Select Committee on Business and Enterprise Written Evidence


Memorandum submitted by the Directorate-General for Trade, European Commission

INDIA: ONE YEAR ON—

DEVELOPMENTS SINCE THE COMMITTEE'S 2006 REPORT

INDIA AS AN ECONOMIC PARTNER FOR THE EU

  1.  Trade and investment is a cornerstone of the EU and India's multidimensional relationship.

  2.  EU-India trade has grown impressively over the years, from €25 billion in 2000 to €47 billion in 2006 corresponding to an average annual growth of 14%. Trade with the EU represents almost 20% of India's exports and imports and the EU thus as a bloc is India's largest trading partner. Even though India still corresponds to only 2% of the EU's total trade, India is now the EU's ninth most important trading partner ahead of Brazil or Canada.

  3.  Trade in commercial services has similarly increased at a phenomenal rate by 10% average annual growth. In 2005 India's exports of commercial services to the EU25 amounted to €4.6 billion (up from €3.9 billion in 2004), while the EU25's exports to India amounted to €5.1 billion in 2005 (up from €3.6 billion in 2004). The EU is also India's largest source of foreign direct investment (FDI) with EU FDI amounting to €1,100 million in 2004 corresponding to around 25% of India's FDI.

  4.  Whilst the expansion of trade and investment between the EU and India is impressive, there are reasons to believe that current levels are below potential: Trade is growing rapidly but remains modest in relative terms. Despite the fact that nearly one out of every six people on the planet is Indian, India currently punches below its weight in terms of share in world trade. India's average applied tariffs have decreased to levels that are now comparable with other countries in Asia but they are still high compared to the EU's tariffs. In particular India's applied tariffs on agriculture are still high and at 37% much higher than that applied by China (15%). At the same time, India represents the only large and growing emerging economy in Asia where the EU remains the leader both in external trade and foreign investment flows. With growth rates above 8% and a population of more than 1bn people, India is on a path to become a global economic heavyweight.

  5.  It is based on these considerations—economic size and growth, level of protection against EU export interests—that the Commission's Global Europe strategy identified India as one of the partners for our new set of competitiveness driven Free Trade Agreements (FTA).

EU-INDIA FTA NEGOTIATIONS

  6.  The Doha Round and the multilateral trading system will remain the EU's overarching trade policy priority not least since it provides sufficient predictability and transparency. But even the ambitious result of the DDA which we are aiming for, can and should be complemented by an ambitious set of carefully chosen FTAs.

  7.  FTAs, if approached with care, can build on WTO and other international rules by going further and faster in promoting openness and integration, by tackling issues which are not ready for multilateral discussion and by preparing the ground for the next level of multilateral liberalisation.

  8.  Negotiations with India were launched in June in Brussels and we have held two additional negotiating rounds since. The 3rd round of negotiations was held in Brussels from 6-11 December. Overall discussions were good and constructive covering all issues to be included into the agreement. These include not only goods, services and establishment, but also non-tariff barriers and issues related to rules and their implementation such as Sanitary and Phytosanitary Standards (SPS), Technical Barriers to Trade (TBT), Intellectual Property Rights (IPR), Public Procurement, Competition and Sustainable Development.

  9.  We remain vigilant to ensure that no issue is left behind in the negotiations and we move ahead in parallel on all fronts. The final agreement needs to be both comprehensive and balanced across all areas so that it delivers real economic benefits to both sides. At the end the key determinant of success will be the level of ambition within the various chapters.

  10.  The potential benefits of the FTA have been analysed by independent consultants in advance of the negotiations. The summary of the findings can be found at the following website: http://ec.europa.eu/trade/issues/bilateral/countries/india/legis/index_en.htm

OTHER FTAS CURRENTLY UNDER NEGOTIATION

  11.  Besides with India, we are currently also negotiating comprehensive FTAs with Korea and ASEAN. The 5th round of negotiations with Korea took place 19-23 November 2007 in Brussels. Progress has been reached in a number of areas, especially services and investment, and rules. We also remain committed to negotiating and concluding a far-reaching and comprehensive FTA with ASEAN.

  12.  Negotiations on the trade part of the Association Agreement with Central America got off to a good start. The first round of negotiations was held in Costa Rica in October. The 2nd round is planned to take place at the end of February 2008.

  13.  Negotiations for the trade part of the EU-Andean Community Association Agreement have started with an encouraging 1st round on scope and objectives in Bogota on 17-21 September 2007. A second round of negotiations was held in Brussels on 10-14 December where further progress was made.

  14.  The Commission has allocated the resources necessary in order to move all five negotiations forward in parallel.

  15.  We note that the Committee is also interested in prospects for opening negotiations with Japan. The Commission's trade priorities though remain the Doha Development Round and the ongoing bilateral negotiations. The Commission is not undertaking any "scoping work" on possible negotiations with Japan. The EC is however following discussions about an EU-Japan Economic Integration Agreement (EIA) proposed by the EU-Japan Business Dialogue Roundtable (BDRT) in July. The Commission will look into the conclusions of the feasibility study on an EIA, which European and Japanese business is currently undertaking, once presented next year. We expect such a study to provide a useful contribution on how to deal with the existing barriers encountered by EU business in Japan.

  16.  As a general comment, the EU and Japan, two major trading partners and strong promoters of the WTO, would have to carefully consider the systemic implications that a bilateral agreement might have.

GENERAL PROGRESS ON THE COMMISSION'S GLOBAL EUROPE STRATEGY

  17.  The Committee also expressed an interest in hearing about progress in trade-related areas more generally as part of the Commission's Global Europe strategy.

  18.  The launch of our Global Europe strategy at the end of last year was an important step in European trade policy. Its basic motivation was to look forward to the landscape outside and beyond current Doha negotiations at the WTO and to see trade policy as part of the wider globalisation agenda. To make sure we are addressing the most important challenges and pressures of the global age, and that our trade instruments are fit for that purpose. It set out an agenda for opening the markets that matter most, and for keeping our own markets open, competitive and protected against unfair trade. It is an agenda based on positive reciprocity—reciprocity that opens, not closes, markets.

  19.  This agenda has already translated itself into concrete initiatives in virtually all areas of trade policy: we are negotiating free trade agreements with Asean countries, India and South Korea; we are reviewing our market access strategy based on a new partnership with Member States and industry; we have published a Green Paper on trade defence instruments; as a result of this consultation we will put forward proposals to adapt trade defence instruments to a globalised world; we have launched an in-depth exercise with the US to tackle transatlantic obstacles to trade and investment; we have set out a vision for our relationship with China and are negotiating a new partnership and cooperation agreement as a result; we have published a list of priority countries for intellectual property rights (IPR) enforcement and set up new IPR dialogues with priority countries; we are currently stepping up our international cooperation in this area by proposing to negotiate an anti-counterfeiting trade agreement between like-minded countries; finally we have proposed a comprehensive review of the single market widening its regulatory reach outside the borders of the EU and ensuring European citizens share the benefits of globalisation through better standards, lower prices and greater choice.

13 December 2007





 
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