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`Enlarged EU will provide opportunity, challenge'

Our Bureau

New Delhi , April 26

THE soon-to-be-enlarged European Union (EU) provides India with both an opportunity and a challenge. This was the view that emerged at a meeting on `The new round of EU enlargement: Implications and potential,' organised by the Confederation of Indian Industry (CII) here on Monday.

Addressing the meeting, the Ambassador of the Delegation of the European Union, Mr Francisco de Camara Gomes, emphasised that the expansion would be "beneficial" for India. On the issue of EU being called a fortress, Mr Gomes said that there could be nothing further from the truth.

The 15-member EU is to be enlarged when 10 more countries, including Cyprus, Estonia, Hungary, Latvia, Malta and Poland, among others, joining the group on May 1.

The Joint Secretary, Ministry of External Affairs, Ms Bhaswati Mukherjee, said the enlargement of the EU had great potential for India-EU relationship as well as fundamental implications for its future.

"Europe, I hardly need emphasise, is a key trading partner of India and a very important investor in India. It is evident that, for a transformed relationship between India and the enlarged EU, traditional links have to be consolidated and nurtured, and new ones built," Ms Mukherjee said.

While pointing to the fact that India's share of EU's global trade at about 1.36 per cent was far below potential, she felt that the enlargement process threw up greater opportunities to help achieve these targets.

In this context, Ms Mukherjee pointed out to the scope for cooperation in knowledge industries, information and communication technology, biotechnology, pharmaceuticals, auto ancillaries and chemicals.

"In these industries, India has a natural advantage and mutually beneficial cooperation could form the basis of our relationship in the 21st century."

Talking about the expansion of the EU, Ms Mukherjee said that in the case of services, where India has a competitive edge, service providers would benefit from the implementation of the single market in the new member- States, where they will get the same treatment as in rest of the EU.

Third countries would also receive enhanced levels of IPR protection in the new member-States due to the adoption of EU regulation upon accession, she said.

Similarly, in the case of subsidies, third countries could benefit as a result of imposition of stricter subsidy standards than those currently applied by the new member-States. In the long term, as income levels in the new member- States rise towards the EU average, there would be greater opportunities for exports from third countries to grow, the official felt.

Besides, the fall in average tariff rates as a result of enlargement is likely to support the growth of Indian exports in those products in which it has a competitive edge . "Trade between India and the accession countries is, however, only 1.5 per cent of the trade between India and the EU-15. This would suggest that trade diversion as a result of enlargement is unlikely to be substantial. On the other hand, the existence of uniform procedures and lower average tariff rates throughout the enlarged EU is likely to benefit Indian exporters," Ms Mukherjee said.

On the issue of investments in India, Ms Mukherjee pointed out that EU investments in India had increased from Euro 78 million during 1991 to about Euro 4 billion during 2003-04 and that it had the distinction of having one of the largest quantum of FDI approvals in India but the rate of realisation of investments hovers just around 35 per cent.

"European companies will do well to notice that several international credit rating agencies have recently upgraded India's outlook and current ratings. The realisation has still to take hold in Europe that India, with its rapidly growing economy, skilled human resources, expanding market and a widening industrial and technological base, can be a much stronger economic partner of the European Union," Ms Mukherjee said.

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