India, EU Reach Trade Agreement

India and the European Union on Thursday agreed to boost their trade and investment ties, putting aside their sharp differences in the World Trade Organization over environment and competition rules.

“It is not all about confrontation between the EU and India. What matters in the end is that together we have succeeded,” said EU Commissioner of Trade Pascal Lamy at a two-day India-EU business meeting in the Indian capital.

This month in Doha, Qatar, India reluctantly agreed with the other 141 WTO members to negotiate new issues such as the environment, competition rules and government procurement.

India agreed to a new round of talks after winning two major concessions, which would allow poor countries to override drug patents during crises to make cheap generic versions available and delay negotiations on new issues by at least two years.

Lamy said the EU supported India on several issues, including patent relaxation during health crises, because those were legitimate concerns of developing countries.

“The biggest boost to our bilateral relation will come from an ambitious program of trade negotiations at a multilateral level,” he said.

“We sincerely hope the EU will fulfill its promise to speed up implementation of the pending issues within the WTO in the interest of the developing countries,” said India’s commerce and industry minister, Murasoli Maran.

Lamy and Maran also met separately to discuss the setting up of working groups in areas such as steel, marine and farm products, textiles and environment.

They agreed to explore whether the EU could work out a deal in the textile sector for India similar to the one it has offered Pakistan, Ukraine and Sri Lanka. Recently it agreed to raise the quota for exports of Pakistani textile products to the EU by 15%.

“The details can be worked provided India makes an effort,” Lamy told a news conference after the meeting. Textile products account for about 15% of India’s total exports, and the EU is the most important destination.

Maran also raised the issue of nontariff barriers, especially to agricultural exports from India and the trade preference rules that harmed Indian exporters. Lamy said he had clearly indicated that the EU is framing new trade preference rules, which will not be unfavorable to India.

In return, he said, the EU wanted India to cut tariffs on several products such as liquor that favor European exporters.

The EU is India’s biggest trade partner. However, India, a country of more than 1 billion people, ranks only 18th on the EU’s list of trade partners with just 1.3% of the EU’s total imports. India-EU trade totaled $22 billion last year.

Similarly, the EU is the biggest investor in India, but India received only 0.6% of the EU’s worldwide investment, less than one-fifth of what China gets.

“Clearly, there is a lot of room for improvement,” Lamy said earlier at the meeting.