Agence France Presse

New Delhi, April 28:

The historic expansion of the European Union (EU) from 15 to 25 members on May 1 is likely to open a huge untapped market for trade with India, industry officials said today. The EU is India’s largest trading partner, with the annual level of trade standing currently at $24 billion. But trade with the 10 acceding nations is only about $564 million due to factors such as weak banking facilities, difficult visa arrangements and complicated trade regulations. YK Modi, president of the Federation of Indian Chambers of Commerce and Industry (FICCI), said commercial arrangements with the 10 mainly former communist bloc countries were likely to improve as their trade regulations would have to be harmonised with those of the EU. “In view of the large untapped potential that exists, we perceive that the enlarged EU with a huge market and GDP of over 10 trillion Euros would result in greater diversification of trade,” Modi told a conference in New Delhi attended by Indian and EU trade officials.

“Two-way trade would be further enhanced with the decline of the average tariff levels of accession countries along with India’s tariffs which are also moving southwards,” he added.

The 10 new states are Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. “We should now look at major technological collaborations with the acceding nations, especially in knowledge-driven areas such as information technology, biotechnology and pharmaceuticals,” Modi said. Several European firms have been scouting in India for collaborations because the cost of medical and research facilities and quality scientific manpower is among the lowest in the world.

“While we are optimistic of the implications of the enlarged European Union on India, we are also deeply concerned about the likely impact of the extension of (stringent) EU regulations and standards to 10 more countries,” Modi said. “This is especially true for our agri food exports to the EU that have, in the past suffered as a result of some stringent standards,” he said, adding that these amounted to non-tariff barriers to trade. Modi said Indian industry was also worried that textiles, their export mainstay, could be hit by these policies.

There were also concerns the benefits to developing countries of the ending in Europe in 2005 of a multi fibre agreement, which sets ceilings on textile imports, could be offset by higher tariffs. “There is considerable apprehension that the removal of multi fibre agreement may lead to even higher tariff levels, which are currently around four to 11 per cent,” he said.

A study carried out by FICCI, entitled ‘EU enlargement and its implications for India’, warned some of the countries joining could provide stiff competition to Indian exports in the European Union. It said Poland and the Czech Republic in particular were India’s main competitors in 46 of the top 100 export items, ranging from footwear, leather products, auto components and synthetic yarn.

“A major concern for India is that once the accession countries become a part of the EU domestic territory, they would have a tariff advantage over India,” it added. The head of the delegation of European Commission in India, Francisco da Camara Gomes, said the enlargement was bound to be beneficial for India. “To my mind ‘Fortress Europe’ has always been a myth and fear of an ‘enlarged Fort’ is likely to be a similarly mythical notion,” he said.