Financial Express - 29 July 2006

Expert panel wants India, Japan economic pact to get cracking

Joint study group favours further diversification of economic engagement

Huma Siddiqui

New Delhi, July 27 A joint study group (JSG), which was set up during the Japanese Prime Minister Junichiro Koizumi’s visit to the country in 2005, has given the green signal for having a Comprehensive Economic Partnership Agreement (CEPA) between India and Japan. Both the countries had accepted the report prepared by JSG after the end of the G-8 summit in St Petersburg last week.

JSG, which was established to undertake a comprehensive review of economic and commercial relations between the two countries, gave its recommendations on liberalising markets for goods, investments and services. In the report, the group concluded that there was a need to tap potential to further develop and diversify the economic engagement between the two countries. It recommended that India and Japan should launch intergovernmental negotiations on an Economic Partnership Agreement of CEPA “within a reasonable period of time.”

It said sensitive sectors should be treated with flexibility and practicality in consideration of current high tariffs of industrial items in India and agricultural products in Japan.

The group recommended that the CEPA negotiations cover wide areas, including goods trade, services and investment. It pointed out that the two economies could complement each other in the area of information technology with the strengths of Japan’s hardware and India’s software technology.

Recommending that a practical and flexible approach could be adopted to make economic cooperation between the two nations mutually beneficial, it said further tariff reduction will increase market access for both sides in agricultural as well as manufacturing sectors.

Also, it will cut the procurement costs for the manufacturing sector which in turn will contribute to promoting Japanese investments in India and will increase export of agricultural products to each other.

With both countries facing new challenges in customs administration and trade facilitation, it has been recommended that thought may be given to setting up a mechanism for facilitating to share experience of each side and to develop a mechanism for resolving misunderstanding and disputes.

The JSG noted that the current volume of high technology trade between the two countries is rather miniscule, therefore both should explore ways and means to utilise the potential and synergies and boost high technology trade.