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Trade tensions simmer ahead of EU-India summit

Trade tensions simmer ahead of EU-India summit

The inaugural EU-India Trade and Technology Council Summit will have to overcome thorny questions between two of the world’s largest democracies.

When European Commission officials and senior Indian ministers meet on Tuesday for their first-ever trade and technology summit, both sides will be eager to show how two of the world's largest democracies are working hand-in-glove on everything from artificial intelligence to climate-saving technologies.

Yet under the surface, ongoing tension — particularly related to tricky trade disputes like an upcoming European Union levy on foreign businesses selling their carbon-intensive wares within the 27-country bloc — will overshadow what Brussels and New Delhi want to frame as a meeting of like-minded partners.

The EU-India Trade and Technology Council brings together some of India's most high-profile politicians, including Subrahmanyam Jaishankar, the country’s external affairs minister, and Piyush Goyal, its trade minister, with Commission counterparts like vice presidents Margrethe Vestager and Valdis Dombrovskis.

"The European Union and India are committed to deepening their partnership and leveraging their respective strengths to accelerate the development and deployment of cutting-edge digital technologies that will benefit both societies and promote global progress," according to a draft of the upcoming summit's communiqué that was obtained by POLITICO.

Yet conversations with Commission and Indian officials, all of whom spoke to POLITICO on the condition of anonymity to discuss each side's internal thinking, reveal likely difficulties in a relationship mired in tense trading negotiations and differences in how to approach tech challenging like global telecommunication standards and how far governments should go in regulating AI and data.

A lot of that tension relates to the EU's upcoming Carbon Border Adjustment Mechanism, a border tax that comes into force in 2026 and will see importers, including those from India, having to pay a levy equivalent to the carbon priced paid by their European rivals that are part of the bloc's carbon emissions trading scheme.

For New Delhi, those additional costs constitute unfair trading practices, particularly for a developing country whose 1.4 billion people are not as wealthy as the EU's 450 million inhabitants. European diplomats, who also spoke on the condition of anonymity, pushed back at those claims, adding that changing the carbon border tax is a red line for Brussels and that Commission officials will explain to their Indian counterparts on Tuesday that the levy is here to stay.

Another trade irritant is how to deal with sustainability requirements the EU wants India to sign up to. These demands are being discussed in separate free trade negotiations between Brussels and New Delhi, but risk overshadowing part of the discussion on climate emissions at the Trade and Tech Council. The trade negotiations are still in a relatively early phase, although the last round "allowed for a more dynamic approach between both sides," a Commission spokesperson said.


Cleantech, standards and 'GovTech'


Still, the upcoming EU-India summit won't all be about trade bickering.

Both sides will also outline concerted efforts to work on global artificial intelligence standards, coordinate upcoming investments in their respective semiconductor industries and share expertise on clean technologies like those associated with the waste management and electric car industries, according to the draft communiqué and discussions with two EU officials and an Indian policymaker.

For Brussels, the goal is to steer New Delhi toward a growing Western consensus to create global digital and technology standards on everything from next-generation telecoms equipment to how to develop so-called quantum computing technologies. That would then help the likes of the EU and India to present a united front against China's own separate efforts to push its own view on how these international standards should develop.

So far, India has avoided picking a side on many of these issues, although it has its own geopolitical and economic tensions with China.

For New Delhi, officials are expected to champion the so-called "India Stack," or government-backed open digital platforms that allow hundreds of millions of locals to access government digital services and private online products, all through a few swipes of their smartphones.

The country's officials and industry executives view these platforms as a viable alternative to those offered by the likes of Google and Meta, and they lie at the heart of how the world's most populous country has positioned itself as a global digital player.

While many of these platforms are not owned by India, the country's government is trying to export these services — known as 'GovTech' — to others across the Global South, something that Brussels is eager to support, as well as offer its own technical expertise to ensure such an expansion upholds the toughest cybersecurity standards.

"The Indian Stack has scaled massively," said Divij Joshi, a researcher from University College London who specializes in India's digital platforms and governance. "India wants to promote that to the wider world."

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