Financial Daily from THE HINDU group of publications
Sunday, Apr 25, 2004
Financial Daily from THE HINDU group of publications Sunday, Apr 25, 2004 |
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Corporate
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Foreign Trade Enlargement of EU will create more trade offers: FICCI study Our Bureau
New Delhi , April 24 ENLARGEMENT of the European Union (EU) would provide an expanded market with a population of more than 455 million and a GDP of around 10 trillion euros and would offer immense trade creation opportunities for India, says a preliminary Federation of Indian Chambers of Commerce and Industry (FICCI) study on the likely implications of the enlargement of the European Union (EU) with 10 more countries joining on May 1. The study identifies the long lasting impact of the enlargement on Indian trade and investment. The new Europe would also represent 20 per cent of the total world trade, 26 per cent of inbound FDI and 46 per cent of the total outbound investments. In essence it would be the largest trading block in the world, according to the study. For non-member countries such as India, another advantage would be the lower average MFN tariffs being applied to the new countries joining the EU. Further, enlargement would also result in harmonisation of the rules and regulations in line with the EU regulations leading to a greater circulation of goods and services. The study points out that enlargement could give a good point of entry for the EU market. However, a word of caution is also added since there are number of products where India and the acceding nations are competitors in West European countries, due to the low cost advantage offered by both. The accession countries compete in 33 of the top Indian 100 exports to the EU. A silver lining for India is that the overtime cost advantage offered by the newly acceded countries may no longer hold especially with the EU labour standards being applied to these nations and with the expected migration of workers to the western countries. The study also cautions against the non-tariff barriers and stringent standards being extended to these countries especially in agri-food commodities that have, in the past, hindered the growth of Indo-EU trade. On the investment front, there are apprehensions of a diversionary impact of EU-15 investments in favour of the joining countries, since they also offer similar cost advantages as India. However, such cost advantages enjoyed by the acceding countries may not remain for long. Secondly, India by itself has emerged as a favoured destination for foreign investors in comparison with other countries. Enlargement may provide opportunities for outbound investments from India to New Europe especially in areas of information technology, agri-food and pharmaceuticals. The preliminary study also analyses the impact of enlargement on some of the key sectors namely agri-food, textiles and clothing and information technology. The European Union has held immense importance for India, being its largest trade and investment partner, accounting for nearly a quarter of India's total trade and more than 26 per cent of the total investments into India since 1991.
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