India, EU Aim for Free Trade Deal in 2008

At a trade summit between India and the European Union, officials have called for a comprehensive economic agreement to be in place during 2008. As VOA correspondent Steve Herman reports from New Delhi, however, there are doubts that a trade pact can come that quickly and in one piece.

Indian trade officials say they are hoping to conclude a free trade agreement with the European Union by the end of next year.

Talks were held here Friday between top EU and Indian government officials with the goal of moving the proposed pact forward.

The EU, composed of 27 member states, is India's largest trading partner and one of its key sources of foreign investment.

Still, economics Professor Pradeep Agrawal of the Institute of Economic Growth predicts the two sides will not be able to conclude a comprehensive trade pact in one shot.

"It will have to go in phases," the professor said. "It cannot be a blanket free trade immediately because there will be, I'm sure, some industries and agricultural groups and others that will be affected adversely, on both sides actually."

In a pitch to Indian businessmen on Thursday, the EU trade commissioner, Peter Mandelson, called for manufacturing to be the centerpiece of the two-way agreement. Mandelson says India's manufacturing sector would get new access to the European market, and a deal would make European industrial exports to India cheaper.

The talks with the EU come as India is finding itself in increased competition with China for foreign capital. At present, China receives 10 times as much foreign direct investment as India.

India is attempting to bolster its manufacturing base to the same level as its highly regarded services sector. But only seven million Indians are employed in the manufacturing sector, compared with 100 million Chinese.

Economics Professor Agrawal says such statistics give India a strong incentive to complete a comprehensive trade deal with the Europeans.

"There will be a certain stance that China, as it is, is doing very well in its exports and so on, and we need to really catch up to some extent," the professor said. "So, certainly there will be that feeling that if China is going to sign such an agreement, and we don't then it will be very detrimental to our exports."

The EU, however, is having difficulties concluding such a deal with either Beijing or New Delhi.

During discussions this week in China, EU negotiators clashed with their Chinese counterparts concerning the ballooning European trade deficit and international concerns about the safety of Chinese products.

Meanwhile, India has made no secret of its resistance to European environmental standards, especially on greenhouse gas emissions. Officials here contend India needs to increase its use of fossil fuels to expand its economy and reduce poverty.

Separate agreements signed Friday between the EU and India include cooperation in the area of science, technology and development.

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