The Hindu Business Line : India, European Union upbeat on free trade pact prospects

New Delhi May 1 The European Commission (EC) has hailed the recent adoption of negotiating mandates by European member countries for new free trade agreements (FTAs) with India, South Korea and ASEAN (Association of South East Asian Nations), stating that these agreements would open new markets for both parties and give a valuable impetus to global trade together with a successful end to the Doha Round.

According to the Brussels-based EC, new independent research released by it suggests that the agreements could add more than 40 billion to EU exports annually and provide wide new trade opportunities for all participants in the FTAs. The EC, which would negotiate on behalf of EU member states, expects to launch negotiations in the months to come.

Officials in the Department of Commerce are equally gung-ho about the prospects of an FTA with the European Union, stating that combined with India's comparative advantage in traditional goods such as textiles and clothing and sophisticated expertise in services, the extension of the proposed FTA later into a comprehensive economic cooperation agreement with the EU would pave the way for "a win-win situation".

Research findings

The initial results of analysis undertaken by CEPII and Copenhagen Economics for the EC suggest that these agreements would result in large net additions to global trade, with trade diversion effects from these agreements likely to be minimal.

While an agreement with ASEAN would see some trade diversion from China and India, Gulf States might see some trade diversion by an EU-India FTA. By focusing on areas currently outside the WTO such as business services, the three agreements would complement the multilateral system as well.

One of the important effects of the FTA between EU and India, the EC said, was that Europe's vehicle exports to India are likely to increase by 700 per cent worth 1.8 billion. Similarly, the biggest gains for EU partners would include, among others, business services from ASEAN (an 80 per cent increase worth 14 billion ); textiles and clothing from India (an increase of 46 per cent worth 3.6 billion ); vehicles from Korea (an increase of 40 per cent worth 5.2 billion ).

The research is based on studies that modelled a scenario under which India would remove almost 95 per cent of all trade barriers and a 25 per cent reduction in barriers to services markets.

The EU said as a central part of the EC's Global Europe trade policy framework, recently adopted, the new free trade agreements would complement the EU's strong commitment to the multilateral trading system by focusing on areas not currently covered by WTO rules such as investment, trade in certain services and the removal of non-tariff barriers.