Brussels, 04/05/2006 (Agence Europe) - The European Parliament's Committee on External Trade carried out preparations, on Wednesday, for a public hearing on the future of trade relations between the EU and India (“with a view to displacing the centre of gravity of trade relations?”). While Doha Round talks drag on, several voices were raised in favour of cooperation between the two powers over and beyond the multilateral framework. An own-initiative report by Sajjad Karim (ALDE, UK) was to be adopted in plenary sitting end September, just before the next EU-India Summit scheduled for October in Helsinki, where partners are due to take stock of implementation of the plan of action adopted in September 2005 (EUROPE 9022).
Illustrating India's impressive economic development, Poonam Kumar, Chairman of Mega Ace Consultancy, recalled a whole series of figures that make the country “the fourth largest economy in the world in terms of purchasing power parity” (the growth rate of GDP was, for example, 8.1% in 2005). And yet, the fact that the Indian economy is doing so well is often cause for concern and seen as a threat as there is a risk that jobs or industry will be relocated to that country, Ms Kumar recognised, pointing out, however, that the country was facing several challenges. Ms Kumar thus called on India to pursue reduction of its budgetary deficit (the current government has reduced it to 3.8% compared to 6% during the nineties), to raise the level of investment in infrastructures and to establish an environment that is favourable for business and investment.
Willem van der Geest, Director of the European Institute for Asian Studies think-tank, says two elements have influenced EU-India relations since the Doha round of talks: external relations (the role of India in the G20, the threat of Chinese imports, and agricultural issues) and the considerable investment prospects of the country. In this context, it would be “quite possible to have an EU-India agreement that goes beyond the WTO, with more equitable relations”, the Dutch professor said. Although conclusion of the Doha Round with an agreement founded on the smallest common denominator seems the most likely thing, Mr van der Geest believes that a voluntary agreement between the two partners would allow account to be taken of European concerns (jobs) as well as Indian concerns (visas and work permits for the EU). Although a bilateral approach will depend on the conclusion of the Doha Round, rapprochement between the two partners could concern imports of products (textiles and craft products in particular), he said. He also went on to stress how important it was to improve the investment climate in India, focusing above all on respect of trade law and the burden of administrative and regulatory red tape. Generally speaking, “discussion must be broadened” to establish ”a vision of relations in the longer term” including migratory movements, cultural cooperation and academic exchanges, and “having precise objectives at least until 2015”, Mr van der Geest concluded.
While Mr van der Geest recalled the high incidence of poverty in the country, where 26% of the population lives in poverty (inequality is growing and the most modest households are stagnating, he said), Dipak Chatterjee, Ambassador for India with the EU, recalled that the percentage was 50% in the early nineties when India began to open up and that, according to the results of studies, this should continue to fall significantly. “We are not giving up the multilateral road but we increasingly recognise the value of the bilateral road which is often simpler and goes further”, Mr Chatterjee admitted, considering it important to consider this road for market access also. The EU is calling for market access that is far too great, but India has recently brought down customs duties and the government hopes to harmonise these cuts at the level of duties imposed by Asian partners, he said, adding that “this gesture is not sufficiently taken into account”. The Indian market is “open and receptive to European products” and the “best is therefore to come” in terms of trade expansion, Mr Chatterjee said.
He went on to stress that, in Geneva, everyone should be prepared to make concessions. However, although India remains open to all options and is ready for “bilateral negotiation”, multilateralism remains “vital” for the European Commission, one of its representatives said, taking part in the discussion. These two approaches must not, however, be opposed to each other and it is possible to explore the possibilities for launching talks on an international agreement on trade and/or investment. He went on to stress that European companies continue to consider the Indian market as a protected market, which explains the fact why foreign investment there is ten times lower than that in China.