Controversial issues like an open and competitive public procurement policy, as well as mutual recognition pacts on services and on laboratory testing standards, marked the commencement of the fourth round of negotiations of the India-European Union (EU) free trade agreement. This round would end on July 10.

While EU has insisted on making an open and competitive public procurement as well as clauses on competition policy a part of the agreement, New Delhi has brought up its complaints on EU?s reluctance to make their safety and health measures of farm products friendlier to Indian exports. This is also the case with EU?s efforts to evade discussions on a mutual recognition pacts on services and on laboratory testing standards, sources said.

EU has been demanding that India?s public procurement policy should be open, transparent and one that should have a formal grievance redressal system to sort out the disputes regarding award of contracts. EU wants specific clauses regarding public procurement (particularly those on the publication of contract awards as well as debriefing of the unsuccessful bidder) in the FTA to protect its interests and to ensure that its companies get national treatment in India.

As per the World Trade Organisation rules, national treatment would ensure that EU companies would be treated on par with the local companies on this aspect and Indian government (especially state governments) will not be able to give preferences to the domestic companies. However, India, unlike the EU, is not party to the WTO?s Government Procurement Agreement and therefore does not have to comply with that pact.

India is also taking up other contentious issues like the EU?s negative list (items not subject to any tariff reduction) of over 400 items that could adversely impact India?s exports of petrochemicals, chemicals and glass items. Besides, India would point out that EU?s food safety as well as animal and plant health measures?known as sanitary and phytosanitary or SPS measures in international trade parlance?as well as technical barriers to trade were acting as non-tariff barriers (NTB) and meant to protect their domestic industry. It would also take up the EU?s tough norms on fruit export as well as the lack of harmonisation of microbiological standards.

India has also called for lifting of the EU?s Rapid Alert System for Food and Feed (RASFF) and also a similar system called RAPEX for non-food consumer products. These rapid alert systems apply an emergency mode of action by swiftly exchanging information if some consignments are found to be of serious and immediate risk to their consumers? safety and health. These measures prevent or restrict the marketing and use of such ?harmful? products. According to India, in some instances this could be seen as a paranoid reaction from the EU authorities that would potentially harm exports from India.

Also, India has pitched for a joint appeal system, where by the affected exporters can file an appeal against a laboratory report given by either EU or India, on the basis of which the consignments were rejected. India has demanded that these two new proposals be incorporated in the final draft of the FTA. Though India had initially set a deadline of 2008-end for the conclusion of FTA talks, this is unlikely to be met owing to these differences.

India wants EU to cut their high tariff and support on agricultural products, EU is reluctant to do so. Instead, they want India to reduce its industrial tariffs, which is already a contentious issue in the Non Agricultural Market Access (NAMA) negotiations in WTO?s Doha Round. India also wanted non-trade and extraneous issues like animal welfare and labour to be kept out of talks.

Commerce and industry minister Kamal Nath has said that India has offered to include 90% of its items that it trades with the EU to be included in the agreement, while it wants the EU to bring 95% of their tradeable items to be a part of the pact. EU trade commissioner Peter Mandelson had wanted India to eliminate barriers to trade in services and have more deep talks on intellectual property protection.

The EU is not only India?s largest trading partner, as it accounts for about 20% of India?s total trade, but also is one of its major sources of foreign direct investment with around $12 billion worth FDI flowing from EU to India so far. Both the sides will meet on Friday to carry forward talks on the FTA.