A Study of Bilateral Economic Relations
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Transcript of A Study of Bilateral Economic Relations
Chapter-1
Introduction
he positive impact of international trade on economic growth has
been widely documented from both a theoretical and empirical
point of view. The classical and Neo-classical economists’ believed that
participation in international trade could be a strong positive force for
economic development. There are so many reasons that support the role
of international trade to economic development. One of such approach of
export trade to development is to concentrate on the industrial sector that
is the core of international trade1. Developing countries learn from
imported technology and also from technological progress embodied in
imported goods. This learning increases domestic stock of knowledge
and, hence, domestic productivity and growth. Thus, one could argue that
the greater the trade volume is, the more knowledge can be potentially
accumulated. Technological progress makes possible to produce goods
of increasing quality at each time lower costs2. Therefore, international
trade can potentially play a crucial role in fueling economic growth of
less developed countries. In other words, it can become one of the
engines of growth for a country.
T
1.1 Foundation of Research Study
Bilateral economic relations refer to the economic relations
between two nations. In the current global scenario, countries can no
longer afford to restrict economic activities within the home economy.
With the growth of globalization and liberalization, countries find it
advantageous to forge economic relations with other nations. Bilateral
1
economic relations help developed nations to access the markets of
developing countries. This is beneficial for the industries of the
developed nations as they can penetrate the markets of various countries.
Developing nations like India has also gained significantly from bilateral
economic relations with other countries.
(a) Economic Relations :
Bilateral economic relations play a strategic role in the growth and
development of an economy. Some of the major benefits of bilateral
economic relations are advantages of lowering cost due to technology
transfers, economies of scale and employment. Many countries across the
globe have established strong bilateral economic relations with other
countries. The biggest advantage for the developing nations from bilateral
economic relations is in the form of employment generation. With the
inflow of capital to these countries, economic activity is boosted resulting
in the growth of the economy. In the case of undeveloped economies,
bilateral economic relations help them to get economic aid and loans for
development projects.
One of the major components of bilateral economic relations is
bilateral trade. The trade of goods and services between two countries
help both the participating countries to reap benefits by exporting goods
and services which are produced in excess and importing those where
there is a shortfall. Bilateral trade brings down cost of production of those
goods and services for which there is comparative disadvantage in an
economy. In this era of globalization, many countries have opened up
their economy to foster bilateral trade. Regulatory relaxations alongwith
relaxations in import excise and customs play an important role in
bilateral trade. Several bilateral trade agreements have been signed
between nations.
2
Another important aspect of bilateral economic relations is FDI.
Inflow of foreign direct investments has proved to be beneficial for many
developing countries. Many countries across the globe have undertaken
liberalization policies to attract foreign direct investments for the
development of the economy.
This is also beneficial for investors since they can invest in
countries from where they can get higher returns. Bilateral economic
relations also help countries to get loans and economic aid from other
countries during times of need. This is especially beneficial for
developing and underdeveloped countries.3
(b) Basic Principles of World Trading System :
One of the basic principles in the world trading system is the
principle of nondiscrimination. This principle provides for the prohibition
of discrimination by a country between its trading partners and
discrimination between its own and foreign goods. This principle is
applied in relation to like products. Thus, the principle of non-
discrimination has two aspects: the Most Favoured Nation (MFN) rule
and the National Treatment rule.
‘The MFN rule requires that a product made in one member
country be treated no less favourably than a “like” good that originates in
any other country.’ The rule of most favoured nation has been in
existence for hundreds of years. In the words of Jackson, most favoured
nation clause apparently have at least seven hundred- years history in
trade agreements. However, the clause was brought to the multilateral
trading arena following the coming into picture of the 1947 General
Agreement, GATT.4
3
1.2 Objectives of the Research Study :
The European Union is one of the largest trading partner of India
in goods and services. It is a large source of FDI inflows and technology
transfer. India needs FDI and technology in infrastructure and
manufacturing and thus there are strong complementarities. India’s low-
cost educated workforce can complement the ageing population of many
EU member states such as Germany, France, Italy, Netherlands and
Sweden. India and the EU also have commonalities in terms of multi-
cultural democracy and quasi-federal governance structure. Both
economies are strong proponent of multilateral liberalization and in
recent years are actively engaged in bilateral negotiations. Even though
the EU is one of India’s largest trading partners in goods, its share is
declining. India is a relatively high tariff country and has other forms of
market protectionism such as restrictions on foreign direct investments
(FDI). Given this background, the study has the following objectives :
(i) To examine the recent trends of bilateral trade and to assess the
impact of European Union on Indian external trade ;
(ii) To evaluate the role of European Union in Foreign Direct
Investment (FDI);
(iii) To highlight the major problems and difficulties’ faced by both
sides for removing the bottlenecks of trade relations; and
(iv) To analyse the ways and means for stronger bilateral trade relations
between European Union and India.
