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Stepped-up talks revive hope of India-EU FTA

Business Standard, India

Stepped-up talks revive hope of India-EU FTA

By Pallavi Aiyar / Brussels

30 November 2010

With the pressure on for the European Union (EU) and India to come up with a significant announcement at the upcoming EU-India summit on December 10, a flurry of activity surrounding the ongoing negotiations for a bilateral free trade agreement (FTA) is giving momentum to the process.

Anand SharmaOn Monday, Commerce Minister Anand Sharma met with his EU counterpart, Trade Commissioner Karel De Gucht in Brussels, only days after the European Director General for Trade David O’Sullivan was in India, meeting with Commerce Secretary Rahul Khullar.

But despite the stepped-up interactions, the two sides remain well short of agreeing to an in-principle agreement on the FTA in time for the EU-India summit, as was until recently hoped.

EU trade spokesperson John Clancy described Monday’s meeting to Business Standard as one that “allowed for a stocktaking of the situation following the recent important high-level meeting (between O’Sullivan and Khullar) in Delhi.” Clancy added that both sides had confirmed “substantial progress” which would be reported at the upcoming summit in Brussels.

“Both sides aim to use this momentum to ensure a political mandate at the highest level from the summit to work towards a rapid and timely conclusion of the FTA,” he said.

Negotiations on the core issues of trade in goods and services have reportedly seen real progress. The two sides have already agreed to eliminate tariffs on 90 per cent of all tradable goods. What is currently under discussion is an upping of this figure, with India asking the EU to abolish tariffs on 95 per cent of goods, while the EU wants India to offer a tariff-slash on 98 per cent of goods.

The key sticking points that remain unresolved, however, are in other sections of the FTA. The chapter on sustainable development, which seeks to bind India to a range of human rights and environmental commitments, is a particularly contentious issue. New Delhi claims there is no room in a trade agreement for such provisions, but Brussels insists the European Parliament will refuse to ratify any agreement that does not include the chapter.

Intellectual property rights are another area where India and the EU have found it tough going to find common ground. The EU is pushing India for Trips-plus provisions which New Delhi has rejected.

Generic drug seizures at EU ports have been a further complicating issue. Between 2008 and 2009, some 20 odd cases of seizures of Indian-made generic drugs in transit at European ports took place. In May, India along with Brazil took the matter to the World Trade Organisation (WTO) where they were asked to establish consultations with the EU as a precursor to the setting up of a Dispute Settlement Panel.

The EU cites domestic customs laws that allow goods in transit to be stopped if they are suspected of being either illegal or substandard, as justification. The generic drugs in question were off-patent in both India and the countries to which they were destined. However, in some cases, the seized drugs were patent protected in the EU.

India maintains that European countries are creating trade barriers against Indian drug companies to protect the interests of their firms.

The EU directive in the spotlight is a customs regulation, 1383, which lays out the details of the condition under which European customs can legitimately stop goods in transit. India and the EU have held several rounds of talks to discuss under what conditions Regulation 1383 can and should be activated. India has asked for a clause in the regulation to be amended.

Sources say it is likely that the EU-India summit might see a breakthrough announcement on the matter, with the European Commission currently in the process of revised the offending regulation as part of an internal EU move that is taking place in parallel to the consultations with India.

Clancy confirmed there had been “very good progress” on the issue of generics and that the two sides were “very close to a solution on this issue”.

In October, Anand Sharma had told reporters the European side had “accepted” India’s position on the matter and that India would be withdrawing its case at the WTO. While officials on both sides were taken aback at the time, no resolution in fact having been reached, the odds for a December 10 announcement of a settlement are high.

The EU-India summit will be attended by Indian Prime Minister Manmohan Singh.