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Updated: November 16, 2011 22:46 IST

Logjam in India-EU FTA talks

Sujay Mehdudia
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Cars wait in a traffic jam near the EU headquarters in Brussels. Germany today said the Indian government was not ready to open up the market to the EU community and bring down tariffs on automobiles and other major products
AP
Cars wait in a traffic jam near the EU headquarters in Brussels. Germany today said the Indian government was not ready to open up the market to the EU community and bring down tariffs on automobiles and other major products

Both sides locked horns over high tariffs on automobiles, pharma and chemicals

Expressing concern over the ‘painfully slow' progress of negotiations between India and the European Union (EU) on the proposed Free Trade Agreement (FTA), Germany said that there was no way the treaty could be signed before the India-EU summit to be held in February, 2012 in New Delhi.

Stating that there was a complete logjam in talks and things were stagnating as far as progress in negotiations were concerned, Germany's Head of Foreign Trade Division, Berend Diekmann, said the EU bloc and India were far away from reaching an agreement on the FTA. Both sides have locked horns over the issue of high tariffs on automobiles, pharmaceuticals, chemicals, machinery products, procurement policy, agriculture and wines and spirits. Dr. Diekmann said the Indian government was not ready to open up the market to the EU community and bring down tariffs on automobiles and other major products. “The proposals on the table at present are not attractive and a lot more will need to be done to work out a satisfying situation for both sides. At present, progress of talks has not been satisfying at all. We are not hopeful of signing the FTA anywhere in the near future,” he said.

For instance, he said India had agreed to bring down tariffs on high-end automobiles from the present 60 per cent to 30 per cent and further to 20 per cent after five years. Similarly, for small cars it had proposed bringing down tariffs to 50 per cent from 60 per cent and after five years to 40 per cent which was not acceptable to the EU negotiators who were demanding drastic cuts in tariffs on automobiles and wines and spirits. On its part, India had been demanding that the EU should without any hindrances allow the free movement of professionals within the 27-nation bloc.

“India is no longer a least developed country (LDC). In fact, it is a developed economy in many aspects and it cannot negotiate and seek concessions as an LDC. At present, India and the EU are far away from each other as far as the negotiations are concerned,” Dr. Diekmann said.

The EU has sought substantial reduction in tariffs for export of its automobiles, wines and spirits to India. The Indian automobile industry is opposed to any kind of duty cuts on imports from Europe stating that such a move will harm the domestic manufacturers who have made huge investments in the sector. The EU also wants India to open financial sectors such as banking and insurance, postal, legal, accounting, maritime as well as security and the retail sector.

India and the 27-nation EU have been negotiating a comprehensive Free Trade Pact, officially known as Broad-based Bilateral Trade and Investment Agreement (BTIA), since June, 2007. The EU is India's largest trading partner; bilateral trade in 2009-10 which is aggregated to $75 billion.

On the eurozone debt crisis, Dr. Diekmann said the situation was worrying and a lot of uncertainty was prevailing.

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