The 15-nation EU (never mind its enlargement to up to 25 member states in early 2004) is the worlds richest economic unit, with a gross domestic product (GDP) of $7.7 trillion, as against the United States $7.1 trillion and Japans $4.3 trillion. It has a gross fixed capital formation of $1.6 trillion, as against $1.5 trillion for the US and $1.1 trillion for Japan. Indias current policy toward the EU is basically that was laid down in 1962 by its first ambassador to the then 6-nation European Economic Community (EEC). KB Lall was sent to Brussels in order to make sure that Indias exports to the United Kingdom, then its largest market, were not damaged by Britains entry into the EEC. The UK entry negotiations collapsed in early 1962, as a result of a French veto. Relations between India and the EEC came alive in the early 1970s, when Britain finally succeeded in joining the EEC (together with Ireland and Denmark). The first evident sign of their new relationship was the realisation of an idea which KB Lall had put forward some 10 years before - the signature of a trade cooperation agreement.
India has moved on since the 1960s and 1970s. But 40 years on, the latest highlight of India-EU relations is a dispute which recalls those distant days: it is a dispute over Indian exports of - wait for it - a bed linen! KB Lall was rushed to Brussels in order to defend Indias textile exports to the EU; four decades later his successor finds himself fighting much the same battles on the countrys behalf! New Delhi, in other words, has chosen to base its relations with the EU not on Indias strengths in information technology, space, nuclear energy and biotechnology, but on the exports of an industry which the government has used to promote its social policies, according to Indian economists. Worse yet, New Delhi has sent a stream of talented civil servants to Brussels to challenge the EU on a losing wicket.
Mind you, the EU has been equally short-sighted in its relations with India. Could anything be more absurd than the anti-dumping action the EU has initiated against Indian bed linen over and over again Its certainly absurd against the background of the new strategic goal for the next decade which EU Presidents and Prime Ministers set themselves at their summit meeting in Lisbon in March, 2000. The goal is to make the EU the most competitive and dynamic knowledge-based economy in the world, capable of sustainable growth and more and better jobs and greater social cohesion.
To this end, the EU will have an overall strategy based on better policies for the information society and R&D, and a faster process of structural reform for competitiveness and innovation. There will be an information society for all and a friendly environment for starting up and developing innovative businesses.
The reality is quite different, and is encapsulated in the European Commissions 20th annual report on the EUs anti-dumping and anti-subsidy activities. In the five years from 1997 to 2001, as many as 224 investigations were initiated on imports from 40 countries. The countries mainly concerned were India (31 investigations), China (25), Korea (22) and Taiwan (17). India headed the league table in 2001 also, with eight investigations, followed by Indonesia, with three.
And the products in question from India Bed linen, of course. But also flat rolled steel products, hot rolled flat products, polyester staple fibres, potassium permanganate, polyethylene sacks and bags, stainless steel fasteners, steel ropes and cables, synthetic fibre ropes and stainless steel wire.
The imports which are holding the EU back from transforming itself into a competitive, knowledge-based economy include advertising matches, monosodium glutamate, ring binder mechanisms, non-refillable lighters, coumarin, binder or baler twine, flat pallets of wood, potassium chloride, etc, etc.
The plain truth is that both India and the EU should be asking themselves, individually and jointly, whether they are not fighting the wrong battles. It is clear that the EUs anti-dumping activities are not in the interests of a Union determined to transform itself into the most competitive and dynamic knowledge-based economy by 2010. And they are not in the interests of countries like India either, because they make it more difficult for them to compete where they have a comparative advantage.
Trade in textiles, EUs chief trade negotiator, Commissioner Pascal Lamy, has pointed out, raises important issues that go to the core of the WTOs Doha Development Agenda. But the core issue is how to make use of the strengths of countries like India (low labour costs, for example) to promote their industrialisation. And if this requires an uneven playing field (special and differential treatment, in WTO jargon), then so be it.
EU officials and industry spokesmen maintain that the European textile and clothing industry is too big to be squeezed into niche markets. In other words, it needs a sufficiently broad economic base to generate the turnover and economies of scale needed to finance the research and innovation needed to devise innovative and high-quality solutions. But much the same arguments were advanced for the steel and shipbuilding industries - and even the motor car industry. They are largely irrelevant in an age of economic globalisation.
India seems equally determined to focus on its weaknesses in its dealings with the EU. Europeans know that India is an important supplier of cheap textiles and clothing, on the one hand, and a reluctant participant in the global economy, on the other. They are also waking up to Indias achievements in the field of software, now that Indian companies are targeting the European market also.
But very few know of Indias achievements in other areas of advanced technology - that it launched its own experimental satellite, as part of its remote sensing programme, in 1979; that it initiated its atomic energy programme nearly 50 years ago; that between 1951 and 1997 the number of students enrolled in undergraduate courses in engineering and technology rose from 1,800 to 1,35,000.
The focus of India-EU relations in 2003 should be these areas of advanced technology. In other words, India should be projecting itself as a scientifically and technologically advanced nation, capable of working with the EU in the implementation of its sixth Framework programme for science and technology, for example. At the same time the EU should make it a point to explore with India opportunities for cooperation in the most advanced areas of science and technology.
Such a far reaching change in India-EU relations will require a change in mindsets, and far more political will than either side has displayed so far. It will also require a change in the institutional machinery set up over the years. India-EU relations can no longer be the preserve, on the Indian side, of the ministry of external affairs, aided by the commerce ministry. The countrys space and nuclear scientists, for example, will have to be closely involved in developing this new and more effective relationship.
Similarly, on the European side, the European Commission will have to make sure that EU-India relations are not the preserve of its directorate-general for external relations, with input from the Trade and Development Directorates. The European Commissioners responsible for science and technology, energy, enterprise and the information society, and the environment will have to be closely involved. It will not be easy, whether for the Indians or the Europeans, to redefine their priorities. But its the only way forward in 2003.