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Trade pact with Israel to give foothold in West Asia

Economic Times, India

Trade pact with Israel to give foothold in West Asia

23 April 2010

By Amiti Sen, ET Bureau

NEW DELHI: India will seek access to Israel’s expertise in areas such as bio-technology and water management as it begins discussions on a free trade agreement in Delhi next month, but the pact is likely to have strategic undertones as well. India already has many trade agreements with other countries, but this is the first Israel will be getting into, indicating the importance it gives to economic relations with India.

“India’s relationship with Israel is of a strategic nature as it is seeking, in various capacities, closer ties in the military area. The FTA would help in making the relationship more robust,” C Uday Bhaskar, strategic analyst and director of National Maritime Foundation said.

A pact with Israel will give India a foothold in the West Asia where it has not managed to make much progress so far, a commerce department official told ET.

Its only engagement in the region is a preferential trade agreement with Afghanistan, which includes just a handful of products. India’s proposed FTA with the Gulf Cooperation Council is stuck because of differences over tariffs on petroleum products. Prime Minster’s trade and economic relations committee has already cleared the proposed FTA with Israel despite some initial doubts raised by the ministry of external affairs because of the political sensitivities involved, the official said.

The FTA, proposed by Israel around four years ago, will cover goods, services as well as investment.
Israel’s tariffs are lower compared to India’s implying that the latter would have to take on steeper tariff reduction commitments. But the country is not apprehensive about a steep increase in imports as Israel’s manufacturing industry is much smaller in size.

“One thing we are totally convinced of is that Israel is not going to economically swamp us with anything,” the official said.

India exported goods worth $189 billion in 2008-09 whereas Israel’s exports were only $65 billion, indicating the smaller manufacturing economy of the latter. India-Israel bilateral trade in 2008 was at $4 billion. The strategic consideration is also likely to weigh heavy in the decision.

“India stands to gain from Israel’s capabilities in the high-tech area especially in dual-use technology,” Mr Bhaskar said.

The main gains for India is likely to be in the area of technology transfer and joint manufacturing. “Israel has cutting edge technology in areas such as bio-tech, nano-technology, medical equipment, water management & drip-irrigation and solar energy, and we are bound to benefit from that,” the official said.

Other areas where India could gain is in services such as IT and telecom. “We will form various groups on different areas such as manufacturing, agriculture, investments and services in our first meeting next month and negotiations would start after that,” the official said.

At a recent business event in Kolkata, Israel’s ambassador to India Mark Sofer pointed out that this would be the first FTA for his country and bilateral trade was expected to increase to $12 billion as a result of the pact.