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T S Vishwanath: Time for European lessons

Indian industry needs to understand EU markets better to benefit from a potential bilateral free trade agreement

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The India-European Union Bilateral Trade and (BITA) is the next big trade agreement to be negotiated by India. Consultations are progressing and issues on the table are slowly getting resolved. However, there are some issues that industry needs to study closely if it wants to benefit from the proposed bilateral trade and investment agreement.

It is important to note that though the European Union (EU) negotiates as a single bloc, all its 27 nations are not fully harmonised on many issues. The latest matter to hit the headlines is the single patent regime. For several years, the EU has been trying to introduce a single patent regime and has failed. At present, the EU has national patents that are not covered under a single jurisdiction. The cost of filing a patent in EU countries is allegedly 10 times higher than the cost of obtaining a patent from the US. This has forced several global companies, especially in sectors like pharmaceuticals in which several patents are registered, to be judicious with their choice of filing for patents in the EU. The reason for the delay in creating a single EU patent regime is that EU member countries are unable to come to a conclusion on issues such as the language regime that has to be used and how disputes can be litigated.

Though the EU industry has been pressing India on issues such as data exclusivity for the pharmaceutical sector, it has not been able to make much inroads with the EU legislators on issues that impact business in a large way. Latest news reports say that while the European Commission is hopeful that a solution may be in sight, some countries such as Spain and Italy have not yet come to terms with the political push from Brussels to move towards a single patent regime for the whole of the EU. This matter would be an important development for many medium-sized Indian firms in the pharmaceutical or high-technology sector. These firms view the free trade agreements as a stepping stone to turn into global companies.

Another matter of concern for industry would be in the area of sanitary and phytosanitary measures in which the EU has adopted limits for pesticide residues without providing adequate scientific reasoning which is needed according to the agreement. Many meat and dairy producers also complain of different laws governing import of these products in different countries of the EU. This issue will need to be addressed to ensure that India manages to gain a foothold in the large food and agricultural market in the EU.

The EU has also been struggling to put in place a Single Services Directive. The Directive, which was introduced in 2006, aims to open up a single market to service providers in the EU and facilitate cross-border provisions of commercial services. However, in a recent debate, Members of the European Parliament were of the view that red tape and lack of information were still stalling progress in the movement towards the final objective. The deadline for member states to implement the directive’s provisions expired at the end of 2009. Since India would want to tap the services market in a big way, industry in India should understand how legislation in the different countries work in sectors that are of interest to them.

The 27-nation EU is certainly a large market for India and an India-EU would go a long way in opening up the market for Indian exports. But at the same time it would also open up the Indian market for EU to export products that, at present, may be facing high tariffs. Saddled with slow economic growth, businesses in the EU view the deal with India as an important milestone to expand their market base. Therefore, there is an urgent need for Indian business to understand better and provide Indian negotiators with relevant issues that need to be tackled even as they negotiate an agreement with Brussels. Indian negotiators have been successful in ensuring that India’s defensive interests are protected during the on-going negotiations. But now industry will have to help the negotiators by providing information on sectors in which they could face market access issues vis-à-vis the EU.

The author is principal adviser, APJ-SLG Law Offices

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