Date:29/06/2004 URL: http://www.thehindubusinessline.com/2004/06/29/stories/2004062900550500.htm

Back FICCI moots panel to study free trade pact with EU

Our Bureau

New Delhi , June 28

IN order to enhance India's trade relations with the European Union (EU), the Federation of Indian Chambers of Commerce and Industry (FICCI) is in favour of setting up of a joint study group to look into the feasibility of Free Trade Agreement (FTA) between the two sides.

This has come in response to the recent statement made by the Head of European Commission (EC) delegation to India, Mr Francisco da Câmara Gomes, in which he said that the EC is not averse to the idea of an FTA between the two.

The Chamber said that despite being a largest trading partner of India, the EU has witnessed a decline in its share of exports over the last decade. India's share in EU's total imports is very small.

All this, it feels, underscores the need for proactive action to arrest the falling share of EU in India's exports and increasing the country's share in EU's total imports.

The Chamber felt that given the difference between the tariff structure of the EU and India, it would be appropriate to extend the FTA to the service sector also.

Given the high duty structure of India vis-à-vis the EU, India would end up giving higher duty concessions in an FTA with EU.

But at the same time by including the service sector in the FTA, India could seek easier access to the EU market for its service providers such as doctors, nurses and other health specialists, engineers, architects, IT professionals, banks and some semi-skilled labour.

In fact, such complementarities have been considered in other FTAs between developed and developing countries.

On the basis of its preliminary analysis, the FICCI said that India's share is just 4 per cent in the top 20 imports of EU, which incidentally, constitute around 76 per cent of its total imports.

These top 20 product categories are machinery and parts; vehicles (other than railways); electrical goods; mineral fuels; pharmaceuticals; plastics; organic chemicals; instruments; aircraft and parts; iron and steel; paper; garments; stones, gems and jewellery; furniture, lamps; aluminium and articles; wood and articles; and rubber.

It further said that the reason for India's low share in these top 20 items could be high tariffs on some of these products in the EU. Such product categories are vehicles (other than railways), garments, consumer electronics and organic chemicals.