The Financial Express, 8th April 03

Brussels, March 16: Relations between India and the 15-nation European Union (EU) are marked by either great expectations or something close to despair. Last fortnight was no exception.

There has been the high-profile visit to New Delhi by EU chief trade negotiator Pascal Lamy. But even while he was preparing for his visit, Mr Lamy’s officials were meeting their counterparts from India from the working group on agriculture and marine products, one of the numerous bodies set up under the 1994 EU-India cooperation agreement on partnership and development.

Trade commissioner Lamy’s visit to New Delhi and the meeting of the members of the working group can be seen as two sides of the same coin: intimately related yet conveying different messages. Speaking at the celebrations to mark the 20th anniversary of the Consumer Unity and Trust Society (CUTS) Mr Lamy maintained that the name given to the current round of trade negotiations, the Doha Development Agenda, “is not just a pretty, politically correct name…but it also demands results, not just retoric”.

Mr Lamy agreed that “market access is the number one priority for the Doha development round for most developing countries with competitive export sectors, such as India”. He went on to defend the EU against the charge that it remains highly protectionist, especially when it comes to agriculture. Mr Lamy pointed out that the EU has put forward a proposal to slash its import tariffs on agricultural products by more than one third, and has listed specific actions aimed at giving developing countries a better deal through the Doha development round of trade negotiations in Geneva.

But Mr Lamy’s bold pronouncements seemed to have little or no bearing on the position taken by his officials at the meeting of the working group on agriculture and marine products. India is determined to increase its exports of these products to the EU, which at present account for 11 per cent of its total exports (of some $13 billion in 2001 and $10 billion during the first nine months of last year). Hence, the importance of the meeting of the working group, which dealt with the key issue of market access for a wide range of products of export interest to India, including sugar, basmati rice, flowers, gherkins, mushrooms and eggs and egg products. Mr Lamy’s officials raised a number of market access issues from their side, such as India’s shelf life requirements and its high level of protection in the case of cheese.

Mr Lamy’s officials listened attentively to their Indian counterparts, undertook to look into their demands for improved market access but made it clear that action on the part of the EU was unlikely – because of the Doha Development Agenda. Take the Indian request for a reduction in the import duty on cut flowers. The EU could not commit itself at this stage, given that it wants the matter taken up in the wider framework of the WTO negotiations, where a reduction in the import duty on floricultural products can be used as a bargaining counter.

An Indian request regarding basmati rice received a somewhat similar response, but this time because of changes to the EU’s own import regulations on rice, currently under discussion among the EU member governments. At present both India and Pakistan enjoy a duty derogation of 250 euros per tonne on their exports of basmati rice. This amounts, in practice, to virtually duty free entry. However, given the conflict of interests within the EU itself as regards rice production and trade, the negotiations among the 15 member states are making slow progress.

In the present confused situation, India has asked the EU to continue with the present duty derogation system, pending the outcome of their internal negotiations. EU officials meanwhile are considering alternatives to this system, including tariff rate quotas. Should the new import regulations for basmati rice be less favourable to India and Pakistan, both countries would be entitled to compensation under Article 28 of the GATT. Under these circumstances, Mr Lamy’s officials on the working group could only offer to take note of Indian concerns at this stage. The unfavourable impact of the EU’s sanitary and phytosanitary measures on India’s exports of marine products, particularly shrimps, was also discussed in the working group. The EU currently has a policy of zero tolerance as regards the presence of certain chemicals, such as chlorophenicol, in shrimps. The regulation is very strictly enforced by EU customs authorities, to the point where shipments which are rejected are destroyed, thus making it impossible for Indian exporters to re-export to destinations where the sanitary and phytosanitary measures are less draconian. Since scientific evidence as to the safety or otherwise of processed foodstuffs is not always conclusive, the EU has preferred the “better safe than sorry” approach to food safety.

Given this situation, India has asked the EU to approve its milk and egg production units, as it wants to export these products, as well as poultry meat, to Europe. The EU will be sending a veterinary mission to look at those production facilities that want to be approved for export purposes. Indian officials taking part in the working group asked their EU counterparts for concessions on exports of gherkins and mushrooms.

The short answer in the case of gherkins was a polite “no”, on the grounds that India already accounts for 75 per cent of the EU’s imports of provisionally processed gherkins. The situation was more complex as regards provisionally preserved mushrooms.

Mr Lamy’s officials had a number of requests of their own to put to their Indian counterparts. Under Indian regulations, 60 per cent of the shelf life of a product should be in India. EU exporters want this requirement scrapped; they maintain that Indian customs procedures for processed foodstuffs are far too time-consuming. EU officials also asked that the Indian regulation requiring the maximum retail price to be shown on the package be waived in the case of European exports to India. But such a move would discriminate against Indian producers, disadvantage Indian consumers and prevent under or over invoicing.

Given the meagre results of the latest meeting of the working group on agricultural and marine products, it could be argued that Mr Lamy’s speech to CUTS last week should be required reading for his officials. The fact is that while the Trade Commissioner was looking at the broader picture, his officials were busy at individual bushes and trees. The task facing Mr Lamy is how to reconcile the EU’s global interests in world trade with the interests of its own mushroom growers, for example. But this is a task facing Mr Lamy’s counterparts in India and the United States also.