Expanded EU will hit Indian exports: study

Monday, 03 May 2004, 19:30 IST
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NEW DELHI: A leading business lobby apprehends Saturday's expansion of the European Union from 15 to 25 members would adversely hit Indian exports on account of inter-country preferential tariffs. The PHD Chamber of Commerce and Industry (Phdcci) also says that though the expanded EU offers a tremendous market, Indian exporters would first have to achieve the high standards, tougher than even those of the US, set by the grouping. Inter-country preferential tariffs would particularly hit Indian exports of textiles, leather, jute and chemicals, said PHD Chamber of Commerce and Industry (PHDCCI) president Ravi Wig in a study released Saturday. Emphasising the importance of the EU market, the chamber has pointed out that in terms of merchandise trade, it accounts for 35.3 percent of world exports and 34.4 percent of world imports as compared to 12.3 percent and 19.2 percent respectively for the US. "If we factor out the intra-EU trade, since it accounts for 62.1 percent of the EU's total trade, the EU accounts for 10-12 percent of world exports and imports. This itself is an indicator of the vast potential this market can offer to Indian companies," the report points out. But, being the most competitive market in the world, the report noted that thorough knowledge of the EU market was absolutely necessary for exporters and companies planning to enter the market. "Indian companies must also gear themselves to meet the high quality, environmental norms and delivery schedules that such a developed market demands," the study states. A major hurdle for exporters is the different yardsticks in different countries of EU. "If quality of the product is the most important factor in Germany, Britain and Ireland, it is the product design which is the pre-dominant factor in France, Italy and parts of Spain and Portugal. In the Netherlands, Belgium and parts of Spain and Portugal, price is the pre-dominant factor," the study points out. Indian exporters and companies keen on entering the EU market have to differentiate very clearly between the market segments they wish to target and accordingly frame their marketing plans, said Wig. Besides fine-tuning to the market requirements, Wig said, "for exports from India to become competitive, manufacturing should be given more importance and the domestic tax rates reduced." The chamber has raised concerns about India's ability to raise its share in the total global trade as it is not part of any major preferential trade zone and 95 percent of its trade is outside the preferential zone. "Therefore, India should demand strengthening of WTO's Article 24 which states that customs union, free trade areas or interim agreements should aim at facilitating trade between countries enjoying preferential arrangement in trade and not to raise barriers to trade with other countries, and India is one such country." According to PHDCCI, India should aggressively explore the possibility of entering into free trade agreements with South Africa, the CIS, Egypt, the Gulf Cooperation Council and others. "The government's decision to have a comprehensive economic cooperation agreement with Singapore and a free trade agreement with Thailand is a welcome move," the chamber noted.
Source: IANS
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