Pros and cons of promoting India-EU textiles trade

04.11.2006 - 15:44
Here is something for Indias textile and clothing manufacturers and exporters to chew over. Which of the two following outcomes do they think will help them boost their exports to the 25-nation European Union (EU), which last year amounted to USD 6.5 billion? The first possible outcome is the successful conclusion of the Doha development round of trade negotiations, while the second is a free trade agreement between India and the EU. The aim of the Doha round is, of course, to boost world trade by reducing, if not eliminating entirely, tariffs and other barriers to it. An India-EU free trade agreement would boost trade between India and the EU by removing tariff and other obstacles to their two-way trade. The Doha round, which is taking place in Geneva among the 140 members of the World Trade Organisation (WTO), is currently stalled. However, both India and the EU remain committed to the WTO, and the successful outcome of the Doha development round remains, therefore their foremost trade policy priority. This is the message Prime Minister Manmohan Singh and the Prime Minister of Finland, representing the EU, sent their people at their summit meeting in Helsinki on October 13. The two leaders also agreed to move towards negotiations for a broad-based bilateral trade and investment agreement. By calling for a successful conclusion to the Doha round and for an India-EU bilateral agreement the two leaders were not hedging their bets, of course. Even so, the fact is that the Doha round may not be concluded before 2011 or 2012, according to the spokesman for the European textiles and clothing industry, William Lakin. Much depends on which party wins the mid-term elections to the US Congress on November 7 and the US presidential elections in 2008. Adding to the uncertainty is the fact that the EU will almost certainly have a new chief trade negotiator in 2009, and the WTO a new Director-General at about the same time. Under these circumstances the EUs present trade supremo, Peter Mandelson, would like to strike a deal in the WTO as quickly as possible. Could he persuade his good friend, Commerce Minister Kamal Nath, to go along? A bilateral India-EU trade and investment agreement should be easier to negotiate. It would have to cover as much as 95 percent of their trade, however, in order to meet WTO requirements. The EU textile and clothing industry favours an India-EU bilateral agreement, and wants to see it concluded as quickly as possible but on its terms. These include an immediate and simultaneous reduction to zero of both Indian and EU tariffs and the elimination of all non-tariff barriers by both sides. So far, only the EUs bilateral agreement with Chile provides for zero duties on both sides from Day One. Alternatively, the European industry could accept the phasing out of Indian and EU tariffs over a four-year period. Clearly, it will be some years before the Doha round is successfully concluded and the India-EU bilateral agreement is signed, sealed and delivered. When that time comes, Indias textile and clothing exporters should have easier access to the EU and world markets in return for more competition on their home market. (INEP)