One of the key roadblocks in concluding an India-EU Free Trade Agreement is the European Union demand that the pact should contain a chapter on Trade and Sustainable Development, or TSD, which requires both parties to adhere to international labour and environmental norms in the economy.
Successive Indian governments have opposed this since the talks began in 2007, arguing that the TSD chapter would interfere with our sovereign right to legislate on labour and environmental issues, but there is actually nothing within it that would infringe on India’s sovereignty.
In fact, including TSD commitments in an India-European Union (EU) Free Trade Agreement (FTA) would simply require the government to incentivise Indian exporters to adopt better labour and environmental protections in their operations, differentiating them from competitors such as China and enhancing India’s attractiveness as a sourcing base for EU and other foreign importers.
The reason both the United Progressive Alliance (UPA) and National Democratic Alliance (NDA) governments have been opposed to the inclusion of a TSD chapter is because it becomes a sovereign commitment to first, improve local labour and environmental laws to meet international standards prescribed by the International Labour Organization (ILO) or the Paris Agreement, and second, ensure local exporters follow these laws, whether through better government enforcement or any other methods.
Nevertheless, the reality is that all next-generation FTAs include TSD or equivalent chapters with sovereign commitments on labour rights and environmental protection.