Indias Challenge 2004 Counter-balancing Between G-20 And EU

Written by Malcolm Subhan | Brussels, Dec 28: | Updated: Dec 29 2003, 05:30am hrs
What is the greatest challenge facing India in its relations with the European Union It is a challenge closely linked to the most important development to have taken place during 2003, one in which India played a leading role. The development was the establishment, by a group of some 22 developing countries, with Brazil, India and China at their head of the G-22. It was set up to counterbalance the power of the EU and the United States in trade negotiations, shortly before the trade ministers from the 148 WTO member-countries met in Mexico in September, to give fresh impetus to the Doha development round of trade negotiations.

Testimony to the importance of the G-20, as the group is now called, was provided by the EU and the US. Both denigrated the G-20 and accused it of being largely responsible for the collapse of the Cancun meeting. Since then the US has done its best to break up the group, and has succeeded to the extent that a number of its Latin American members, including Uruguay, but not Brazil, have left the group.

The challenge facing India is to secure the EUs co-operation with the G-20, because it is the best placed of all the G-20 countries to ensure this. Brazil is taking part in the US-inspired negotiations to set up a free trade agreement of the Americas. It is also taking part in the negotiations for a trade agreement between the EU and the Mercosur group (Brazil, Argentina, Uruguay and Paraguay).

China carries greater clout with the EU than does India, but it is handicapped by the fact that it is second only to the US in the level of its exports to the EU. It accounted for 8.2 per cent of the EUs total imports during 2002. The EUs trade deficit with China was by far the largest than with any of its trading partners at $45 billion.

Indias trade performance is modest by comparison. It accounted for just 1.3 per cent of the EUs total imports during 2002, leaving the EU with a small surplus of $900 million. (Brazil, by comparison, accounted for 1.7 per cent of EU imports end enjoyed a trade surplus of some $1.5 billion.) The EU, unlike the US, is looking for an accommodation with the G-20. Its chief trade negotiator Pascal Lamy accepted an invitation from the G-20, which the US trade representative Robert Zoellick turned down. Lamy met with the trade ministers from the G-20 countries in Brasilia on December 12. Their dialogue proved to be fruitful and positive, according to the joint press communique they issued afterwards. Both sides explained their own positions in a business-like manner.

Even more to the point, they acknowledged the importance of this dialogue to achieve progress in the (Doha development round) negotiations. And both sides agreed to continue exchanging views, in Geneva and at ministerial level, in order to contribute for a successful and timely completion of the Doha round.

New Delhi is well placed to maintain the momentum generated in the Brazilian capital. Of course Indias commerce and agriculture ministers and the EU trade commissioner Pascal Lamy will have to look beyond their present differences.

Having won its case against the EU in the WTO over a key feature of the EUs GSP scheme, India will have to be prepared to compromise - in its own interests, and those of the G-20. The WTO ruling deals a blow to the interest of several Latin American countries, Pakistan.

Mr Lamy will have to take a more flexible line in his complaint to the WTO about the way in which India is targeting EU companies when taking anti-dumping action. The Indian authorities have ruled against the EU in 27 cases since 1999, according to commissioner Lamys spokeswoman.

At first sight none of this augurs well for any attempts by India to act as a bridge between the EU and the G-20. But the solution, as the old song had it, is to accentuate the positive. And the fourth EU-India summit, held in New Delhi on November 29, set the stage for closer India-EU cooperation in the trade field.

The summits agenda for action provides for the launch of a trade and investment development programme, for which the EU has earmarked well over $15 million. It provides for continuing high-level dialogue on multilateral trade issues, and a dialogue at experts level to promote a better understanding of trade defence instruments, including anti-dumping measures.

And now is a good time to remind the EUs chief trade negotiator Pascal Lamy of the confidence he expressed in closer EU-India trade relations in a speech he gave to the members of the Federation of Indian Chamber of Commerce and Industry last March.

Nothing could be further from reality, he declared on that occasion, than the stereotype viewwhich goes roughly like this: The EU pushing for an over-ambitious Doha Development Agenda, on the one hand and India, as the great opponent, on the other, with differences that are supposedly impossible to bridge.

Lamy was speaking before the emergence of the G-20, of course. But his concluding remarks at the Ficci luncheon meeting still have the ring of truth. They certainly present both sides with a challenge for the new year. The EU and India should forge ahead jointly, Lamy declared, adding, we need to shape consensus, building on our natural convergences and bridging our differences.