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EU- FTA: Wine Tax Reduction Remains Pipe Dream

Posted: Tuesday, 27 September 2011 15:22

EU- FTA: Wine Tax Reduction Remains Pipe Dream

Sep 27 : If you were hoping for the import duties on wines to come down with the imminent signing of the Foreign Trade Agreement between EU and India, you may have to dream longer with the Trade Commissioner of the European Commission Karel De Gucht admitting at a Press Conference in Brussels yesterday that due to slow progress in free trade negotiations with India, the target and hopeful date for reaching a deal is now February 2012 during the next Summit to be held in New delhi

The much hyped up news in the media recently gave a false hope to many that perhaps the deal was around the corner, matched only by the fervour created by the FDI approval which has been delayed on a monthly basis regularly. Announcing after the Trade Council’s meeting on Foreign Affairs on 26 September in Brussels, Trade Commissioner Karel De Gucht said amidst growing uncertainty regarding conclusion of negotiations, I’m determined to achieve a deal. I hope to get there by the next EU-India summit, to be held in February.’  He agreed that a common ground has yet to be found on such issues as wine and spirits, services, the automobile sector and public procurement. “I hope that the remaining problems will be overcome. This would require more flexibility on both sides,” said De Gucht.

EU is anxious to get the pact signed at the next summit to be held in Delhi in February as the general elections taking place later will otherwise take the focus away from the negotiations and the talks may go to the back burner till after the elections.

It is unlikely that Indian bureaucracy will be in a hurry to sign at this summit either. “We have made it very clear to the EU that India is not desperate to do the deal. We have made our position very clear that we cannot move beyond a point as far as tariff liberalisation is concerned,” said a senior commerce ministry official according to Business Standard.

With several NGOs strongly opposing different aspects of the treated, he underlined that despite their apprehensions, the agreement would not hamper the delivery of life-saving medicines to the third world, one of the major contentious issues. While NGOs have expressed concerns about the impact that changes to India's IP regulations could have on its generics drug industry, Mr De Gucht pledged there would be safeguards to ensure that it would not impact the delivery of vital medication. “There will be a clear provision that this will not hamper the delivery of life saving medicines to the third world,” he said.

EU has been urging for greater tariff relaxation on India’s wine and automobiles sector while India is seeking greater movement of its professionals to EU countries. It has also urged the EU to remove some of the non-tariff barriers faced by Indian exporters. There are also wide gaps on intellectual property rights (IPR) issues related to geographical indications, liberalisation of services and government procurement.

EU is a leading trade partner for India, with annual bilateral trade about $85 billion. Both sides have set a target of $200 Billion by 2013.As much as 90 per cent of the bilateral trade in goods and services would be covered under the pact, according to a report.

The EU had been demanding major tariff cuts specifically on fully-built vehicles, which has irked the Indian auto industry. It would give European car manufactures such as BMW, Mercedes-Benz, Volkswagen, FIAT and Renault considerable access to the Indian market. No such deals were made with Japan and Korea  who would have to continue to pay import duty of 110%  on fully built-up cars clearly giving an unfair advantage to EU.

With the speed that Indian Bureaucracy works and with the current political mood, it will be a miracle if the treaty the talks for which began in 2007, is signed at the forthcoming 14th inter-ministerial meeting. One can only and always hope for the best.


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