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Open trade can unlock India's potential
Peter Mandelson
 
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January 15, 2005

You look at India and you see the future. By 2030 India will probably have overtaken China as the world's most populous country. It will be the world's largest democracy and the world's third or fourth largest economy.

With one of the most literate and numerate workforces in the developing world and an entrepreneurialism increasingly turning to the challenges of global competition, India has the potential to be a global trade heavyweight.

A new outward-looking European Union needs to build closer ties with India. Last year the European Union and India agreed on a new Joint Action Plan that will provide a framework for strategic partnership.

This year the EU and India must both show leadership in bringing the Doha Development Round of trade talks to a successful conclusion.

Strategic partnership should mean closer relations at every level: a new spirit of openness. The EU is already India's largest trading partner and its largest source of foreign direct investment.

Yet India's levels of FDI are much lower than other large developing countries, and its international commerce still constrained by unnecessary barriers to trade.

India's newly elected government has an ambitious goal of sustained annual growth of 7-8 per cent and a doubling of per capita income over the next 10 years. These targets will only be reached through boosted foreign trade and increased inward investment.

India still has the highest average tariff barriers in the world and a range of non-tariff barriers in the form of mandatory certification requirements and import bans.

The Prime Minister's announcement of measures to facilitate joint ventures between Indian and European countries is a welcome step. But conditions for inward investment must continue to improve if India is properly to capitalise on its potential.

More transparent and predictable regulation is important for Indian companies and a crucial confidence-builder for European investors. Much better enforcement of intellectual property in India is also crucial.

I would like to see protection for Indian and European 'geographical indicators' -- trademark protection for products identified with their place of production such as Darjeeling tea and Stilton cheese -- written into our bilateral trade agreements.

As part of the Joint Initiative for Enhancing Trade and Investment, EU and Indian business have done good work in identifying these and other obstacles and constraints to trade in eight key sectors including IT and telecommunications.

A strong business to government dialogue is now needed to find policy solutions. It is also time to move beyond annual business summitry and forge closer commercial links between the EU and India.

In education, I want to see European universities welcoming more Indian students.

In the fields of science and research we can develop and ease the movement of scientists between India and Europe and improve and strengthen the partnerships between European and Indian companies.

The EU and India have already concluded agreements on scientific and technological cooperation and we can cooperate further. Especially in fields such as IT, both sides benefit from better technology transfer and can facilitate movement of computer specialists back and forth.

There is a huge reserve of untapped potential in India that could be freed by more open trade and the growth it produces. In India the challenge of poverty makes economic development an urgent priority.

India combines first world capabilities in information technology, pharmaceuticals and biotechnology with third world levels of poverty. Open trade allows India to turn its genius in the former to the work of fighting the latter.

The successful model of its IT sector shows that India has little to fear from a more open international trading system. India's size and potential global influence bring with them challenges of leadership.

Other developing countries will be looking to India for a signal in this year's crucial negotiations on the Doha Development Round of international trade talks.

The round, badly damaged at Cancun and resurrected last July, needs to make urgent progress this year. That progress will depend on our ability to craft an agreement that meets the needs of developing countries.

With such a share of the world's poor, India is rightly committed to ensuring that the Doha round delivers free and fair trade for the most vulnerable. But it is also in a unique position to make the case for open trade in goods and services as a powerful development tool. India's offer for Doha should be ambitious, not defensive.

Europe stands ready to work in partnership with India to achieve our common goals.

Peter Mandelson is European Commissioner for Trade


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