Business Standard, India

Japan trade deal unlikely this year

By Rituparna Bhuyan, New Delhi

14 October 2008

The proposed India-Japan Comprehensive Economic Partnership Agreement (CEPA), involving trade in goods, services and investments, is unlikely to be signed this year.

According to sources, last week’s talks between the two countries had hit a roadblock as Japanese trade envoys were unwilling to grant market access to Indian pharmaceuticals and allow professionals, including nurses, to work in the island nation. The talks were held in Tokyo.

The Japanese side, sources said, was also unwilling to commit on allowing Indian banks to open branches, while expecting a similar word from India.

“We were ready to seal the talks but Japan was unwilling to grant market access in many areas. Trade talks work on reciprocity and there was none from them. Hence it is unlikely that talks will proceed towards conclusion this year. The final decision will be taken by the next government,” said a source in the know.

Both sides had planned to seal the deal before Prime Minister Manmohan Singh’s scheduled three-day visit to Japan from October 21. It was expected that the final agreement would be signed in December, when India is likely to seal trade deals with Asean and South Korea.

Bilateral trade between India and Japan is worth around $4 billion. It is expected to double after the signing of CEPA.

Sources said Japan was unwilling to allow preferential market access to Indian pharmaceuticals, including generic drugs. “They felt Indian drugs are not suitable for the Japanese, who primarily belong to a certain anthropological group. The Indian side said a majority of people in its north-eastern states belong to the same group and have never faced problems with medicines made in the country,” said a source.

Japan imports drugs worth $10 billion in a year, of which India’s share in only $200 million. India sees Japan as a lucrative market for its drugs.

Indian trade envoys were also surprised at the Japanese opposition to allowing health professionals, including nurses, to work in their country. “Japan has an aging population and an acute shortage of paramedic staff to take care of them. But they said their nurses’ union is opposed to allowing Indians to work in their country,” said the source.

India wants to send about 20,000 nurses to Japan.

Other points of friction included norms on rules of origin, which ensure that products from other countries are not imported by taking advantage of the easy terms of the trade pact.