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Post breakfast

EU, India and evolving opportunities for South Asia

Muhammad Zamir
THE latest summit between the European Union and India held in Delhi towards the end of 2007 offered both sides an opportunity to inject much-needed momentum into their hitherto relatively uninspiring relationship. There was an effort to identify a qualitative leap forward in relations. There was reference to shared democratic values and common goals and the need to strengthen the existing patchwork of sectoral cooperation initiatives. India in particular was in buoyant mode as it reiterated its views on regional flashpoints and global economic concerns.
The EU, already mesmerized by China's rapidly expanding market, is now beginning to pay more attention to developing relations with India. Indian policy-makers are also trying to bring EU-India ties out of the shadow cast by Delhi's budding relationship with the United States. Successive EU enlargements, the Union's growing reputation as a global defence and security actor, and its continued strong economic performance have also become key reasons for India's increased interest in Europe.
European companies with global ambitions have also reciprocated India's interest in Europe. They are recognizing that they cannot afford to ignore this country any longer. The remarkable success of India’s information technology sector (including the rise of its Euro 33 billion computer services outsourcing industry), and the emergence of Indian world-class industrial giants eager to scour Europe for new markets and acquisitions, have also put the country on the EU business map.
This increase in mutual interest has led to attempts to forge a strategic partnership. A Joint Action Plan
has been hammered out covering a vast arrdy of areas for increased cooperation, ranging from energy, terrorism and maritime transport to space technology. The two sides have also agreed to start exploratory talks on a possible new EU-India Partnership and Cooperation Agreement to replace an accord signed in 1994 and to set up a European Business and Technical Centre in Delhi to promote business partnerships and foster better mutual understanding of EU and
Indian markets.
However, it is also clear that differences remain. Despite the impressive array of meetings and the range of issues under discussion, both sides are still struggling to give real substance to their strategic partnership. One key reason for this is that while India and the EU share many common values, they have very different views on what 'strategic partnership' means in practice. This divergence in outlook has reflected differing geo-strategic interests and different levels of economic development. EU and India also seem to have differences on how to use their strategic partnership pertaining to issues like the proliferation of weapons of mass destruction, state failures and regional conflicts. India's immediate concerns are understandably very different from those of the Union and its Member States.
As it aspires to play a more forceful global role, India views its strategic partnerships with the EU and the US as vehicles for ensuring greater worldwide visibility, prestige and political clout. Its foreign policy agenda is also dominated by subjects like rivalry with China, tensions with Pakistan, and political turmoil in Bangladesh, Nepal and Sri Lanka. This has led to a significant mis-
match of aspirations between the EU and India. The Union, in this context, has made no secret of its disappointment at India's failure to stand up for perceived democracy and human rights during Myanmar's recent military crackdown on dissidents. The strategic partnership has also failed to soften Delhi's tough line in theWorldTYade Organization's Doha trade negotiations, with India continuing to resist US and EU demands for further cuts in industrial tariffs. Furthermore, India has refused to
accept EU calls for stricter binding commitments to reduce greenhouse gas emissions to combat climate change, arguing that a developing country cannot be expected to slow down the pace of its industrialization. Differences have also emerged on the US-India nuclear agreement regarding access to US civil nuclear technology. Several EU member states have argued that the deal lacks sufficient safeguards to prevent Delhi from continuing to produce nuclear weapons by diverting its own nuclear fuel to weapons production.
Indians continue to find EU institutions bewildering and complex and, for many, the focus remains on the Union as an economic rather than a political partner. This perception has now led the EU, after their latest summit, to the decision of developing a wider network of contacts in India in government, business and nongovernment circles to project a more accurate view of its multifaceted identity as both a leading trade bloc and an increasingly influential global political player. It has also been agreed that the Indians will have to make a similar effort to ensure that Europeans recognize the diversity of their country.
In this context it is generally
agreed that the planned establishment of the European Business Centre in Delhi will further EU business interests and contacts in India. It is also believed that further dialogue on regulatory cooperation should assist their envisaged cooperation in the energy sector and help meet India's hunger for access to clean technology, expansion of its use of renewable energy, combating water and air pollution, soil degradation and a further loss ofbiodiversity.
