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BW Businessworld

Europe Needs Some Repairs

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I wrote in the last issue of the way david cameron has been courting the bashful Indian damsel for three years without success. I forgot to mention that Britain is no virgin. In fact, it has had a centuries-old liaison with the US; and it has been living in a collective live-in relationship with other members of the European Union for half a century. One would have thought that all its needs would be satisfied by one or the other of its partners. But its affair with the European Union has been especially rocky. It is worth following its gripes, for it may teach us something about the troubles we may have if India signs a Free Trade Agreement with the EU.
India has already had some taste of the difficulties in respect of pharmaceuticals. Basically, EU’s intellectual property laws favour patentors, while India reserves the right to override patents in public interest. Indian pharmaceutical producers produce drugs with expired patents. Big pharmaceutical companies try to prevent that by evergreening patents; the Indian government refuses to register such patents. Indian drug producers have built up a sizeable export business; but when they have tried to export to or through Europe, they have faced trouble. So have they when they tried to buy pharmaceutical companies in Europe. Basically, India’s and EU’s national interests conflict in respect of patents. China has been branded robber of intellectual property in industrial countries. India has not been so targeted largely because our companies are not so good or so active in technology acquisition. But they would have the same trouble if they got better.
We should be aware that there is potential for such conflict also in chemicals, processed foods, insurance, finance and automotives. EU has its REACH —Regulations on Registration, Evaluation, Authorization and Restriction in Chemicals — which create much red tape for exporters to the Union.  So do its rules about value-added tax.
Some of the hurdles will not affect our companies because India is even more bureaucratic than the EU. Bank charges on credit and debit cards are not particularly high; but their use is so restricted in India that they are hardly used for international trade and investment. British firms are used to paying for imports by credit card. They find that fees on a single transaction can go up to 2 per cent in some countries. Indian travellers too should be careful; they can end up paying heavily on credit card transactions in Europe.
The EU is keen on country-of-origin rules; it would like to modulate its import restrictions on the basis of how far regulations in other countries fall short of its own. The Europeans keep making a case for the restrictions by publicising impurities found in our exports. Since India is nowhere close to the EU in the scope and strictness of regulations, its exports would face the worst restrictions. Our small exporters of, say, pepper or mangoes would find it impossible to meet the restrictions. All that an FTA would do is to extend the reach of such restrictions. Unfortunately, India is crazy about signing FTAs with all and sundry; so India’s exports are already riddled with red tape. No wonder we cannot pay our way in trade.
So, possibly, India is perfectly competitive with the EU in bureaucratic rigmarole, and may not have the same complaints about its red tape as Britain. But Indian bureaucrats should read the British businessmen’s report on European red tape to learn what red tape they could do without. The government could go further and ask the same businessmen to make a similar report on Indian red tape. If Cameron is keen on developing closer ties with India, he will also be interested in making India more friendly to British businessmen and traders. And if it becomes friendlier to them, it will become friendlier to our own businessmen. We have topped world tables of most bureaucratic countries for years; it is time we made an effort to climb down the ladder. And we can come down faster with some help from abroad.   

The author is Consultant Editor of Businessworld.

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(This story was published in BW | Businessworld Issue Dated 30-12-2013)