Free trade with EU could increase Indian exports by 20 percent

April 27th, 2008 - 3:43 pm ICT by admin  

By Dipankar De Sarkar
London, April 27 (IANS) Both European and Indian negotiators are finding progress slow on a key free trade agreement with Europe that could net India billions of extra dollars in 20 percent more exports, a British minister has warned. New Delhi has given its negotiators an ambitious year-end target to strike a free trade deal with the 27-nation European Union but has been frustrated by what it says are European technical barriers to trade.

However, Britain’s minister for international trade Gareth Thomas - fresh from a meeting with India’s Commerce and Industry Minister Kamal Nath in Accra, Ghana - said the two sides needed to move faster.

“European and Indian trade negotiators are finding, I have to say, progress slow on the EU-India Free Trade Agreement.

“The European Commission that is negotiating our agreement for us, EU Trade Commissioner Peter Mandelson as well as European business are increasingly frustrated at the pace of those negotiations,” Thomas told a meeting of top European bankers this week.

“Europe remains ready to make rapid progress but the substance needs to be there from both sides,” Thomas told the bankers in a briefing on EU-India trade relations at the Deutsche Bank in London.

The EU-India FTA has been watched keenly by governments around the world because it is a potentially significant bilateral deal that has run in parallel with the Doha Develop Round - multi-nation negotiations aimed at setting the basic rules governing world trade.

Many analysts hold that New Delhi launched the separate talks with the EU last summer because it was frustrated by the reluctance of America and the EU at the Doha talks to make further substantial cuts in the billions of dollars of government subsidies that they dole out to their agriculture sector - from ordinary farmers to wealthy exporters.

As far as the British are concerned, the two processes are clearly linked - it wants India to help the world secure a fair Doha deal before concluding a bilateral FTA with Europe.

Thomas said an FTA with the EU could increase India’s exports to Europe by 20 percent, give a boost to India’s manufacturing sector and see cheaper European exports to India at the same time.

Already, the EU, as a bloc, is India’s largest trading partner and main source of inward investment.

EU-India trade has grown impressively over the years, from 4.4 billion Euros in 1980 to over 46 billion Euros in 2006. Trade with the EU accounts for nearly 20 percent of India’s exports and imports.

“An agreement could begin to tackle European tariffs in areas of interest to India: in cars, pharmaceuticals and textiles,” Thomas said Thursday.

In the past, New Delhi has complained about a landmark EU law, known as Reach - acronym for Registration, Evaluation and Authorisation of Chemicals - that it said is technical barrier to Indian chemical exports.

The law puts the onus on businesses to show that the chemicals they produce are safe.

“But the biggest potential gains for India lie possibly in a 40 percent plus increase of textiles and clothing - a huge potential and windfall from such an agreement if we can get it done quickly,” Thomas said.

Gareth said the FTA could “significantly enhance” the Indian investment climate in European business, particularly freely traded business, and help ramp up growth in agriculture - a sector that has stagnated at 2.5 percent compared to a national average of 8.5 percent.

“An EU-India FTA which Britain both supports and indeed wants to champion could further unlock investment in India and further develop whilst at the same time offering opportunities to British business,” he said.

Part of this three trade-off between the EU, Britain and India, it appears, would involve India liberalising its services sector among other reforms. This would allow British banks to enter the Indian rural market, insurers to own more than the 26 percent of equity currently allowed, and lawyers to sell consultancies to globalising Indian firms.

“Expansion of Indian business overseas means significant demand from Indian business for quality international lawyers, and the UK is well placed to provide quality international advice,” Thomas said.

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