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Productive summit

The agreement reached between the world's largest trading bloc and Asia's second fastest growing economy at the seventh annual EU-India summit in Helsinki to launch formal talks on a broad-based bilateral trade and investment agreement is an expression of economic as much as political will. Despite some reservations on the EU side on the implications of the decision for the future trajectory of the World Trade Organisation, this attempt to convert the failure of the Doha Development Agenda into what Commerce Minister Kamal Nath characterises, arguably, as a "WTO-plus" opportunity is well conceived. India's relations with the European Union are rooted in broadly shared values — commitment to democracy and the rule of law, promotion of human rights, respect for diversity and pluralism, and support for multilateralism. Under politically congenial conditions, India-EU bilateral relations have progressed from trade in merchandise and development cooperation during the Cold War to a political dialogue in the 1990s culminating in a comprehensive strategic partnership. Not surprisingly, the EU is India's largest trading partner. The new arrangement, to be in place within two years, promises to be wider in scope than a free trade agreement. Aside from seeking to eliminate import duties on 90 per cent of tariff lines and trade volumes within a seven-year period, it will encompass investment, trade facilitation, transparency in regulatory frameworks, and the investment-related movement of natural persons. Of course, such a broad-based bilateral agreement should address India's concerns over EU's farm subsidies and non-tariff barriers on Indian goods as well as European concerns over openness, regulatory mechanisms, and tariffs in India.

The EU's inherent strength lies in its huge single market that is integrating ever so rapidly. With the entry of Bulgaria and Romania in January 2007, the grouping will comprise 27 countries. The challenges EU economies face include coping with the needs of aging populations and handling competitive pressures to cut cost under the current phase of globalisation, which relentlessly drives capital to low-cost locations. Prime Minister Manmohan Singh's attempts at the Helsinki summit to leverage India's "Asian" identity in the economic sphere and also to sell the "strong geo-political underpinnings" between India's rising economic profile and global vision on the one hand and the EU's integrated foreign and defence policies on the other were interesting conceptual exercises. However, India will need to back up its advocacy of a multipolar world order based on well-defined rules and effective institutions with a much better demonstration of independence in international affairs than the Manmohan Singh Government has shown thus far.

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