Round The World

New Delhi, 31 March 2015

Brussels Denial

COUNTER STRATEGY IN PLACE

By Ashok B Sharma

Brussels may not be willingly to oblige India at the moment by inviting Prime Minister Modi for what would be an EU-India summit, as it is perturbed over the delay in rendering justice to the two Italian marines who allegedly shot down two Indian fishermen in the country’s waters. But France and Germany have taken a different view and are to welcome him.

Brussels’ denial, however, does not upset Modi’s calculus. India-EU Broad-based Trade and Investment Agreement (BTIA) is still under negotiation striving to settle contentious issues relating to intellectual property rights among others. According to several trade analysts, watering down of Indian intellectual property regime and data exclusivity at the behest of the European Union is likely to spell a doom for the Indian pharma and agro-chemical industry in particular. The terms being insisted by the European Union are inimical to the dairy sector in the country. EU wants free access to their subsidized skimmed milk powder and Feta cheese.

At the World Trade Organisation (WTO), India and other developing countries have been consistently complaining about highly subsidized European agriculture and protectionist barriers like high tariff regime, non-tariff barriers and politically motivated sanitary and phyto-sanitary measures (SPS). These European initiatives have placed the farmers, in particular in the Third World countries at a serious disadvantage, denying them of a level playing field in the multilateral trade. While keeping their subsidy regime and protectionist measures intact, the European Union wants easy access of their farm products and also industrial products such as scrap cars in the Indian market. It also wants elimination of export tax on raw materials exported to Europe.

The EU has become more protectionist in trade following the global recession that followed the liquidation of Lehman Brothers in US in 2008. Again the blow of the sovereign debt crisis made Europe difficult to recover and come back to its pre-recession growth rate. EU’s involvement in the Ukraine crisis further complicated the problem. EU had been a major destination for Indian exports which has experienced considerable shrinkage following recession in Europe. In such a situation it is unlikely that EU would make any major concessions to accommodate Indian exports. Rather it would be willing to seek more markets for its goods.

However, investment in enterprises is a different ball game altogether. India needs more inflow of foreign direct investments (FDIs) to facilitate growth. But unfortunately both trade and investment are clubbed together in BTIA which has made difficult to reach a final conclusion. Yet there is scope for striking bilateral trade and investment agreements with several European countries which can be a better option. Hence it would be better not to harp much on the deal like BTIA with EU but rather go ahead with inking mutually beneficial agreements with major European economies like France, Germany and the UK.

Though in aggregate terms the countries of the European Union are growing slowly at 1.2 per cent, Germany, UK and France have the potentiality to grow faster. Modi is scheduled to visit France and Germany in the second and the third week of April and is expected to ink several bilateral agreements and seek investments from these countries. In his first leg of his visit he is scheduled to meet President Francois Hollande. The purchase of Dassault Aviation’s $12 billion Rafale fighter planes, Multi-crore Maitri surface-to-air missile system project - SR-SAM project are likely to figure in the talks along with proposals for strengthening defence cooperation. The two sides are expected to take up Jaitapur nuclear power project where the two countries are planning installation of six nuclear power plants in a phased manner.

On 6 December 2010 an agreement was signed for the construction of first set of two third-generation European Pressurized Reactors and the supply of nuclear fuel for 25 years in the presence of the then French president Nicolas Sarkozy and the then Indian Prime Minister Manmohan Singh. But in this year’s Defence Budget there is very small space to make big ticket purchase in the pipeline like $12 billion for medium multirole fighter jets, $1.2 billion for six Airbus A330 tankers, $1.1 billion for 22 Boeing Apache attack helicopters, $1 billion for 197 light utility helicopters, $833 million for 15 Boeing Chinook heavy lift helicopters, $600 million for light howitzer guns from BAE Systems, $200 million for 98 Black Shark torpedoes from WASS, $350 million for 1,418 Israeli-made thermal imaging sights for T-72 tanks, $250 million for 262 Barak missiles from Israel Aerospace Industries.

However, with a view to curtail defence imports, Prime Minister Modi is insisting upon co-designing, co-production and co-development of defence equipment and platforms in the country under the ‘Make in India’ initiative. This is the time for him to discuss and finalise such initiatives with President Hollande. Also Modi may take the advantage of discussing cooperation in renewable energy and combating climate change ahead of the Paris talks.

As India is a partner country to Hannover Messe 2015, Modi’s visit to Germany is likely to centre round urging for more investment flows into the country. Apart from inaugurating the Hannover Messe along with Chancellor Angela Merkel, he will also have bilateral discussions with her and other senior leaders. After the joint `Walk Through’ of selected Indian stalls, both the leaders are scheduled to attend the inaugural session of Indo-German Business Summit. More than 300 Indian companies and 100 CEOs of Indian companies are participating in Hannover Messe. Other than 12 State governments, including Maharashtra, Andhra Pradesh, Punjab, Gujarat, Rajasthan and UP who will exhibit their profiles in the State Pavilion adjacent to India’s.

Germany is a leader in renewable energy and Modi expects to mobilise investments for not only renewable energy, but also for electronics and electricals, smart cities, Skill India, heavy industries and motion drive and automation and Digital India. He is also expected to appeal to the Indian diaspora in France and Germany.

Modi’s visit will not only be limited to these two European countries, but it will be Trans-Atlantic covering Canada as well. In his scheduled visit in mid-April, he is expected to discuss with Prime Minister Stephen Harper and interact with the Indian community. It was Harper who cleared the deal for sale of Canadian uranium to India in 2012 for use in nuclear power plants. Apart from trade and investment issues, talks are likely to be on combating climate change and cooperation in renewable energy.

Thus Brussels’ denial to host Modi is not likely to upset Indian strategy, if bilateral agreements are carefully inked with France, Germany and Canada. Indian officials are quite confident of the success of the forthcoming visits.---INFA

(Copyright, India News and Feature Alliance)