4
1.3 Nature and Significance of Research Study :
During the last twenty five years, the process of European
economic integration and economic liberalization in India has created
tremendous opportunities for European Union and India. Trade and
economic relations with the European Union have always been very
important for India. Although, in absolute terms, India’s trade with the
EU has increased, but in relative terms it is decreasing. There are several
reasons, due to which India and European Union trade has grown at a
slower pace than India’s total trade.
The European Union is India’s vast market for agricultural goods
but the potentiality does not get fully exploited because of high level of
protection in the form of Non Tariff Barriers (NTB). In this context the
present study analyses the EU’s tariff and non tariff barriers to India’s
export. For this, the study calculated International Revealed Comparative
Advantage (IRCA) for both India and European Union by using the
Balassa index.
1.4 Theoretical Exposition of Trade Agreements:
Over the last decades, numerous types of arrangements and
agreements between countries have been established. The trade
arrangements and agreements range from informal working groups to
customs unions and include anything from safe investment guarantees to
environmental agreements. Intellectual Property Rights are part of most if
not all agreements. The most common, or perhaps well-known,
agreements are Bilateral Investment Treaties and Free Trade Agreements.
The road to a FTA is usually long and bumpy – a few FTAs are
5
concluded and effective within 3 years of the first round of FTA
negotiation rounds and more than a few of those talks have taken over a
decade5.
1.4.1 Agreements without Duty Reduction :
Many of the Trade Agreements that do not include duty reduction
schemes are actually completed with the objective to complete a Free
Trade Agreement in the future. These types of agreements include:
Bilateral Investment Treaty : A Bilateral Investment Treaty (BIT)
provides investors with various guarantees when investing in the
country of the treaty partner. The BIT partners commitment is
basically extending security on investing to foreign companies and
individuals. BITs are not necessarily an agreement that is the start
for further reaching agreements; they are merely common courtesy
agreements for financial security. Currently, over 2,000 BITs are in
place e.g.: Canada–Argentina
Foreign Investment and Protection Agreement : The main
provisions of the Foreign Investment and Protection Agreement
(FIPA) cover the handling of foreign investments by the host
country, the transfer of capital and investment income,
compensation for expropriation and procedures for settling
disputes. e.g.: Switzerland–Colombia signed in 2006.
Joint Commission : A Joint Commission (JC) is a forum where
members of the JC discuss opportunities to advance cooperation
between the members, for example, on economic cooperation,
technology, or environmental issues. e.g.: CARICOM–Chile.
Economic Partnership Agreement EPA : The EPA agreements are
comprehensive in scope, covering such fields as trade in goods,
6
trade in services, investment and economic cooperation. e.g.,
Japan–ASEAN.
Trade and Investment Framework Agreement : A Trade and
Investment Framework Agreement (or TIFA) is a trade pact that
establishes a framework for expanding trade and resolving
outstanding disputes between countries. TIFAs are mostly
negotiated with countries that are in the beginning stages of
opening up their economies to international trade and investment,
because they either were traditionally isolated or had closed
economies. e.g.: Australia–Egypt.
Economic Framework Agreement : An Economic Framework
Agreement is typically an agreement that highlights cooperation
and promotion at various levels and in various areas. The
Agreement can and usually does include a section on the objective
to create an FTA feasibility study. Typical areas included in the
agreement are : trade facilitation (inspection, quarantine,
cooperation, promotion). e.g.: Australia–China EFA.
Partnership Cooperation Agreement : The aim of the Partnership
and Cooperation Agreement (PCA) is to encourage political,
commercial, economic and cultural cooperation. e.g.: EU and
Russia. The EU–Russia PCA covers trade, commercial and
economic relations and institutes political communication up to the
highest levels.
