India and the European Union (EU) took the first step towards an ambitious trade pact on Friday.
A joint statement released at the end of the seventh EU-India Summit in Helsinki called for "a broad-based bilateral trade and investment agreement", that both the EU and Indian leaders insisted would add to — not reduce — the importance of multilateral agreements at the World Trade Organisation (WTO).
Last year, the Doha round of WTO talks was halted due to differences over farm subsidies between the United States, European and developing countries, including India. The deadlock was discussed at the summit, which eventually agreed that the talks should be resumed soon.
Prime Minister Manmohan Singh called the efforts a "very significant step", a win-win situation for Europe as well as India. "We have agreed to start negotiations on a broad-based bilateral trade and investment agreement between India and the EU, covering over 90 per cent of tariff lines and trade volumes," he said.
The agreement will give the two economies easier access to each other's markets for goods, services and investment, besides dealing with complaints of tariff and non-tariff barriers from importers on both sides. "We will gain but so will the rest of the world," said EU trade commissioner Peter Mandelson. "Any agreement between us will set new standards for openness and global trade rules."
Sources in the Indian delegation claimed the EU had suggested a comprehensive economic cooperation agreement, rather than one in trade and investment alone.
But India demurred, since such an agreement would involve the European Parliament, and require meeting the EU's controversial environmental standards.
Commerce Minister Kamal Nath said there would have to be separate negotiations for these.
Last year, the trade between the EU and India grew by 20 per cent to about €40 billion (Rs 2,28,000 crore). The Confederation of Indian Industry expects it to rise to €70 billion by 2008.