?Actions,? they say, ?speak louder than words.? If you want to feel the pulse of relations between India and the 15-nation European Union (EU), then disregard the joint press statement issued at the conclusion of the India-EU summit held in New Delhi on November 29. Look, instead, at the two events that took place on December 1 and December 8.
On December 8 the EU challenged the 27 anti-dumping measures imposed by India between 1999 and 2003 on EU exports, when it formally requested the World Trade Organisation (WTO) for consultations with India. It pointed to the growing frustration felt by EU exporters at the jump in the number of anti-dumping measures and the very low standards applied by India when taking anti-dumping action.
European products hit by anti-dumping measures consist mainly of chemicals and pharmaceuticals, textiles, and steel. The loss to EU exporters has been put at more than Euro 35 million annually.
EU?s chief trade negotiator, Pascal Lamy, pointed out that ?under a rules-based system, it is essential that all players abide by the same rules, and India is no exception.? But he added, ?I hope we will now be able to solve this matter amicably.?
There is little chance of that, if we now look at the second of the two events that followed the EU-India summit in New Delhi. On December 1, WTO reported on the outcome of India?s recourse to the dispute settlement mechanism in connection with a key feature of the EU?s generalized system of preferences (GSP) scheme.
A WTO panel ruled that the EU?s special tariff preferences for 12 developing countries – 11 Central and South American countries and Pakistan – were in violation of WTO trade rules, because they discriminated against other developing countries. These other countries included India, of course (which, it should be noted in passing is one of the main beneficiaries of the EU?s GSP scheme, well ahead of Pakistan.
The EU?s scheme contains additional benefits for countries that combat drug production and trafficking: their exports of both agricultural and industrial products enter the EU duty-free. The aim is to support the efforts of the beneficiary countries to reduce their dependence on the drug economy, and stabilize their economic and social structures. Pakistan was added to the list in 2001, after it entered into a bilateral textile agreement with the EU.
The benefits to Pakistan were specially designed to promote its exports of textiles and clothing, which account for some three-quarters of its exports to the EU. As from 1 January 2002, Pakistan?s exports enjoy duty-free entry into the EU. This gives its exports a 7% margin of preference over Indian exports. At the same time, the quotas in force on Pakistan?s exports of textiles and clothing were increased by 15%.
These provisions, the EU noted, would raise Pakistan?s exports to the EU by over Euro 100 million a year.
Briefly, was the EU?s decision of December 8 to challenge India?s anti-dumping measures related in any way to India?s successful challenge in the WTO against the EU?s special arrangements for countries engaged in drug production and trafficking? The fact is that India went to the WTO after numerous bilateral consultations in Brussels had failed to resolve the dispute.
India indicated its willingness to enter into a mutually satisfactory agreed settlement, while the EU consistently refused even to discuss the possibility of such an agreement.
The European Commission, the EU?s trade negotiating arm, justified its decision to seek consultations with India on its anti-dumping measures in the WTO on the grounds that ?numerous discussions to persuade India to align itself on WTO standards? had failed.
Now the 1994 EU-India cooperation and partnership agreement provides for such consultations. Under the Agenda for Action adopted at the latest EU-India summit, the two sides undertake to continue their ?high-level dialogue on mutilateral trade issues? and their ?dialogue at the experts level to promote better understanding of the trade defence instruments.? Just so much verbiage? Actions count louder than words? All the evidence suggests that when the chips are down, rhetoric is revealed for what it is.
India can find consolation in the fact that rhetoric is a key feature of the EU?s relations with third countries. Take EU-US relations. At their summit here on December 12 and 13 the EU heads of state and government maintained that ?the trans-atlantic relationship is irreplaceable,? given that it is based on ?shared values and common interests.?
As if that were not enough, the EU summit went on to claim that a ?strong trans-atlantic cooperation is crucial for fostering economic growth and sustainable development.?
EU heads of state clearly had forgotten that the US had imposed additional tariffs of up to 30% on its imports of steel from the EU (and several other countries, including India). The US decision to lift these tariffs was welcomed by the EU?s chief trade negotiator on December 4. But Trade Commissioner Pascal Lamy also pointed out that it took ?nearly two years of litigation? to persuade the Americans to ?abide by their international obligations in lifting the illegal safeguards.?
Clearly the discussions between the EU and its trading partners, whether it is India or the United States, is marked by an absence of political will. The EU?s trading relations are driven by down-to-earth domestic economic- and political-considerations. No amount of rhetoric will disguise this fact.
Given that India?s trading relations are also driven by domestic considerations, what is the answer at the level of EU-India relations? Less rhetoric, especially when their leaders meet, to begin with. Let political leaders frankly admit their differences on key economic – and political – issues. And then go on to give political direction to their subordinates, for sorting out these differences – amicably, as trade commissioner Lamy put it.
