EU to Focus on Diversifying Crucial Supply Chains

EU to Focus on Diversifying Crucial Supply Chains

The European Union will seek to diversify its supply chains to cut reliance on other nations for crucial assets such as medicines, even as it works to strengthen trade ties with India, the bloc’s top diplomat said.

The reevaluation by the group of 27 countries will mark a shift similar to moves made after the oil crisis in the 1970s when Europe faced high prices amid fuel shortages, said the group’s foreign policy chief Josep Borrell in an email interview ahead of Wednesday’s India-EU trade summit.

“In practice this will mean stockpiling some crucial assets. It is not normal, for example, that Europe does not produce even one milligram of paracetamol,” Borrell said. “This is nothing against India — and we are grateful that India indeed lifted the temporary export restrictions that it had put in place — but it reflects a wider concern.”

India restored exports of hydroxychloroquine and paracetamol as global demand for the drugs grew with the pandemic. Yet as concerns escalated over the reliance on international sourcing for crucial products, calls to reevaluate supply chains grew louder, especially against the backdrop of a worsening conflict between the U.S. and China. While India is the world’s third-largest producer of finished drugs, it depends on China for about 70% of its active pharmaceutical ingredients.

Trade and security will form part of the virtual India-EU summit on Wednesday, according to EU officials in a media briefing on Tuesday, asking not to be identified citing rules. Borrell will be part of the summit, along with Prime Minister Narendra Modi, Charles Michel, president of the European Council, and Ursula von der Leyen, president of the European Commission.

Negotiations over a free trade agreement between India and the EU have been stalled since 2013. While India has sought more access for its services industry along with other demands, EU officials have cited protectionism, high import duties and lack of investment protection among reasons for the lack of progress.

EU funding for Indian infrastructure projects including a metro rail line will form part of Wednesday’s discussions, according to an Indian foreign ministry briefing on Monday.

The EU accounted for $91 billion or 11% of total trade with India in 2019, on par with the U.S. and ahead of China, according to the European Commission.

China Tensions

Discussions around the worst India-China border tensions in four decades are expected to be part of the talks. While the EU has stated its satisfaction about India-China talks for deescalation after a nine-week-long border standoff turned violent killing of 20 Indian soldiers and an unknown number of Chinese troops, concerns about Chinese actions in the region remain.

“The Chinese authorities have repeatedly stressed that they do not have military ambitions and do not intend to use force or participate in military conflicts,” said Borrell. “While words matter in diplomacy, what matters more are actions.”

Borrell’s comments follow his vow on Monday that the bloc would support Hong Kong’s autonomy with a “coordinated” mix of EU-wide and national measures meant to counter China’s new national-security law in the Asian financial hub.

Tensions between the EU and Beijing have been simmering, with allegations that China has spread disinformation about the coronavirus and frustration over Beijing’s curbs on foreign investors featuring prominently in talks between the two last month.

The EU will work with India on strengthening multilateral organizations, as it takes on a role as non-permanent member of the security council, heads the executive body at the World Health Organization and takes over presidency of the Group of 20 in 2022, officials told reporters Tuesday.

Talks will also include World Trade Organization reforms and a possible research-based nuclear agreement between India and the EU, the officials said. The Press Trust of India reported late Tuesday a pact on civil-nuclear cooperation between the two had been finalized, without giving details.

“We are facing a multilateral crisis and if like-minded countries do not work together swiftly to save and improve the system that has been the basis for progress, peace and stability worldwide since the middle of the 19th century, we will regret it,” said Borrell.


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