FTA with EU must cover 95 per cent goods: FICCI

27 Sep 2008


Mumbai: The Federation of Indian Chambers of Commerce and Industry (FICCI) has demanded market access on 95 per cent of goods traded with the European Union (EU), with whom India is negotiating a free trade agreement (FTA).

The India-EU High Level Trade Group in its report has set tariff elimination target of 90 per cent of the trade in goods by both sides under the FTA. However, FICCI feels that this 90 per cent coverage would not guarantee any real market access for products of export interest to India in EU.

Currently, EU has high tariffs on approximately 9 per cent of its overall tariff lines. And if the coverage of trade in goods under the FTA is limited to only 90 per cent for EU, then EU can easily retain practically all its sensitive products under the sensitive list of FTA, noted FICCI.
FICCI further said that in the absence of any effective resolution of issue related to non-tariff barriers faced by Indian exporters in EU there would not be any meaningful gains for Indian exporters from the FTA.

Citing an example of REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals Substances) regulation of EU, FICCI said that the regulation requires extensive tests and a very high compliance cost for Indian exporters. It has been reported that the one-time cost for complying with REACH could be 5 to 10 per cent of the turnover of a manufacturer in addition to significant recurring cost required afterwards, observed FICCI.

This has not only affected the chemicals and dyes exporters but also the users of these chemicals like textile industry. Even the textile exporters are required to procure their chemicals from pre-registered entities under REACH regulations, FICCI pointed out.
FICCI further said that exports of textiles and clothing is also becoming difficult for Indian exporters to EU not only because of high tariffs but also because of various certification requirements related to environment, health and labour. An Indian exporter of textile and garment is required to have number of certificates like OEKOTEX, ISO9001, ISO14001, Certification for Fumigation (ISPM), Certification for Social Accountability Standards for Working Conditions (SA8000), Fair Trade Certifications (for Social & Environmental Standards), etc.

In a survey done by FICCI, it was reported that the OEKOTEX Certificate cost around 1600 Pounds and the Fumigation Certificate cost around 50 Euros per container. The cost related to OEKOTEX Certificate is around 2 per cent of the sale value of an exporters and total compliance cost for various certificates could be as high as 2300 pounds, noted FICCI. This indeed has made our exports in EU market uncompetitive vis-à-vis exports from EU member-countries.
In case of agricultural products, FICCI has sought simplification of sampling and testing procedures in EU countries. These procedures are not only complex but expensive also for Indian exporters. In addition, EU needs to have harmonized regulation related to Maximum Residue Limits (MRLs) for pesticides.

Currently, member-countries of EU have different MRLs for pesticides that make it difficult for the exporters to comply with while exporting to one EU market. All this has discouraged the exports of agricultural products to EU market.
In services, FICCI feels that EU should give one common commitment in various service sectors for Indian service suppliers under the FTA. Currently, the EU service market is very heterogeneous in regulations and conditions for third countries' exporters of services. Liberalisation of a service market at European Commission level does not ensure an effective market access for Indian service providers in individual EU countries as they may be maintaining additional requirements for exceptions from the EU commitments, FICCI emphasised. Also, there is a need to have Social Security Agreement with EU that would ensure export of social security contributions made by Indian professionals while working in EU.
FICCI noted that India continues to have small share in EU's goods and services imports. In 2007, share of India in EU's total goods imports was only 1.9 per cent and in services it was only 1.5 per cent. The FTA could increase India's share in EU's trade provided meaningful market access is given by EU for Indian exporters of textiles, apparels, leather products, chemicals, architectural services, medical professionals, IT professionals, etc, FICCI pointed out.

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