India will gain from a larger EU

The European Union has grown to a huge 25-country economic entity, with 10 new members: Cyprus, Czech Republic, Latvia, Estonia, Lithuania, ...

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The European Union has grown to a huge 25-country economic entity, with 10 new members: Cyprus, Czech Republic, Latvia, Estonia, Lithuania, Poland, Hungary, Slovakia, Slovenia and Malta. The earlier 15-member body was already a world trading power to reckon with, coming just a little behind the US. Its exports of goods worth Euro 985 bn and services worth Euro 307 bn in 2001 had already made it the leading exporting and importing entity in the world. For India and other developing countries, it was a huge market, importing goods and services worth Euro 432 bn in 2000. Now, with an addition of 10 members and 75 mn people, it naturally becomes a very coveted market.

The enlarged EU market, now accounting for roughly 20 per cent of the world trade, should definitely be seen as a large trade opportunity. A single set of trade rules, a single tariff and a single set of administrative procedures procedures, besides paperwork and entry requirements reduced to just one set of documents, should not only expedite trading but reduce transaction costs.

Countries like India, which were so far competing with the new members for a greater share of the EU, will of course be at a disadvantage against them. The 10 acceding countries were competing in more than 30 of our top 100 products exported to the EU. The other disadvantage, will be a big reduction in EU demand for many Indian goods and services as the enlarged market would be seeking the same from its new members. There is, however, an expansion of opportunities, as our share in EU’s global trade is only about 1.36 per cent. As new members adopt the EU’s Common Customs Tariff, it will mean better market access for products as the average weighted tariff of the acceding countries is higher (around 9 per cent) than that of the EU (around 3.6 per cent).

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India’s main exports to the 10 acceding countries are gems, jewellery, pharmaceuticals, leather, textiles, plastics and linoleum and agricultural products. India enjoys a competitive edge in these.

Indian service providers too should benefit from the implementation of the single market rules, tariff and other norms by the acceding countries as they will get the same treatment in the new countries as they have been getting in the rest of EU. India’s service providers, who are already meeting the high EU standards, will therefore be able to do well in the markets of the 10 new members. The enlarged EU will also offer a big opportunity for joint ventures. Indeed, India can be a big gainer from the enlargement of the EU.

The writer is president, Federation of Indian Export Organisations