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 considerationseconomic
size and growth, level of protection against EU export intereststhat
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
reciprocityreciprocity 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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