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INDIA-EU SUMMIT
Si! No! May be..

Vajpayee's visit to Rome and Lisbon raises hope in Indian circles but results range from vague to iffy

By Rohit Saran in Lisbon and Rome 

What would you make of a report card that is marked both "pass" and "fail"? If judged by the promises the declaration of the first India-European Union (EU) summit in Lisbon this past week holds out, it was an unqualified success. If measured by anything except some marks in business activity, Prime Minister A.B. Vajpayee's five-day, two-nation jaunt through Italy and Portugal was an undeniable disappointment.

The two-day Lisbon summit had the most powerful Indian Government delegation ever. Vajpayee, Finance Minister Yashwant Sinha, Foreign Minister Jaswant Singh, Industry and Commerce Minister Murasoli Maran and Information Technology Minister Pramod Mahajan trotted out the latest from India's policy and decision-making arsenal. Yet, this A-Team -- backed by top officials from various ministries besides a high-powered delegation from the CII -- could not elicit any major pro-India commitment from any of the 15 countries that comprise the EU.

The Indian delegation couldn't persuade the EU to discontinue any of the anti-dumping investigations pending against Indian imports, just as it could not steer any dramatic shift in the EU's stance on geopolitical issues of relevance to India -- be it nuclear proliferation, India's claim to a permanent seat in the UN Security Council, or international perception of the problems in Jammu and Kashmir. "Summits like these aren't meant to yield anything dramatic," says Sinha. "They set the ball rolling for progress in different directions." This is perhaps true -- and an India-EU meeting of this nature is long overdue. But at the end of a five-day trip that was preceded by hype at home and a high degree of ennui abroad -- major Italian newspapers hadn't even a line about Vajpayee meeting the Pope the day all major Indian dailies front-paged it -- it seemed like a case of India being a victim of its own overstated importance.

In the run-up to the summit, which followed two days in Italy (a combination of a bilateral courtesy call and an opportunity for Vajpayee to meet the Pope and soothe ruffled feathers at home and the West) the Government spokesmen had consistently used two arguments to bolster the meet's importance. One, that the "EU is India's largest trading and investment partner". And two, that "India is only the sixth nation with which the EU had agreed to hold a bilateral summit". Both need qualifying.

While the EU is certainly India's largest trading and investment partner as a bloc (see box), it is not a country, but a region locked in a complicated system of give and take. For example, investments are dealt with at a country level and at a corporate level, but while negotiating trading parameters member countries of the EU adopt a behind-the-wall approach with a country and concessions are extremely difficult to squeeze out. Says Bibek Debroy, an expert on international economics: "Dealing with a region is both different and more difficult than dealing with a country." It would be easier to negotiate with, say, the US, India's single largest investment and trading partner.

Secondly, when it comes to strategic issues, diplomacy and UN affairs, the EU is as splintered as any grouping. That precisely is the reason why India could not get any firm support from the EU on it's claim to a permanent seat in the UN Security Council. The EU does not have a vote in the UN, it's member countries do. Similarly, the EU cannot make any new trade or investment commitments. Any such initiative must come individually from member states.

Shorn of the hype, the India-EU summit did achieve a few things. India has been consistently sidelined at every summit between the EU and Asia by ASEAN countries. In that sense, it is beneficial to develop a direct forum -- this will be an annual affair alternating between a European venue and an Indian one -- for talking business and politics with a powerful European bloc. Before India, EU has held summits with the US, Canada, Japan, Russia and China.

More importantly for Indian trade, the summit provided an opportunity to hammer out some solutions to the long-standing disputes over adequacy and fairness of access to European market for Indian exports. The EU had suspended the quota of import of 3,500 tonnes of textile from India in 1998 because of a dispute over customs duties. After talks in Lisbon, the EU has not only restored this facility but also committed to raise the quota to 8,000 tonnes a year till 2004 if India amends the custom duty on 71 items within three months. The EU has also agreed not to withdraw special facilities available to imports of basmati rice and sugar from India.

Of course, trade -- like investment -- is a two-way process. What India wants from the EU is about the same as what the EU expects from India: greater market access for products and services, lowering of import duties, quicker clearance of infrastructure projects and dependable government policies. Such demands resonated from Rome to Lisbon at every meeting that the prime minister or any of his four cabinet colleagues had with businessmen. In that sense, the summit did provide India an opportunity to address the concerns of investors from all over Europe under one roof -- or in the course of one visit, as it were.

To the extent they could, the ministers did their bit to hardsell India. In his address to a business summit, Vajpayee offered to guarantee returns to investors in power transmission and distribution. He also promised a government-industry forum to sort out problems foreign investors face in implementing projects that have been cleared. Sinha and Maran followed that by listening to individual complaints of European industrialists.

Somewhat expectedly, both the ministers got carried away in claiming that "bureaucratic problems are a thing of the past in India". Their explanation: the Central Government has already put most foreign investments in the automatic route of approvals which takes care of bureaucratic delays at the Centre. At the state level, the competition to elicit investment is getting so intense that most state governments are rolling out the red carpet for investors. As Maran says: "The basic purpose of the summit is to remove misconceptions from the minds of investors and to put India on the global map of investment destinations."

Okay, so India is more on the map -- in terms of business, if nothing else -- for 15 countries of Europe than it was a week ago. Are investors going to act on it? That takes more than five days in sunny southern Europe.

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