The Hindu Business Line : Taking the strategic partnership forward

The EU top brass begins talks with Indian leaders led by the Prime Minister, Dr Manmohan Singh, in New Delhi today to boost bilateral relations. The EU-India summit, sixth in the series, is likely to endorse an ambitious and result-oriented Action Plan as well as a Political Declaration signalling a mutual commitment to enhanced engagement on all issues of mutual concern and consequence, says G. Srinivasan.

THE sixth India-European Union (EU) summit begins in New Delhi today (Wednesday), with the British Prime Minister, Mr Tony Blair, in attendance as President of the European Union Council, along with the European Commission President, Mr Jose Manuel Barroso, the EU Trade Commissioner, Mr Peter Mandleson, and the EU's High Representative for the Common Foreign and Security Policy, Mr Javier Solana.

The top brass of the EU will hold talks with Indian leaders led by the Prime Minister, Dr Manmohan Singh, and his Ministers on boosting bilateral relations to forge a consensus on issues of mutual concern. Though the relationship between India and the EU began flourishing in the early 1990s, bonhomie at the political level became evident during the first EU-India summit in 2000 in Lisbon, in which the the then Prime Minister, Mr Atal Bihari Vajpayee, participated.

After four years of periodic meetings, the Commission issued a communique on "EU-India Strategic Partnership", in June 2004, setting out proposals to place bilateral ties on firm footing.

The text, adopted by the European Parliament in October 2004, recommended that the European Council, at its fifth EU-India summit at The Hague, in November 2004, take a decision to upgrade the existing relationship to one of strategic partnership.

This strategic partnership entails concrete steps in four key areas — cooperation on the international front, economic and trade cooperation, promote new development policies to meet the Millennium Development Goals (MDGs) and academic, cultural and parliamentary exchanges. At the fifth summit, the Indian team was led by Dr Manmohan Singh.

That the EU deems China and India emerging powers in a multi-polar world is amply demonstrated by the fact that the EU team, including the British Premier, visited Beijing to participate in the eighth EU-China summit on September 5. The EU-China summit followed Mr Barroso's successful first official trip to China in July and it also marked the 30th anniversary of EU-China diplomatic relations. Before his departure from Brussels, the EU President commented thus: "At the eighth EU-China summit, we will agree on a new strategic dialogue with China and through a joint declaration launch an important new partnership to enable us to act on climate change."

Agreements in the sidelines of the summit include a new dialogue on employment and social affairs; two MoUs on Geographical Indication and on a Chinese Science and Technology Year in Europe; a protocol extending the extant maritime agreement to new member-states, two environment projects on bio-diversity (30 million euro) and river-basin management (25 million euro) and a 500-million euro European Investment Bank loan, besides a joint statement on space exploration.

The list of benefits being conferred on Beijing by the EU recognises the strategic importance with which it is held; a reflection of the eagerness of the outside world not to be left without a toehold in the Middle Kingdom. China accounted for 5 per cent of EU-25's exports and 12 per cent of imports in 2004. Exports amounted to 48 billion euro and imports 127 billion euro. It is with China that the EU-25 logged its largest trade deficit of 78.9 billion euro and 46.3 billion euro in the first half of 2005. This is against the aggregate trade balance for the EU-25 of 62 billion euro in 2004 and 45.8 billion euro in the first half of 2005.

Despite cheap Chinese clothing and textile products flooding the European markets and provoking trade-defence measures from Brussels, China clearly enjoys a commanding commercial relationship with the EU-25 because of its excellent manufactured goods exports.

Even as two-thirds of the goods exported to China from the EU in 2004 were `machinery and vehicles' and a fifth of `other manufactured articles', imports of manufactured goods from China to the EU had an even larger share, with machinery and vehicles representing almost half the imports and other manufactured articles just over 40 per cent. The Chinese have succeeded in selling the same goods they are importing from the EU in greater volumes to the EU, leveraging their excellent low-cost economy advantages.

Set against the EU-China commercial ties, India accounted for 2 per cent of both EU-25 imports and exports in 2004. In fact, the EU-25 registered a modest surplus with India, of 0.8 billion euro in 2004 and 0.6 billion in the first six months of 2005. India could not match China in manufactured exports to Europe; the Chinese had beaten Europe in its own game.

This is why India should consciously improve its manufacturing excellence, leveraging its information technology expertise and software skills. For this to happen, the high-cost economy structure needs to be dismantled, infrastructure improved and raw material and intermediate inputs made available at international prices to manufacturers.

Till all these measures are in place to tone up the efficiency of capital in a capital scarce country such as ours, any strategic alliance with the big trading bloc will not lead to any material change in the quality of life for millions.

The EU-India summit, sixth in the series, is likely to "endorse an ambitious and result-oriented Action Plan as well as a Political Declaration signalling the commitment of the EU and India to enhanced engagement on all issues of mutual concern and consequences".

Small wonder that the EU President should say: "With our ambitious Action Plan we will be able to jointly work together against terrorism and build up a security dialogue. We will be able to meet common environmental challenges and strengthen our two-way trade and investment."

The Action Plan emphasises constructive dialogue on human rights and cooperation with the United Nations and establishes a dedicated dialogue on migration and consular issues.

The chapter on economic policy aims to put the EU and its economic operators at the core of India's ongoing economic reform process and promote good governance.

It proposes enhanced economic cooperation through the establishment of new dialogues and working groups, such as biotechnology, pharmaceuticals, finance, health, social affairs and agriculture, and aims to promote space cooperation and India's participation in the Galileo project (satellite).

Although the new Generalised System Of Preferences (GSP), under which preferential duty is levied for entry into the EU market, excludes textiles, sectors such as fur skin and leather are back in the new GSP.

With the entry of an additional 300 products and graduation of China in most of the industrial products, India would definitely have an edge over its competitors in the EU markets, provided exporters do not compromise on quality, standards and delivery.

The trade and investment chapter aims to promote trade flows and investment. The summit would entrust a High Level Trade Group to make recommendations towards a possible comprehensive trade and investment agreement.

Both sides will work towards enhanced cooperation on the Doha Development Agenda and a successful Hong Kong Ministerial of the World Trade Organisation in December. As the EU Trade Commissioner, Mr Peter Mandelson, stated, "this Round will only work if developing countries gain from it." New Delhi will use the summit to get around how the EU and India can deal with market access for agricultural and non-agricultural products and the opening up of the market in the services sector and trade facilitation to ease transaction cost to trade and industry.

Eventually, the enhanced engagement between the EU and India would not be confined to scoring political points by promising joint action on international issues.

Unless the economic contents and cooperation produce results for New Delhi, the relationship between the two giants will be without substance .

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