1.4.2. Agreements with Duty Reduction :
Agreements with duty reduction schemes vary both in range of
duty rate reduction and scope outside duty rate reductions. Within the
type of agreements, the level of reductions and scope can also vary. These
types of agreements include :
7
Economic Completion Agreement : The ECA is typically bilateral
and covers only specific sectors/products. Partial or full duty
reductions are the main components of the agreement. ECA’s can
be regarded as a partial FTA or a partial preferential agreement and
are very common in Latin America.
Economic Cooperation Agreement : An Economic Cooperation
Agreement typically includes duty rate provisions and also
supports language with regard to trade facilitation and increased
levels of cooperation between signees e.g.: BIMSTEC.
Free Trade Agreement/Regional Trade Agreement : Free Trade
Agreements or Regional Trade Agreements are agreements
between two or more countries that regulate duty reduction
schemes, the conditions under which the duty reduction can be
applied, and often times include additional agreements regarding
trade facilitation.
Common Internal/External Tariff : A common internal tariff is
set up when countries that signed a particular agreement set up a
single tariff for shipments originating in and destined for countries
party to the agreement. A common external tariff means shipments
from non agreement countries into agreement countries are
classified in the same external tariff and the duty rates applied are
identical notwithstanding into what agreement country the import
takes place. Typically, common external tariffs are in place where
Customs Unions are established.
1.5 Unilateral, Bilateral and Multilateral Trade Agreements :
Recent years have witnessed a shift in regional economic
cooperation strategy from multilateral to regional and bilateral
8
cooperation agreements.6 Unilateral trade agreements are trade incentives
an importing country offers in order to encourage the exporting country
to engage in international economic activities that will improve the
exporting country’s economy. Typically, unilateral initiatives are offered
to developing countries or countries that are encouraged to steer away
from export of illegal drugs. The incentives typically include reduced
duty rates, for which the exporting country will qualify if certain
thresholds are met. The most common programme is the General System
of Preferences (GSP).
A bilateral trade agreement is an agreement entered into between
two countries under which the participants agree to reduce tariffs, quotas
and other restrictions on trade between them. Bilateral trade agreements
are, as the name suggests, bilateral in character7.
A multilateral trade agreement involves three or more countries
who wish to regulate trade between the nations without discrimination.
They are usually intended to lower trade barriers between participating
countries and, as a consequence, increase the degree of economic
integration between the participants. Multilateral trade agreements are
considered the most effective way of liberalizing trade in an
interdependent global economy. The multilateral trade agreements can be
formed in regional basis also. There are many multilateral trade
agreements between countries, worldwide regionally, for the
development of economy of each member countries signed in each
multilateral trade agreement. SAARC (South Asian Association for
Regional Cooperation), NAFTA (North American Free Trade
Agreement) etc. are some of the multilateral trade agreements constructed
geographically. Although multilateral trade existed earlier, it was only
after World War II that nations recognized the need for a set of rules with
9
the objective of securing market access for postwar recovering
economies. The first such set of rules came in 1947 in the form of the
General Agreement on Tariffs and Trade (GATT). Article 13 of the UN
Charter 9 states that the UN General Assembly shall: […] initiate studies
and make recommendations for the purpose of promoting international
co-operation in the political field and encouraging the progressive
development of international law and its codification8.. GATT was
replaced in 1995 by the World Trade Organization (WTO), which has
more than 150 members. The WTO agreements cover goods, services and
intellectual property.
Although India has been a strong supporter of the multilateral
trading system, it started taking a keen interest in the increasing
regionalism around the world in recent past. One explanation for this is
that the WTO has become increasingly slow and comparatively
ineffective as a means of establishing a system of free trade between
countries. As the trade rounds of the WTO have become more liberal and
sought to address wider issues, they have also become more lengthy and
difficult to conclude. Currently, India is among the top most countries
having RTAs/FTAs either in place or under negotiation. The total
cumulative number of India’s proposed or existing RTAs/FTAs is 31 of
which 21 are with countries in Asia and the Pacific region. Among the
first preferential trading agreements in Asia was the Bangkok Agreement
of 1975 of which India and Korea, among other countries, were founder
members. Thereafter, India has joined various other regional trading
arrangements9.
