India, Japan to negotiate economic agreement

India and Japan are expected to kickstart negotiations for a possible Economic Partnership Agreement or a Comprehensive Economic Partnership Agreement during the proposed visit of Prime Minister Manmohan Singh to Tokyo later this month.

The two sides are expected to announce the setting up of a joint task force to be headed by commerce secretaries for initiating the negotiations. The issue was discussed by the Prime Minister's Trade and Economic Relations Committee, which met earlier this week.

The setting up of the joint task force is part of the recommendations of a joint study group (JSG), which submitted its report in June this year. The group suggested that an India-Japan EPA or CEPA could cover trade in goods and services, measures for trade promotion and liberalisation of investment flows.

The group was of the view that there was a need to maximise investment opportunities, such as Japan's investment in the Delhi Metro project. Japan has been the third largest foreign direct investor in India since 1991.

However, FDI from Japan has been declining post 1997-98. Japanese investment in India in 2004 stood at $116 million, which was just 0.27 per cent of the global FDI from Japan.

Opening up the trade in goods through a reduction in tariff is expected to increase market access for both countries, particularly in agricultural products.

Japan has high tariffs and stringent quality norms for several agricultural goods. It took nearly 17 years for India to persuade Japan to allow import of its mangoes. Similarly, trade in goods is expected to boost free movement and mutual recognition of professional qualifications.

Both sides are also keen to conclude an investment agreement to address various issues such as national treatment, investment protection and dispute settlement.

Some of the other areas identified for economic cooperation by the JSG included strengthening of air connectivity, infrastructure development, cooperation for small and medium enterprises, management of energy resources including coordinating research in hydrogen fuel.