Q+A-Trade pact in focus at India-EU summit

NEW DELHI Thu Dec 9, 2010 12:28pm IST

NEW DELHI Dec 9 (Reuters) - Negotiations on a free trade pact will top the agenda at a summit of Indian and European Union (EU) leaders on Friday, an agreement that could generate two-way trade worth about $134 billion, officials said.

Here are some questions and answers on issues at the 11th India-European Union Summit to be held in Brussels, which will also be Indian Prime Minister Manmohan Singh's first trip to Europe since its Lisbon Treaty came into force.

WHAT IS THE TRADE DEAL?

India and the European Union launched negotiations for a free trade and investment agreement in 2007. An agreement is expected by the middle of next year or perhaps sooner.

European exporters see an enormous opportunity in everything from cars to fashion and luxury goods in the world's second-fastest growing major economy with a potential customer base of 1.2 billion people and a rapidly expanding middle-class.

For India, the European Union is its largest trading partner despite a recent slowdown following the euro zone crisis. The Indian government has been aggressive in its push for free trade agreements and sealed a deal with Japan in October.

But the talks on a pact have run into differences, such as over EU efforts to link it with sensitive topics such as India's performance on climate change and reducing child labour, and over greater market access.

Such efforts grate with Indian trade officials, who see them as irrelevant to negotiations for a commercial partnership. The details of what Europe wants have not been revealed but any deal will have to be acceptable to its parliament.

Complications have also arisen over the possibility of the proposed pact leading to easier immigration rules for Indians seeking to find work in Europe, particularly Britain which has capped immigration.

The two sides have missed a previous target of October 2010 to conclude the deal, negotiations for which must satisfy a wide range of stakeholders and the interests of a total of more than 1.5 billion people.

India's trade minister has said the deal was awaiting "finishing touches" but it will almost certainly not be signed during the summit as the two sides iron out the last hurdles.

Two-way trade between India and the European Union touched $92.2 billion in 2009 in goods and services, but the figure could rise to $134 billion (100 billion euros) if the free trade agreement goes through, senior Indian Foreign Ministry official Vivek Katju said. The proposed pact is expected to help bilateral trade exceed $237 billion by 2015.

Against a backdrop of uncertain progress on the Doha global trade talks, India has pushed ahead with free trade agreements with countries such as South Korea and the ASEAN bloc of Southeast Asian nations. [ID:nDEL520335]

ARE THERE ANY OTHER TRADE ISSUES?

India and the European Union have a running dispute over Indian generic drugs in a case dating back to the seizure by Dutch customs in December 2008 of an Indian blood pressure drug in transit to Brazil. The row highlights disagreement between those who call for the protection of the intellectual property rights of drug companies and others pushing for greater access to cheap medicines.

Activists have said the case represented a more aggressive stance by patent rights holders which could undermine the supply of cheap drugs to developing countries. Indian trade officials initiated the first steps of a trade dispute at the World Trade Organisation (WTO) this year and have reserved their right to escalate the case even as they work towards a solution with their European counterparts.

Indian Trade Minister Anand Sharma has said the two sides have come to an "understanding" on the matter.

Indian trade officials have complained of what they see as the unfair obstruction of goods to Europe, such as farm and fishery goods on safety grounds. But accusations of protectionism can cut both ways. India has launched more anti-dumping investigations than any other country this year, according to the WTO.

India, a cotton exporter, has also complained of European moves to give concessions to Pakistani exporters after recent flooding that engulfed much of India's neighbour, saying it was unfair to other countries.

WHAT ARE THE OTHER ISSUES?

India and the 27 country-EU bloc also seek to cooperate more on global issues such as financial imbalances, security, trade and climate change. As a major member of the Group of 20 countries, India's views on the euro zone crisis could be of significance and the two sides could also discuss reform of the international monetary system and improvements in global governance.

As India increasingly looks to the United States on global issues from trade to climate change and security, Europeans have appeared to lag in engaging Asia's third-largest economy. India will seek clarity on European plans in war-torn Afghanistan and India's role there and will also try to extract European pledges for green technology support. (Editing by Paul De Bendern) (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)

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