10
Table1.1India’s Engagements in Regional Trading Agreements
I. List of India’s 15 FTAs / PTAs already in forceS. No
Name of the Agreement
1 India - Sri Lanka FTA
2Agreement on SAFTA (India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives)
3Revised Agreement of Cooperation between Government of India and Nepal to control unauthorized trade
4 India - Bhutan Agreement on Trade Commerce and Transit5 India - Thailand FTA - Early Harvest Scheme (EHS)6 India - Singapore CECA
7India - ASEAN- CECA - Trade in Goods Agreement (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam)
8 India - South Korea CEPA9 India - Japan CEPA10 India - Malaysia CECA
11Asia Pacific Trade Agreement (APTA) - (Bangladesh, China, India, Republic of Korea, Sri Lanka)
12
Global System of Trade Preferences (G S T P)-(Algeria, Argentina, Bangladesh, Benin, Bolivia, Brazil, Cameroon, Chile, Colombia, Cuba, Democratic People's Republic of Korea, Ecuador, Egypt, Ghana, Guinea, Guyana, India, Indonesia, Iran, Iraq, Libya, Malaysia, Mexico, Morocco, Mozambique, Myanmar, Nicaragua, Nigeria, Pakistan, Peru, Philippines, Republic of Korea, Romania, Singapore, Sri Lanka, Sudan, Thailand, Trinidad and Tobago, Tunisia, Tanzania, Venezuela, Viet Nam, Yugoslavia, Zimbabwe)
13 India - Afghanistan14 India – MERCOSUR-(Argentina, Brazil, Paraguay and Uruguay)15 India - Chile
11
II List of FTAs / PTAs under negotiations
S. No.
Name of the Agreement and Partner Countries
1.
India - EU Bilateral Trade and Investment Agreement (BTIA)-(Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom)
2.India - ASEAN CECA- Services and Investment Agreement (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam)
3. India – Sri Lanka CEPA4. India - Thailand CECA5. India - Mauritius CECPA
6.India - EFTA BTIA (Ireland, Norway, Liechtenstein and Switzerland)
7. India - New Zealand FTA/CECA8. India – Israel FTA9. India - Singapore CECA (Second Review)
10.India – Southern African Customs Union (SACU) Preferential Trade Agreement (PTA) (South Africa, Botswana, Lesotho, Swaziland and Namibia)
11.India - MERCOSUR PTA (Argentina, Brazil, Paraguay and Uruguay)
12. India – Chile PTA
13.BIMSTEC CECA (Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal)
14.India – Gulf Cooperation Council (GCC) Framework Agreement
(Saudi Arabia, Oman, Kuwait, Bahrain, Qatar and Yemen.)15. India – Canada CEPA
16.India - Indonesia Comprehensive Economic Cooperation Agreement (CECA)
17. India-Australia CECA
Source: Annual Report 2012-2013/ Department of Commerce, Ministry of Commerce and Industry, Govt. of India.
12
13
1.6 India’s Economic Relations :
India has important and strong economic relations with many
countries in the world. After the economic reforms of the early nineties,
the Indian economy was opened up to further bilateral trade relations with
various countries and to foreign Direct Investment (FDI). Import
restrictions on many items were lifted which led to expansion of India’s
economic relations with other nations.
Relations between the European Union and the Indian sub
continent have a long history that reaches back to the establishment of the
first official contacts at the beginning of the 1960s. India was one of the
first developing countries to establish relations with the European
Economic Community (EEC).10
EU-India trade relations have progressed tremendously over the
last several years. India ranked 8th in the list of the EU's main trading
partners in 2010, up from 15th in 2002. The EU is India's largest trading
partner accounting for approximately € 96.3 billion in trade in goods and
services in 201311. Bilateral trade in goods alone rose by 20% between
2010 and 2011.The EU accounted for 19% of India's total exports and
14% of India's total imports in 2010. On the other hand, India accounts
for 2.6% of EU's total exports and 2.2% of the EU's total imports.
Though economic relations between India and EU have been
strengthening, the current size of trade and investment between the two
economies is relatively low compared to the size and structural
complementarities of the two economies. In this context, the present
research work is an attempt to analyse trade and investment relations and
14
to explore future areas of potential economic co-operation between India
and European Union.
