On the sidelines of last week’s European Business Summit, New Europe’s Irene Kostaki sat down with Dr. Subrahmanyam Jaishankar, President, Global Corporate Affairs of Indian conglomerate Tata Sons, to talk Europe, the future of Indo-European relations, and global trade rebalancing.
Irene Kostaki (IK): Ahead of the European Parliament elections on the 26 May, the global focus remains not on the bloc’s politics, but mostly on the US-China trade tensions. Do you consider this to be a full-blown crisis and how is it going to change Europe and the position of the rest of the players when it comes to global trade?
Subrahmanyam Jaishankar (SJ): Obviously, US-China is the dominant event for the moment. I’m not sure if I could use the word “crisis”. I think it is too strong a word. The point I am making was, look, for India, Europe is its largest trade partner and India is among the top 10 trade partners for Europe. Europe actually has an enormous influence in the world. If you look in terms of standards, values, and, I would say, behavioural correctness. Actually, there is a lot that Europe stands for in terms of being an example. Sometimes, even Europe goes too far in some issues. But, by and large, Europe stands for something.
My point was a much simpler one. It was that as European leaders are going to Sibiu (for the EU-27 leaders’ summit that took place on 9 May), what is the most important question they are asking themselves? They are asking the question “How could Europe have more global influence?” If Europe is to have more global influence, that means it needs to have influence in places that it does not have much influence in today.
Asia, I think, is one such region. In Asia, the focus, so far, for Europe has understandably been China, also Japan and to some extent, the ASEAN countries. I am simply pointing out that there is a country called India, it does 60% of the trade that Japan does, it has 80% of the investment which the EU has in Japan, so Europe needs to give it a little more attention.
On the Indian side, I think that Indians take Europe very seriously. It is a good place to do business and in many ways there is a lot that can work as the basis for a new relationship with India. In India, for example, today we have a Smart Cities programme. There are many European governments that are partners in that. There is also a big environmental clean-up programme. These are all areas where Europe is relevant and if you look not just at trade narrowly, but at the big picture on economy and partnership, I would say there are a lot of things Europe could do. I agree that, let’s say, we can look at issues like a Free Trade Agreement, but I don’t think these are not the only issues. I think we need a much broader conversation.
IK: Let’s go back to the European Union’s role in global trade. Is the EU ready to lead global trade? Is it well prepared? How do you assess the European Union’s proposal for a World Trade Organisation reform package? Is it too little too late or is there room for compromise?
SJ: I would again make two points when Europe is concerned. “Lead” is not the word to use. Who is the leader? The US is a leader, China is a leader, the EU is a leader. I think today that kind of world is behind us. The fact is there are many more players and the balance of the influence in the world is much more distributed than it was before.
Suppose you think of the world as a company with many more shareholders than before, many big shareholders. The board of management has to reflect that new reality. The old days when you could say ‘America-led’ or ‘Russia-led’ or ‘Europe-led’ are over, I think it has to be a more consolidated process.
Even when it comes to the reform of the WTO, Europe has a view. Obviously, the Europeans believe in their view, that is their right, but it is hard to understand that the European view might not be what everybody thinks. The fact is that, today, one of the changes we have seen in the last 10 years is that we used to have the old G7, formed basically by Europe, North America, and Japan, which has pretty much given way to the G20. Even if the G7 still exists, the G20 is considered much more contemporary, because it has a different power distribution, a different economic representation.
I think that when it comes to the reform of institutions, of practices and mechanisms, yes, everybody has their interests, people will have their views and their initiatives. I know that there is a European view, an American view. But we have to understand there is an Indian view, and a G77 view, a Brazilian view, a Brazilian-South African-Indian view, it could vary. And it is not like, “Hey, I have a view and you are negative about it”. Because, remember, I could also have a view that you would be negative about. What we have to do is have more conversations. This idea that one set of countries bulldozes everybody, that concept is behind us. I think what we need right now is to talk more.
IK: What is the state of play at the moment? Are trade discussions between the EU and India obsolete?
SJ: I cannot give you a granular, exact description, but my understanding is that we had negotiations for many years. The formal discussions are suspended, but they are not closed. There are a lot of informal discussions, though. People are talking to each other and they need to talk more. Sometimes you will have difficult negotiations, but to my mind, and I have spent all my life as a negotiator, I tell you this – no good negotiator ever gives up. It takes time. It might be more difficult, as difficult problems take more time, but it is a process.
IK: As for the type of the future relationship, what model would be most fit for an EU-India partnership? Should we limit the scope and head to a “mini FTA,” like the EU will now do with the US, trying to keep all troubling aspects aside, and move forward with a swift agreement, or a greater EU-Japan-like partnership, on the more inclusive side?
SJ: That is a question that only the trade negotiators can answer. My interest is something different. I am today representing TATA, a major business group in India, which has a huge interest in Europe. We employ 80,000 people in Europe and TATA has a very substantial portion of its revenues coming out of its European operations. The company owns many significant businesses here, we consider ourselves global, we feel at home in Europe. We would like to see a more substantial, comfortable relationship between Europe and India. Exactly what form it would take and if it would it be an FTA, an investment treaty, a more high-ambitioned FTA…these are all for the government negotiators to do.
Private citizens can have their views, but that remains an opinion. But the larger sentiment is what my purpose is, to get everybody in the room thinking that “OK, there is a country called India that is currently the fifth or sixth largest economy in the world. It will soon be the third largest economy. It has a lot of business opportunities, let’s look at them.” It does not have to be a conversation only about trade agreements. There is trade outside of Free Trade Agreements. There is no FTA with America or China, but there is trade.
Look at what is happening in India. If you take one of the big development challenges – the Sustainable Development Goals, how these will work in India, the number of people they will impact in terms of better health, better literacy, human development, livelihood, connectivity, habitation…it’s enormous. We are actually talking about hundreds of millions. And we saw that 20 years ago when the Millennium Development Goals were set and that was a period when China actually lifted a lot of people up in terms of poverty elimination. We are actually looking at a society that is in the middle of multiple layers of change. Today, people are rapidly getting more connected, getting more shopper awareness, getting opportunities that they did not know they existed.
IK: Are those people turning into a middle-class?
SJ: Maybe for the people down there, middle class may be a bigger jump, but it is a journey towards that. The level is turning closer to middle class, but they are facing an enormous infrastructure deficit. In the next 20 years I can see people just constructing infrastructure in India, there is that kind of demand. There is a huge demand for skills because even if you have people going to school, that still does not make them employable. This is a huge issue that goes together with industrialisation.
You have disruptive technologies and all that digitalisation. Digital interventions or even digital awareness can suddenly give people some sort of a boost, it can optimise limited resources and it can create new situations, particularly in the delivery of services. Take pre-middle class, if you look at people that are coming out of poverty, issues like housing, health or even electricity are considered basics, but they were not being considered basics 10-15 years ago. So, there will be new demands for all of them.
If you want to see what the digital revolution will do, you can see a very big start-up push in India, so you have multiple transformational processes at many levels. Every one of them is a business opportunity. Connectivity is a business opportunity, infrastructure, skills, environmental business. Anything new, anything that will deal with the consequences for all, is a business opportunity, and that is what European businesses should be looking at.
In a sense, they are looking at it in China, but why not in India? I want them to do that, and if I can get them to do it, I do not care why they didn’t do it before. I would rather work for the future. What is important for India, is to build awareness, change the sentiments for India, create interest, and get people to look at it more, and then good things will happen.