India Looking Forward To Enlarged EU

Written by Malcolm Subhan | Brussels, October 13 | Updated: Oct 14 2003, 05:30am hrs
Mention India in any gathering in Brussels, and a comparison with China follows as inevitably as night follows day. This happened during the third Business Forum on Trade and Investment, which met here on October 9. The Forum brought together representatives of Federation of Indian Chambers of Commerce and Industry (Ficci), Confederation of Indian Industries (CII) and Indian companies, and their counterparts from the European Union (EU) countries, in the run-up to the fourth India-EU Business Summit, to be held in New Delhi on November 28.

I cant convince West Midland companies to look at India; theyre more focused on China, Mrs Neena Gill told the audience of some 100 businessmen, industrialists, representatives of business organisations, diplomats and officials from the European Commission, the EUs trade negotiating arm. We all believe in strengthening the Indo-EU dialogue, but its lagging far behind the EU-Latin America dialogue, she added for good measure.

And Mrs Gill should know. Born in Ludhiana, she went to Britain as a child. Today she represents the West Midlands constituency, with its small army of Indian entrepreneurs, in the European Parliament. A member of the Labour Party, she is also a key member of the Parliamentary committee that shapes the EU budget.

But Non-resident Indians (NRIs) and People of Indian Origin (PIOs) in the West Midlands are not alone in preferring China to India. The eight East European and two Mediterranean countries that are joining the EU next May also have a much greater awareness of China rather than India as a business partner, according to Mr Murray Smith. His consultancy firm, DMI Associates, and its Indian partners, Ace Global Private, New Delhi, have carried out the studies which are the basis of the recommendations that the India-EU Business Summit will submit to the EU-India political summit on November 29. The summit, an annual event since 2000, will be attended by the Indian and Italian prime ministers, the latter as the holder of the EU presidency.

Mr Murray addressed the Business Forum on the forthcoming enlargement of the EU from 15 to 25 member countries. Will enlargement result in trade creation or trade diversion Mr Murray thought that it would result in trade creation. Given that most trade barriers between the EU and the 10 acceding countries were removed in the 1990s, he believed that enlargement will result in greater economies of scale and increased intra-industry trade.

Mr Murrays view that the enlarged EU therefore will be an even more important trading partner for India, was shared by TS Vishwanath, representing the CII. Mr Vivek Bharati, adviser to Ficci, was equally positive.

He noted that the enlarged EU would be an even more attractive destination for Indian exporters, as tariffs in Poland and Hungary, Indias main trading partners among the 10 acceding countries, will come down once they join the EU. But Mr Bharati sounded a warning note: the acceding countries compete with India in its top 33 exports, so that there could be trade diversion also.

RP Agrawal, the No 2 diplomat at Indias embassy to the EU, held that enlargement offered a new and much larger context for future investment possibilities within a stable and well-regulated framework. He hoped that enlargement would also resolve some of the problems that India faces in its bilateral trade with the accession countries, including difficulties in financial and banking arrangements and air and sea linkages.

Mr Agrawal stressed the opportunities India offers. We may have lost out on the industrial revolution, but we do not want the digital revolution to bypass us, he told the European businessmen and industrialists in the audience. Indo-EU business cooperation cannot be based solely on low-technology and low-value products, he said.

And to drive home his point Mr Agrawal pointed to space technology, where India has been cooperating with the European Space Agency (ESA) as well as individual member states, including Germany. He noted that the Indian IT industry is growing, despite the worldwide slump, and that the country hoped to replicate our software revolution in biotechnology and other areas.

He was strongly supported by the secretary general of the Euro-India Centre, a French organisation devoted to promoting increased ties between Indian and French industry. Indias strength is in knowledge-based industries and services, Mr Michel Sabatier declared. Here India is a global player, but not with Europe, he lamented.

But you cannot get away from textiles and garments, the products which belong to the past, as far as Mr Sabatier is concerned. But as they account for one-third of Indias exports to the EU, there was a lively exchange between the representative of Euratex, the European textile lobby, Francesco Marchi, and the CIIs Mr Vishwanath. The latter claimed that despite several meetings between them, each side has been saying the same thing over the last two years.

We should look for solutions, not problems, Mr Vishwanath pointed out. But the stakes clearly are too high for both sides, especially with quotas coming to an end 15 months from now. Even so, both sides also recognise the need to work together, if only to keep the Chinese wolf from the door.

Working together was the theme of the one-day India-EU Business Forum, which was sponsored by the European Commission in order to further the Joint Initiative To Enhance Trade And Investment, launched by the Indian and EU authorities two years ago. The Initiative is aimed at encouraging Indian and European economic operators, and their trade and business organisations, to draw up the recommendations to be made to their political authorities.

For greater effectiveness, the latter have limited themselves to eight key sectors, including food processing, engineering, telecommunications and information technology, biotechnology, textiles and energy. Some 150 recommendations have been adopted by the two sides so far, a small number of which are being actively considered by the Indian and EU authorities.

Progress remains slow, however. This is partly because officially sponsored forums tend to focus on problems; left to themselves, companies are able to find solutions, as FicciS Mr Bharati pointed out in the discussion over the EUs coming enlargement. But the Forum also demonstrated that, left to themselves, European companies see China as the more attractive market and manufacturing base for a wide range of products. Indian companies too, Mr Bharati suggested, feel the need to come to grips with the threat and opportunities China represents.