1.7 Research Methodology and Sources of Data:
The research methodology constitutes all those methods, which are
used by the researcher in the fact-finding mission. For any type of
research methodology the important as well as crucial aspect include the
rationale in choosing the research design. It should include not only the
relevant aspects of the plan of the study but also the possible instrument
for the conduct of research in the process of finding solution to the
problem. For the present study, on the basis of nature of the research, data
structure is largely based on secondary data. The data was extracted from
the following sources :
i. Annual reports, Ministry of Commerce and Trade Govt. of India.
ii. Hand book of statistics on the Indian Economy, RBI, various issues
iii. Economic Survey, Government of India, various issues.
iv. UNCTAD, WITS, various issues.
v. World Bank, World Development Indicators.
vi. Periodical Reports, publications of Ministry of Commerce,
Ministry of Finance, trade related magazines and Commission of
European Union.
The researcher also consulted libraries of School of International
Studies, Jawaharlal Nehru University, New Delhi, Indian Institute of
Foreign Trade, New Delhi, ICSSR New Delhi, Ratan Tata library, Delhi
15
School of Economics, ICRIER, Central library M.J.P. Rohilkhand
University, Bareilly etc.
16
Statistical Tools :
During the course of the study, the researcher has used various
statistical techniques for the analysis and interpretation as well as
presentation of data. Data have been arranged in the proper form
according the needs of the study. The researcher has used some specific
techniques to establish relationships between a set of variables. These
techniques include measures of central tendency, time series and
Revealed Comparative Advantage method. Besides this histogram, pie
diagram, and several other methods have been used for the presentation
of data.
1.8 Plan of the Study:Chapter 1: Introduction
The areas covered in this chapter are as follows:
Foundation of Research Study
Objectives of the Research study
Nature and Significance of Research Study
Theoretical Exposition of Trade Agreements
Unilateral, Bilateral and Multilateral Trade Agreements
India’s Economic Relations
Research Methodology, Sources of Data and Statistical tools.
Chapter 2: Review of Literature
This chapter comprises a review of the major works done in the area of
Economic Union, India’s Foreign Trade and Bilateral trade Relations.
Chapter 3: Background Interlinkages of India and European Union.
The issues that have been studied in this chapter are:
17
Background of India- EU economic Relations
History before the formation of EU
Rome Treaty
Institutions of the community
Brief political economic history of India
Chapter 4: Analytical Framework of Bilateral Trade Relations
In this chapter, the trade relationship between the EU and India i.e.
direction, pattern, composition and volume of trade is reviewed and
analysed. In addition, Foreign Direct Investment (FDI) flows and service
sector are also examined.
Chapter 5: Shifting Paradigm of Trade Diversions
The issues that have been studied in this chapter are
Revealed Comparative Advantage
RCA of India
Revealed Comparative Advantage of European Union.
Top 10 commodities exported to EU
Chapter 6: Findings and Recommendations
18
References
1 Hogendom, J.S. (1996). Economic Development. 3rd ed.
HarperCollins
2 Keller, W. (2002). “Trade and the Transmission of Technology,”
Journal of Economic Growth, 7, 5-24.
3 Economy Watch-“Bilateral Economic Relations”, 29 June, 2010.
4 Hoekman, (2002), The WTO: Functions and Basic Principles, in
Development, Trade and the WTO, The World Bank, Washington
DC (2002),
5 A. van de Heetkamp and R. Tusveld, (2011) “Origin
Management, Rules of origin in Free Trade Agreements” 7-6.
6 Asian Development Outlook, (2011) and World Trade Development
Report, 2007.
7 Liz Brownsell Allen & Overy “Bilateral and Regional Trade
Agreements” Advocates for International Development (2012).
8 Article 13, Charter of the United Nations, 1945. The full text of the
UN Charter can be found at http://www.un.org/aboutun/charter/.
9 These include agreements such as the India-Sri Lanka FTA, SAFTA,
India-Thailand FTA, and India-Singapore CECA. Currently, India is
in the process of negotiating several other regional and bilateral
trade agreements such as India- ASEAN CECA, BIMSTEC FTA,
and India-GCC framework agreement on economic co-operation,
India-Australia Trade and Economic framework agreement, India-
Israel PTA, India-Chile PTA, India-Japan CECA/CEPA and India-
19
Korea CECA etc. Apart from these, India has set up various joint
study groups to see the feasibility of economic co-operation with
several countries like China, Malaysia, Indonesia, etc
10 Cyril Berthod- India and the European Union: Evolution and
interlinking issues of a multi-level relationship, June 19, 2011.
