EU-INDIA FTA MAY NOT HAPPEN THIS YEAR, SUGGESTS BRUSSELS

The EU is not in a hurry to conclude free trade agreement (FTA) negotiations with India this year, EU officials suggested last week.

India's commerce minister, Kamal Nath, recently expressed hopes for finalising the talks by the year's end.

However, although both sides have acknowledged significant progress thus far, differences have emerged.

"Although goods (agricultural and non-agricultural) have never been a problem area, services, intellectual property rights and government procurement are not the areas for hurried negotiations," said Annette Grunberg, the European Commission's director-general of trade, pointing to areas of discord in the talks.

The same report in the Financial Express newspaper quoted EU trade spokesperson Peter Power as saying that "2008 is not our deadline for concluding negotiations with India."

The two governments planned to meet this month to discuss their negotiation proposals, but talks have now been postponed until April.

Both sides are aiming to liberalise over 90 percent of merchandise trade, with each to have a 'negative list' of goods which on which tariffs would not be lifted.

The EU's initial negative list, released this week, includes 416 items, with 226 of those goods falling under the chemical, pharmaceutical, or plastics categories, reports the Business Standard. Last year India exported $1.4 Billion in organic chemicals to the EU, as well as $451 million in pharmaceuticals. India has yet to release its own proposed negative list.

Bilateral trade flows between India and the EU have grown rapidly in recent years, reaching €55 Billion in 2006-2007, up from €28 Billion three years earlier.

EU negotiators are also carefully watching FTA negotiations between India and Japan, which Brussels says could affect the EU interests in the Indian market. New Delhi and Tokyo hope to conclude their FTA talks by 2009 (see BRIDGES Weekly, 14 February 2007).

The EU's Grunberg has said that Brussels would like to conclude talks with India before Japan does, but is not willing to rush on crucial issues.
India and the EU plan to hold their annual summit in Paris later this year.

ICTSD reporting; "EU won't push India on FTA" FINANCIAL EXPRESS, 3 March 2008. "EU - India Free Trade Agreement hits roadblock" THE HINDU, 4 March 2008. "416 Items in EU's Negative List for FTA" BUSINESS STANDARD, 10 March 2008. "Which India, Mr. Brown?" THE GUARDIAN, 21 January 2008.

RESERVE BANK OF INDIA SPEAKS OUT AGAINST BILATERAL TRADE AGREEMENTS

Experts at India's central bank are worried that the country's expanding number of bilateral trade agreements could harm the domestic finance sector and undermine multilateral liberalisation, an Indian newspaper reported this week.

According to the Business Standard, the Reserve Bank of India (RBI) has been meeting with the Indian finance ministry about trade talks, arguing that more bilateral free trade agreements risk compromising the goal of a liberal banking and finance sector.

For instance, under FTAs, partner countries will be treated more favourably for the purposes of receiving banking licenses, thus nullifying the purpose of the multilateral system, under which all countries would be treated equally.

The RBI has voiced objections to two FTAs: the already-signed 'Comprehensive Economic Cooperation Agreement' (CECA) with Singapore, and the proposed accord currently under negotiation with Japan.

The RBI feels that some banking and financial regulations in the agreement with Singapore still need to be clarified. For instance, India had agreed to treat two sovereign funds owned by the Singaporean government, Temasek Holdings and the Government of Singapore Investment Corporation, as separate entities for the purposes of investment in ICICI, India's largest privately-held bank. Now, each fund holds a 10 percent stake, and is pressuring the Indian government into making the same concession on future investments, which would essentially allow for double the access envisioned by the original agreement.

India has stepped up its pursuit of bilateral trade deals in recent years, in part due to frustration over the slow pace of the Doha Round negotiations at the WTO. Although politicians have questioned the wisdom of the strategy - generally due to fears of liberalisation-related job losses - this marks the first criticism from the country's central bank, for a very different set of concerns.

ICTSD reporting; "RBI objects to bilateral trade agreements" BUSINESS STANDARD, 11 March 2008. "Indian Rupee Snaps 3-day Loss as Exporters May Have Sold dollars" BLOOMBERG, 4 March 2008.