Pleased With Indo-Pak Thaw, EUs Lamy Coming On A Politico-business Tour

Written by Malcolm Subhan | Brussels, Jan 16 | Updated: Jan 17 2004, 05:30am hrs
Since economics and politics are two sides of the same coin, the visit of European Union (EU) chief trade negotiator Pascal Lamy to New Delhi is taking place under very favourable auspices. The warm welcome leading EU personalities have given to the successful Saarc summit can only reinforce the political impetus which the recent Indo-EU political summit gave to economic and trade relations between India and the 15-nation EU.

The fact is that if you mention India in EU circles here, its long-running dispute with Pakistan over Kashmir at once springs to the minds of both Eurocrats and members of the European Parliament. That both India and Pakistan are nuclear powers has only raised concerns here of a nuclear confrontation between them.

The glowing political endorsement by the EU of the results of the Saarc (South Asian Association for Regional Co-operation) summit should therefore create a very favourable climate for the six-day visit to Bangladesh, India and Pakistan by the EU trade commissioner, which starts on Saturday in Dhaka. This is not to say that the tensions generated by the recent events in the trade field will disappear; but they should make it easier for both Mr Lamy and his hosts to look at the broader picture.

In all three countries the EUs generalised system of preferences (GSP) scheme will be an important agenda item. Since January 1, Pakistans clothing exports are no longer entitled to GSP benefits. At the same time, GSP benefits have been restored as regards Indian exports of leather, raw hides and skins.

Bangladeshi exports enjoy duty-free and quota-free entry int the Union, because of its status as a least-developed country. But the Unions rules of origin make it very difficult for that countrys exporters to take full advantage of what would otherwise be a very substantial concession to them.

Sri Lankan exporters, on the other hand, have just received a new year present from the EU trade commissioner. The European Commission (EC), the EUs executive arm in all trade matters, has granted Sri Lanka additional GSP benefits, amounting to a doubling of preferential margins. The total reduction for clothing, for example, will therefore amount to 40 per cent of the Unions MFN rates (as against 20 per cent for India).

Under the EUs GSP scheme, countries which comply with core labour standards are entitled to additional benefits. Sri Lanka is making good progress towards full compliance with core labour standards...even if this situation will have to be carefully monitored, says the EC.

Any GSP beneficiary country is entitled to ask for these additional benefits if it believes that it is complying with the eight International Labour Organisation conventions which the EU deems to be core labour standards. They include the effective abolition of child labour.

As the additional benefits are available to any country complying with labour - and environmental - standards, the relevant GSP provisions are not discriminatory. They are very different in this respect from the provisions under which the Union has granted additional benefits to countries combating drug trafficking. India successfully challenged these provisions at the World Trade Organisation after these benefits were granted to Pakistan.

When Mr Lamy comes calling next week, New Delhi could also seek clarification of the ECs latest proposal in favour of the developing countries. This calls on the European companies and research institutes which use exotic plants to guarantee a fair share of profits, and the results of their research, to the countries these plants come from.

The plants mentioned by the EC include ginseng, green tea, cinnamon and jojoba. Neem - and cinchona - seem to be absent from the list, however.

The warm welcome the EU has given to the results of the Saarc summit should make for closer EU-India relations, even though New Delhi believes that one should not mix trade and politics, as when Islamabad was granted additional GSP benefits for combating drug trafficking. Consider, nevertheless, the strength of the response in the highest EU circles here to the results of the Saarc summit.

EUs foreign policy supremo Javier Solana declared that the joint statement by the Indian Prime Minister and Pakistani president constitutes a very important step towards the resolution of difficult bilateral issues between the two countries. He conveyed to them the EUs readiness to help achieving their common objectives of peace, security and economic development.

The EU presidency, held by Ireland since January 1, described as particularly welcome the important statement by India and Pakistan that they have agreed to commence a process of composite dialogue. It maintained that the Saarc protocol on combating terrorism demonstrates the effectiveness of regional co-operation and dialogue, and will be of great benefit to the region. Commission president Romano Prodi stated that the decision by India and Pakistan to start the process of composite dialogue in February is proof of their commitment to further strengthen the process of confidence-building, and to resolve outstanding bilateral issues.

Mr Lamy is too shrewd a negotiator to ignore political developments on the ground.