Times of India | 14 Oct, 2006
India has its way on trade pact with EU
HELSINKI: A deal which could deliver the mother of all FTAs between EU and India was sealed a few minutes before PM Manmohan Singh’s summit with European leaders began.
Singh told a reluctant EU team that there could be no commas and semi-colons on labour laws and no vague "to be discussed" caveats on the proposed investment and trade deal expected to add up to euros 70 billion in the next two-three years.
The unequivocal exercise of political and economic muscle saw the EU brass, in particular European Commission president Jose Manuel Barroso, accept that a no deal would not only be terribly embarrassing, it would mean that a massive investment pie would move away from Europe’s businesses. So when the summit began at 9 am, the big deal was already in the bag.
Negotiations between commerce minister Kamal Nath and EU trade commissioner Peter Mandelson stretched to the midnight of Thursday and though the EU team did not back down, the Indian resolve came through clearly.
Labour and other non-tariff issues were a no-fly zone even though India was ready to look at EU concern on issues like access to financial services sectors.
The path ahead, for negotiations to deliver an agreement and then an FTA, would take time, admitted Nath. But the implications were not inconsiderable because one of the issues that the agreenment will look at is to make sure that there are no repeats of flashpoints like the take over of Arcelor by Mittal Steel.
"Negotiations will focus on our business being accorded ’national treatment’ in EU nations," said Nath.
The talks will also need to look at travel of Indian professionals and acceptance of Indian qualifications like law and accountancy degrees. A review of visa rules is also expected to be looked at.
What this means is that a jingoistic pitch cannot be used to ward off takeover bids by Indian firms. EU has often made this point with regard to treatment of foreign companies in India and now that Indian businesses were looking for overseas acquisitions with an appetite that did not exist earlier, the ball was in EU’s court.
The agreement will also look at permitting access to Indian garments, textiles, leather, jems and jewellery to European markets, a highly contentious issue.
Later at a joint press conference with EU leaders, Singh said the high level trade group had "worked diligently and there had been no delay in the negotiations beginning".
The Indian PM was quite emphatic that the roadmap to long-term trade between India and EU was now in the offing, even if it took a while in happening.
Three top EU leaders, Finnish PM Matti Vanhanen, foreign policy and security head Javier Solana and Barroso, said there was now a strong case for the trade and investment pact.
They did hint at some differences of opinion by referring to the need to build consensus within EU and Vanhanen somewhat euphemistically described the delay in getting the pact in place as being due to "some technical detail".
The negotiations, which the EU-India business community gathered here wanted concluded in one year, will allow lowering of duties on hi-tech European goods.
The talks will cover about 90% of goods and services and ought to increase what both sides described as complementarities between the two sides.
Both also claimed this would not impact on WTO, but a bilateral clinch is significant as it recognises the business opportunities for either side.