India, EU Work To Hike Trade & Investment Flows

Written by Malcolm Subhan | Brussels, July 20: | Updated: Jul 21 2003, 05:30am hrs
For the first time, India and the 15-nation European Union (EU) are taking concrete steps to increase their two-way trade and investment flows, with the EU contributing Euro 15 million (roughly Rs 80 crore) for this purpose. Rather than simply accusing each other of restricting imports, the two sides are working on an ambitious programme under which the EU will help India develop its exports.

The fact is that Indian exporters are under-performing on the 15-nation European single market. Indias exports reached Euro 13 billion last year, an increase of 34 per cent over 1997 (Euro 9.5 billion). But even so it was outclassed last year by Malaysia, South Korea and Taiwan (let alone China, with exports of Euro 81 billion).

When the Indian and Danish Prime Ministers met at the India-EU summit in Copenhagen last year, the EU formally announced the launch of an EU-India Trade and Investment Development Programme (TIDP), for which it was allocating Euro 15 million over a 3- to 4-year period.

India is the first non-EU country to take part in such a programme, and TIDP was therefore a key item on the agenda of the India-EU trade and economic cooperation sub-committees that met here last week.

The programmes two-fold aim is to help Indian authorities take steps needed to increase exports to EU and to attract inward investment from EU entrepreneurs. Given the growing concern among European consumers over food safety, Indian exporters must meet EUs sanitary and phytosanitary (SPS) standards if they wish to export to any of the 15 EU countries.

The TIDP will therefore provide for the upgrading of food laboratories, as regards testing and inspection. It will also work towards mutual recognition and equivalence agreements, thus making it easier for Indian exporters to meet certification requirements. The flow of information on food regulations and standards will be improved.

Under TIDP, technical assistance will be provided to improve customs efficiency, through the development of best practices, standardisation and an electronic customs environment. These activities will be within the framework of the proposed India-EU customs cooperation agreement.

The new programme will also seek to make it easier for EU investors, notably through a one-stop information centre, which will not only help them with their plans but also look at their grievances, for example. These services are likely to be provided through one or other of the leading Indian trade and business organisations.

The new trade and investment development programme now taking shape should mitigate, if not eliminate, some of the market access problems faced by Indian exporters in the field of SPS, for example. Agreements between Indian and EU export inspection agencies should put an end to problems such as those currently faced by seafood exporters.

At Indias request, the sub-committee on trade looked at some of these problems, notably the destruction of seafood consignments, even when they had been cleared by confirmatory tests. The EU, for its part, questioned Indias refusal to allow imports of European mineral water and black olives. Could products widely available in Europe really pose a threat to the health of tourists, many of them Europeans

The TIDP will be the first programme of its kind to be launched by the European Commission, the EUs executive arm, and the Indian government. But Indian business was first in this field, with the Joint Initiative for Enhancing Trade and Investment, launched at the first India-EU Business Summit, organised jointly by Federation of Indian Chambers of Commerce and Industry (Ficci) and Confederation of Indian Industry (CII), and held the day before the EU-India political summit.

The two action plans, drafted jointly by Indian and European business representatives, were also discussed by the trade and economic sub-committees last week. The first action plan was based on four sectoral studies, covering mechanical engineering, food processing, information technology and telecommunications. Its recommendations are now being examined by the EU and Indian authorities.

The second action plan also covers four sectors: biotechnology, financial services, textiles and power. It has yet to be finalised, however. The action plans reflect the views of Indian and European business on the measures needed to increase two-way trade flows, and are aimed primarily at the authorities. They should provide useful input to the official TIDP.

The sub-committee on economic cooperation also looked at the India-EU civil aviation and maritime projects. The former was in fact the subject of a separate one-day seminar, during which the two sides examined the progress to date. The project covers training programmes in such fields as airport management and instrument landing systems. Both Europeans and Indians felt the project should be continued after 2004.

The maritime project is equally practical, dealing as it does with the development of e-services at ports, in order to improve turnaround times, for example. The suggestion was made that the two projects should be discussed together.

The two days of meetings confirmed that relations between India and the EU were wide-ranging, and that the institutional machinery set up to develop and expand these relations was working well. Even so, both Indians and Europeans felt that they were far from realising their full potential, whether in trade or economic cooperation.