports to the EU as proposed in the Carbon Border Adjustment Mechanism (CBAM suggest taxing imported goods based on the difference between imported goods and carbon used in the production of domestic.
• Governmental agencies in the EU and India need to assist and collaborate more with the private sector to increase trade volumes.