Angela Merkel to arrive for 5th India-Germany IGC: Trade likely to be high on agenda in light of China, Brexit

  • India and Germany have had a 'strategic partnership' since 2001, but it was a whole decade later that the two countries held the first Intergovernmental Consultation

  • This is a mechanism through which heads of government and key Cabinet ministers meet every two years to discuss issues spanning the entire gamut of the bilateral

  • For the past five years, India-Germany trade has consistently hovered around the $20 billion mark for the past five years

German chancellor Angela Merkel begins her fourth visit to India — for the fifth in a series of biennial bilateral summits — on the back of her party's humbling defeats in regional elections. The Christian Democratic Union (CDU) has lost ground to the Far-Left Die Linke and Far-Right Alternative for Germany (AfD) in the country's Brandenburg, Saxony and Thuringia states. However, and expectedly, while her weakening position on the national stage will certainly be on Merkel's mind, it'll be international imperatives that will take centre stage over the next four days.

India and Germany have had a 'strategic partnership' since 2001, but it was a whole decade later that the two countries held the first Intergovernmental Consultation (IGC) — a mechanism through which heads of government and key Cabinet ministers meet every two years to discuss issues spanning the entire gamut of the bilateral.

On the agenda this time around, will be such topics as trade and investment, technology, culture and security. Furthermore, agreements related to sustainable development and artificial intelligence are also expected to be signed over the course of the IGC. Germany has already maintained that Kashmir is India's internal matter, so while the two sides may discuss the situation in the Valley after the abrogation of Article 370, this discussion is unlikely to take precedence. Trade will likely be the key component of discussions between both sides.

 Angela Merkel to arrive for 5th India-Germany IGC: Trade likely to be high on agenda in light of China, Brexit

File image of German chancellor Angela Merkel. AP

Pushing trade forward

For the past five years, India-Germany trade has consistently hovered around the $20 billion mark for the past five years, hitting a high of $24 billion in 2018/19 and a low of $18.8 billion in 2016/17, as per Ministry of Commerce figures. The present Fiscal Year (2019/20) has already seen bilateral trade worth $9.4 billion between the two countries. To put matters into perspective, last year, Germany was India's eighth-largest trade partner, while India was Germany's 25th-largest trade partner. Meanwhile, with bilateral trade worth over $222 billion, China is Germany's top trade partner.

The danger of this overreliance on an assertive — both politically and economically — China is why, according to senior CDU member Johann Wadephul, Germany seeks to deepen its relations with 'natural partner' India. Wadephul said, "No country in Europe or Asia that wishes to hold its own against China's growing power can do so by relying only on itself... That's why, we're seeking to build 'an alliance of multilateralists' with 'shared values'." At present, China accounts for 7.1 percent of Germany's exports and 10 percent of its imports. India's corresponding numbers are 0.9 and 0.92 percent respectively. It's safe to say there's a long way to go.

Additionally, it is likely that Germany will seek to inject momentum into the long-pending India-EU Free Trade Agreement. Proposed in 2007, negotiations hit a roadblock in 2013 when both sides arrived at an impasse on tariffs and market access. Disagreements on standards and practices exacerbated the situation and negotiations were shelved for five years. Germany has been an advocate of the free trade agreement and welcomed the resumption of negotiations last year.

If Great Britain does leave the EU in January 2020, Germany will account for a larger chunk of the EU-India trade pie and be in a stronger position to lead negotiations on behalf of the bloc. At present, the EU is India's largest trade partner (12.9 percent of its total trade), while India is the EU's ninth-largest trade partner (2.3 percent of its total trade). That a breakthrough on the FTA would be a win-win for both sides goes without saying.

The IGC should give both sides a good opportunity to build on areas of convergence and attempt to mitigate divergences on trade.

Updated Date: Oct 31, 2019 11:46:03 IST