Though India and the European Union (EU) have been holding negotiations to wrap up a free trade agreement (FTA) on goods and services since 2007, the EU is now moving the dismantling of trade barriers in the markets of six strategic economic partners including India to the ‘top of its political agenda'.
In a just released report in Brussels, which will be presented to the European Council on March 24, the European Commission has highlighted market access barriers in six of its strategic economic partners – China, India, Russia, Japan, Mercosur (Brazil/Argentina) and the US.
These countries together cover 45 per cent of the EU's trade in goods and commercial services and 41 per cent of the EU's foreign direct investment.
The new “assertive approach to tackle trade barriers is not least to ensure that European companies are not deprived of legitimate market access opportunities and that our rights are properly enforced to ensure a level playing field”, it said.
“The Commission will be focused and tough in pursuing this agenda,” it added.
Terming India as an ‘important trade partner' and ‘a growing economic power', the EU said in just four years EU-India trade increased by 31 per cent to over €53 billion in 2009 and EU investment to India has more than quadrupled since 2003 to €3.1 billion in 2009.
‘Restrictive' regime
Pointing out that India's trade regime and regulatory milieu still remain comparatively ‘restrictive', it said that over and above high tariff barriers, India also slaps a spate of non-tariff barriers (NTBs).
These are in the form of quantitative restrictions, import licensing, burdensome mandatory testing such as for tyres and certification for a large number of products as well as “complicated and lengthy customs procedures”.
While some improvement in the intellectual property rights (IPR) enforcement was reported, there exist still some significant concerns about India's response to counterfeiting and piracy.
In the area of procurement, the Indian legislative framework is incomplete with major reforms pending to ensure compliance with global standards and a predictable environment for bidders, it added.
It singled out ‘burdensome licensing requirements' about proposed new security provisions which would affect, if fully implemented, the access of European operators to the commercial procurement of telecommunications.
It said the provisions stipulate prior security clearance and technology transfer riders, as well as obligations to substitute foreign engineers with Indians.
In 2009, the EU exported telecom equipment worth €1 billion to India and ‘such requirements' as are proposed would ‘damage investment in India', it cautioned.
Again, it said, though the EU total imports of cotton products from India suffered a decline of 48 per cent from 2004 to 2009, India's recent restrictions on cotton exports are “important since 23 per cent of EU imports of these types of cotton products came from India in 2009”.
Being the second largest cotton producer in the world and the only global net exporter of cotton, India's policy has a significant impact on global cotton supply and hence on prices in “aggravating the global upward price spiral”, it said adding that European industry is facing very high prices and a shortage in supply with India remaining the EU's major import source for cotton products.
It further said sanitary and phyto-sanitary (SPS) import requirements from India are going beyond global standards, without “scientific justification” which hinder various EU exports mainly poultry, pig meat, vegetables, fruits and timber.
Finally, the EU said India's investment policy continues to obstruct foreign investments in many important segments such as multi-brand retail which is closed to foreign investment.
India has also adopted a series of steps to control foreign capital flows and ensure maximum benefits for local companies through technology and know-how transfers, it said.
The report suggested concrete action such as the launch of an initiative to open government procurement markets, possible dispute settlement action and continuing dialogue with strategic partners but also raising the bar at the highest political level in bilateral summits with the countries concerned to bring down trade and technical barriers.