India and the EU hope to work together in many sectors. Delhi views Europe as an important source of high technology. In this context, India is participating in the European satellite project Galileo and working with the Union (as well as Japan, South Korea, Russia and the US) in the International Thermonuclear Experimental Reactor (ITER) programme designed to produce electricity using nuclear fusion. Cooperation links have also been established between the Indian Space Research Organization and the European Space Agency. Such strategic networking will enhance India's regional profile. The two sides have also initiated a security dialogue on terrorism, migration issues and visa policy, and EU-India working groups have been established to study the prospects for cooperation in pharmaceuticals, biotechnology, and information and communication technologies.
Negotiations are also underway on a prospective EU-lndia Free Trade Agreement which will focus on reducing tariffs on trade in manufactured goods, removing non-tariff barriers, liberalizing trade in services, easing investment flows and trade facilitation.
The negotiations also cover intellectual property rights, competition policy and government procurement. India on its side, has already agreed to substantially reduce import tariffs and various additional duties, taxes and charges that are levied on top of the basic customs duty, resulting in what the European Union regards as a complex and non-transparent system.
These negotiations are being pursued because both sides
believe that trade between the EU and India could certainly do with a boost. While EU-India trade has grown impressively over the years from Euro 4.4 billion in 1980 to more than Euro 46 billion in 2006 India still accounts for only 1.8 percent of total EU trade. By contrast, trade with the EU represents almost 20 percent of India's exports and imports, making the Union India's largest trading partner. In 2006, EU imports from India (mainly textiles/clothing, agricultural products and chemicals) were worth a total of Euro 22.4 billion, while EU exports to India (mostly machinery and chemical products) totaled Euro 24 billion.
It is being hoped by both sides that expansion in trade will also enhance investment. The EU is presently India's largest source of foreign direct investment (FDD, especially in the energy, Telecommunication and transport sectors. In 2005, EU investment outflows to India amounted to Euro 2.2 billion 1.3 percent of total FD1 outflows from the Union. EU officials, however, believe that there is still scope for improvement. They have again pointed out that greater liberalization is required in India's important sectors like retail distribution,
insurance, banking and aviation, all of which remain restricted to foreign investors.
It would, however, be worthwhile to note here that despite the vast array of new issues under discussion, poverty alleviation, health and education still remain the primary focus of EU policy towards India. This is not surprising given that the large majority of that country's population still lives on less than S2 a day. The EU has earmarked substantial funds for this purpose. It will be used tc .support,India's effort^ to achieve its Mulehnium Development boals in the health and education sectors, through a range of measures including public administration reforms, decentralization and
community empowerment, deepening school enrolment, better quality education and teacher training.
The EU is also focusing on subregional disparities within India. They, in this regard, are suggesting generation of additional employment and economic opportunities by India and further opening its economy to international trade and foreign direct investment The EU believes that such a step within the tightly protected service sectors such as insurance and retailing will be particularly helpful. India is agreeable in principle but not in agreement with regard to the speed of its implementation.
I have focused today on EU-India relations because that should be a pointer for all the other South Asian countries in the evolution of their relationship with the EU. Bangladesh in particular has several areas that need to be pursued with seriousness. I am referring in this context not only to capacity building and facilitation of governance areas but also in matters like improvement of backward and forward linkages in industry, agro-processing, tackling the bane of climate variability, usage of alternative sources of energy (including nuclear energy), pharmaceuticals, bio-technology and the creation of better telecommunication networking. One can only hope that we are also able to seize this possibility of expanded opportunities.
Muhammad Zam-.f is a former Secreta-y and Ambassador who can be reached at mzamir@dhaka net
***Despite the vast array of new issues under discussion, poverty alleviation, health and education still remain the primary focus of EU policy towards India. This is not surprising given that the large majority of that country's population still lives on less than $2 a day. The EU has earmarked substantial funds for this purpose. It will be used to support India's efforts to achieve its Millennium Development Goals in the health and education sectors, through a range of measures.***