Wednesday, May 28, 2008

India, EU at crossroads

Common values can play catalyst for compatible views

Rising from the ashes of two World Wars and expanding to include 27 Member States with more in the waiting, the European Union today is a bastion of peace, harmony and prosperity. On the other hand, India, with 28 States and seven Union Territories, has emerged over last six decades in a buoyant mood thanks to its democratic principles, freedom of speech and its new found economic strengths.

At The Hague Summit 2004, India and the EU agreed to forge a “Strategic Partnership,” which was a result of an earlier EU publication in December 2003 when the EU published its first-ever security strategy identifying India along with the US, Russia, Japan, China and Canada, as the ones with whom it should develop a “Strategic Partnership,” in order to build an “effective multilateral system leading to a fairer, safer and more United World.”

India, riding on its financial success story, is focusing on greater worldwide visibility, prestige and political clout with a demand for a UN Security Council seat and favourable visa exchange partnerships. In the same vein, the EU wants to use its Strategic Partnership with India, the world’s largest democracy, to meet 21st Century challenges like terrorism, proliferation of Weapons of Mass Destruction (WMDs), failed states and regional conflicts.

For example, the EU expected Delhi with its growing economic ties, to stand up for democracy and human rights during Burma’s military crackdown on dissidents, but Delhi responded saying it does not believe sanctions work. There will always be differences but those as such need not become insurmountable obstacles to building a deeper and wider relationship.

Political ties can not go far without financial bonds and a look at the trade figures from recent past show that its time to inject much needed momentum into an uninspiring trade relationship. The trade statistics shifted a gear from a meagre less than five billion Euro in 1980 to a respectable more than 45 billion Euro in 2006. Although trade with the EU is 20 percent of India’s import-export business, making the EU India’s largest trading partner in 2006, India’s share is only 1.8 percent of total EU trade.

In the context of the ongoing negotiations in the EU-India Free Trade Agreement, there are some stumbling blocks that need to be addressed on both sides. According to reliable sources, the major hurdle is in the fields of agriculture which is a protected sector in the EU which earmarks 40 percent of its total budget to this sector where there are subsidies galore.

The EU has, in recent times, accepted the fact that Indian import tariffs have been substantially reduced but it complains they are still high by international standards. The EU calls it a “complex and non-transparent” system as it points at additional duties, taxes, and charges that are levied on top of the basic customs duties.

Pointing to the “non-tariff” barriers, the EU lists quantitative restrictions, mandatory testing, import licensing, certification for a large number of products and a complicated procedural modus operandi as the major speed breakers for a smooth trade relationship. With Indians finding the EU institutions bewildering and complex, India has its own set of complaints, foremost being in recent times the frequent use of anti-dumping duties on its exports including footwear.

The OECD (Organization for Economic Cooperation and Development) in a recent report highlighted the need for India to go for tough and bold reforms in opening its economy more rapidly to international trade and FDI (Foreign Direct Investment) by loosening service sectors like insurance and retailing, while India argues it has liberalised the FDI regime considerably.

The figures are still disappointing, as in recent years the FDI flow to India from the EU has been a paltry less than two percent of the total FDI outflow from the EU.Climate Change is another major sticking factor in the relationship equation, as India negates EU calls for a stricter binding commitments to reduce greenhouse gas emission, while Delhi argues that as a developing country it can not be expected to slow down its pace of industrialisation.

The EU has allotted 470 million Euro between 2007-2013 to tackle cooperation in the energy sector and environmental concerns while making efforts to reach its Millennium Development Goals.Doha is another word that sends alarm bells ringing in Delhi and Brussels as the former has failed to soften tough line in the WTO (World Trade Organization) Doha round negotiations refusing to cut industrial tariffs and demanding the EU comes clear on agricultural subsidies.

The global disparity between the South and the North seems to be playing a pivotal role here also. India, along with Brazil and others, has emerged as the leader of the equatorial hunger belt with billions of people and still counting, while the EU with an overaging and ever-decreasing population of the North highlights the threat of this growing southern human avalanche.

With the present stalemate at the Doha Round consultations, it is a miracle of sorts that can revive the Doha Round to the fullest potential as it’s already surviving on life-support devices of optimistic political statements.

The EU and India are together in many global projects, like the European Satellite project “Galileo” which got a goahead last week from the European Parliament, International Thermonuclear Experimental Reactor (ITER) to produce electricity using nuclear fusion, Indian space agency ISRO with its European counterpart ESA.

With the EU-India Free Trade Agreement in the pipeline along with other fields of cooperation being explored, both India and the EU are ready for taking a qualitative leap forward in relations, but the political leaderships on both sides have to transform all the talk of shared values of democracy, diversity and multilateralism into concrete pragmatic actions, thus making an effective and cohesive EU-India Strategic Partnership out of the present patchwork of sectoral cooperation.

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