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Labour pangs likely to hold up India-EU free-trade agreement

The Economic Times, India

Labour pangs likely to hold up India-EU free-trade agreement

7 November 2009

By ET Bureau

NEW DELHI: The fate of the India-EU trade and investment agreement—which seeks to further open up bilateral markets for goods, investments
and services—may hang in balance as India and the EU lock horns over including labour standards in the pact. EU trade commissioner Catherine Ashton, however, conceded the issue of tackling climate change was outside the agreement.

“At the beginning of the discussions, the issues were seen to be in large part separate issues, outside the agreement, especially that on climate change,” Ms Ashton said at a press conference, when asked whether the issues of labour and climate change were being made part of the negotiations.

An EU spokesperson later clarified to ET that the bloc considered only the issue of climate change to be outside the realm of the negotiations while the issue of including labour was still being discussed.

Commerce & industry minister Anand Sharma, however, stressed that any issue other than trade, services and investment cannot be part of the bilateral agreement. “Here we are talking about trade and investment and services. No other extraneous issues are part of the agreement,” he said when asked whether India would be open to talking about social sector issues in the agreement. The briefing was held at the end of the India-EU Business Summit jointly organised by CII and Ficci on Friday.

“If the EU continues to press for inclusion of new issues, the pact could be in trouble. As far as India is concerned, the matter was settled when the talks were launched,” a commerce department official, who refused to be named, told ET.

India and the EU had extensive discussions on whether labour, environment and other social sector issues should be part of the agreement when the talks were launched in 2006. With India emphasising that it could not agree to make the issues part of the negotiations, it was decided to scale down the scope of the negotiations and restrict it to issues related to trade in goods, services and investment. It was therefore decided that the agreement would be called a trade and investment agreement instead of a comprehensive economic cooperation agreement.

Bilateral trade in goods has nearly doubled between the EU and India over the last five years. From a level of 33.52 billion Euros in 2004, it has risen to 61 billion Euros in 2008.

‘Differences to be ironed out’

With a target to more than double bilateral trade to $200 billion in four years, India and EU on Friday hoped they can resolve differences and reach a free-trade pact within a year.

“We have expressed the hope that the negotiations can be completed in a year,” Prime Minister Manmohan Singh said after the 10th India-EU Summit here. Addressing a joint press conference with Prime Minister Fredrik Reinfeldt of Sweden and European Commission President Jose Manuel Barroso, Mr Singh said both sides reviewed the progress on negotiations.

“Trade is important for economic recovery...the agreement in trade is important for sustaining this recovery,” Mr Barroso said.