India, EU plan trade agreement

Manmohan Singh, Tony Blair highlight existing barriers.

India and the European Union today agreed to explore the possibility of a trade and investment agreement, though leaders from both sides pointed to hurdles to expansion of bilateral trade and investment.

"I believe there is a perception in Indian trade and industry circles that the European market is becoming increasingly difficult to penetrate. As tariff barriers disintegrate, non-tariff barriers suddenly come up," Prime Minister Manmohan Singh said in his address at the Sixth India-EU Business Summit.

He said Indian agricultural exports, which enjoyed a competitive advantage, faced protection and discrimination in the European markets. Singh also called for liberalised rules of entry for Indian professionals in the EU.

"Increased market access to Indian products and services in the EU market would create healthy conditions in placing our two-way trade on an even keel," Singh said.

British Prime Minister Tony Blair, who is also the president of the European Council, said India will have to open its economy further to attract $150 billion foreign investment in the infrastructure sectors. He said the two sides should be "bold" in opening up their markets within the mechanism created under the World Trade Organisation.

"The WTO requires to open up but through mutual agreement and it was for the policy makers to manage the consequences in the transition period," he said.

Both sides agreed to set up a high-level joint trade group which will explore ways to deepen and widen bilateral trade and investment relationship and examine the scope for an investment treaty. The group will present its report at the next summit in 2006.

While the EU wants the investment treaty to accord pre-establishment benefits to European companies, while India is against the proposal. The benefit has only been given to investment coming from Singapore.

A joint action plan, unveiled at the Sixth India-EU Summit said the two sides have also agreed to cooperate in nuclear energy, oil and gas sectors.

The two sides decided to set up working groups on energy efficiencies and renewable energies, coal and clean coal conversion technologies and fusion energy including India's membership in ITER, a multinational collaboration between countries like China, EU, Japan, Korea, Russia and the United States which is involved in fusion research.

India and EU also signed a framework agreement for participation in the Global Navigation Satellite System (Galileo) designed for civilian use worldwide and is estimated to cost Euro 3.4 billion. India's equity contribution will be decided depending on the scale of its participation in the project.