Policy Watch: An Uneasy Camaraderie

POLICY WATCH
An Uneasy Camaraderie

Despite several differences, India and the EU can work together
on multilateral trade issues.

By Seetha

The plush office of the Delegation of the European Commission in New Delhi is busier than usual. Hectic preparations are under way for the visit of Chris Patten, the European Union's (EU) commissioner for external affairs, next month. One of the high points of the visit: the launch of a EU-India Round Table on bilateral relations. The Round Table will consist of Big Names who will brainstorm regularly on how the EU and India can move closer to each other.

They'll certainly have their work cut out for them. Despite all the hype over the first-ever EU-India summit in June 2000, the relationship hasn't got any warmer. Not that there were any tangible benefits of consequence even then, but the Summit was expected to set the ball rolling for progress in different directions. Six months on, the ball hasn't moved very far.

That's inevitable, given the number of irritants in the EU-India relationship ranging from bilateral trade to negotiating positions on multilateral issues, despite attempts by both sides to play it down in public.

In any case, India doesn't figure very prominently on the EU's horizon. While the EU tops the list of India's trade partners, India ranks twentieth among the EU's trade partners. India's exports to the EU, which accounts for 27 per cent of its total exports, amounts to a measly 1.3 per cent of the EU's imports. Similarly, the EU's exports to India constitute 1.4 per cent of its total exports. And India receives only 0.6 per cent of the EU's worldwide investments.

Both the EU and India are peeved at problems they face in accessing each other's markets. The EU complains that India isn't liberalising trade fast enough, with average tariffs hovering at around 30 per cent. India has its own list of woes. Foremost is the fact that the EU is not easing quotas on the import of textiles and garments, an important issue considering this category accounts for the bulk of India's exports to the EU. India is also sore over the massive protection that the EU provides to agriculture and the non-tariff barriers in the form of sanitary and phyto-sanitary stipulations and packaging requirements.

The EU doesn't understand why these are issues at all. Asks Laurence Argimon-Pistre, head of the EU's India, Nepal, and Bhutan desk: ''How are exports from other countries doing so well?''

There are other irritants as well. Both sides have filed an equal number of anti-dumping cases against the other and dragged each other to the Dispute Settlement Board of the World Trade Organization (WTO). India filed and won a case against dumping duty imposed by the EU on Indian bed linen, while the EU has complained about India's automobile policy. Not quite the recipe for an EU-India camaraderie.

Wary Investors

Wooing investment from Europe will also not be easy. Points out Principal Administrator at the EU's India desk, Ulrich Eckle: ''European businessmen have been testing the waters of India, but haven't taken the plunge yet.'' It's a lot to do with the business environment in India, with its policy bottlenecks and inadequate infrastructure. As a result, the Small and Medium Enterprises (SMEs), which account for a major chunk of the European business environment, are largely absent from India. Asserts Eckle: ''Our SMEs don't have the mettle or the nerve to go into the Indian market.''

Especially, when there are other more attractive markets closer home. With East Europe opening up, industry in the western part of the Continent would obviously prefer to do business there. Next on the list are countries of the Mediterranean region and the Mercosur bloc in South America, regions with which the EU has free trade agreements. Says Pistre: ''People just do not think India.''

Where India and EU can probably find common ground is, strangely enough, at the WTO. That seems impossible, considering the number of issues on which the two sides don't see eye to eye.

Take the issue of market access for India's agricultural exports, severely limited by the massive subsidies the EU gives to its farmers, and the high tariff walls it has erected. It won't be easy to make the EU yield. Pointing out that the EU has already reduced its subsidies from 50 per cent in 1992 to 9 per cent now, EU's trade spokesman Anthony Gooch declares: ''It is important for our social fabric to preserve an agriculture sector in Europe.'' India, for its part, wonders why it should give in on issues of interest to the EU. Avers Additional Secretary, Commerce Ministry, Nripendra Misra: ''If they have their political compulsions, we have ours.''

The EU wants a new round of negotiations which India is refusing to support unless the lack of implementation of earlier agreements is first addressed. Besides, the EU wants to bring labour standards, environmental standards, and competition policy within the WTO framework, another strict no-no for India.

But there are signs that India and the EU are looking for a meeting ground. Says Deputy Chief of Mission at the Indian embassy in Brussels, K.B. Chandrashekhar: "There is an attempt to understand India's position on issues. And, Pistre declares that India cannot be ignored because of its clout as a representative of the developing countries in the WTO.

That's why Advisor, Confederation of Indian Industry, T.K. Bhaumik, argues for India looking at the EU more strategically. The EU, he points out, is looking to India for support on various issues. That's also the refrain of Director, Rajiv Gandhi Institute of Contemporary Studies, Bibek Debroy. India, he suggests, must learn to exploit the divide within the developed world on several matters. On agriculture, for example, it should play off the US against the EU and Japan. Similarly, it should side with the EU against the US over the indiscriminate use of anti-dumping measures.

The government seems to see the logic of this argument but is wary, nonetheless. Says Misra: ''It is important that the EU doesn't see India as playing its card.''

As the two sides try to find some common ground, they'll throw up enough issues and problems for the big names to chew on at the Round Table.

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