11 ec.europa.eu/trade/policy/countries-and-region/countries/india.
20
Chapter-2
Review of Literature
When we study the relationship between India and European Union,
We take up the combination of different aspects to make general
conclusion by the views of various economist. A brief glance at this topic
is essential for clear and proper understanding from early time to the
present age which is primary concern of this thesis. As review of
literature in the present study has been divided into three parts
respectively, Studies Related to Foreign Trade, Studies Related To
Economic Union, EU-India Economic Relation. Now we take up each
part to discuss separately.
2.1 Studies Related To Foreign Trade:
The argument concerning the role of foreign trade as one of the
main deterministic factors of economic growth is not a recent topic. It
goes back to the classical-economic theories by Adam Smith and David
Ricardo, who put their thought that international trade plays an important
role in economic growth and that there are many economic gains from
specialization .This part covers various reviews relating to India’s
Foreign Trade.
Haberler1 says: "International trade has made a tremendous
contribution to the development of less developed countries in the
nineteenth and twentieth century’s, and can be expected to make an
equally big contribution in the future if it is allowed to proceed freely".
21
Trade is preferable to aid as it could evoke dynamic responses to
competitive opportunities that would reinforce the growth process.
Nayyar2(1977) revealed that India's falling share in the world
market could be due to the declining share of exports in domestic-
production.
Da Costa3 demonstrates that the world’s demand has severely
constrained Indian export. The stagnation was followed by moderate
expansion during 1960s, and there was a temporary decline during 1965-
67, and a buoyant growth in the seventies.
Subasat4 investigated the empirical linkages between exports and
economic-growth. The study suggested that the more export-oriented
countries like middle-income countries grow faster than the relatively less
export-oriented countries. The study further showed that export
promotion does not have any significant impact on economic growth for
low and high income countries.
Bharadwaj5 sought to test empirically, with the help of Indian data,
the Hecksher Ohlin “hypothesis” that a country’s exports use intensively
the country’s abundant factors of production.
Vohra6 showed the relationship between the exports and economic
growth in India, Pakistan, Philippines, Malaysia, and Thailand between
the period of 1973 to 1993. The empirical results indicated that when a
country has achieved some level of economic development then the
exports have a positive and significant impact on economic-growth. The
study also showed the importance of liberal market policies by pursuing
export expansion strategies, and by attracting foreign investments.
22
Frankena7 says that there are four types of changes that influenced
export performance in the country. They are in different shapes as,
changes in material supply, constraints on output as result of changes in
import licensing and changes in domestic demand. Changes in productive
capacity and changes in explicit exchange rates on exports as a result of
export subsidization and de-valuation.
Kletzer and Bardhan8 show that countries with relatively well
developed financial sector have a comparative advantage in industries
that depend on external finance. They revealed that even when
technology and endowments are identical between the countries and
economies of scale which are absent, credit market frictions lead to one
country facing a higher interest rate or rationed credit compared to other
countries. This may lead to differences in comparative advantages in
processed goods which require more working capital, marketing cost or
trade finance. They presumed that more sophisticated manufactured
finished goods require more finance to cover selling and distribution costs
than primary or intermediate goods.
Delis and Zilberfarb9 have argued that high volatility of exchange
rates may theoretically exert either positive, negative, or no effects upon
trade flow. They suggest that the impact depends upon several important
key factors including the relative strength of income and substitution
effects and the degree of risk aversion of the trader.
Katti10 points out that for India to become a major player in world
trade, an all encompassing and comprehensive view needs to be taken for
the over-all development of the country's foreign trade. The EXIM policy
was renamed as the new Foreign-Trade Policy. The Foreign Trade Policy
was built around two major objectives. These are to double our
23
percentage in share of global merchandise trade within the next five
years, and to act as an effective instrument of economic growth by giving
a thrust to employment generation. She was of the opinion that the new
trade policy was of immense use to India's foreign trade.
Bhagwati and Krueger11(2007) in their comparative analysis of the
impact of foreign trade regimes and economic development in a number
of countries, defined a set of analytical phases with reference to the
EXIM policy of a country. These phases in the foreign trade regime were
designed essentially as a descriptive device to capture meaningfully the
evolution of foreign trade regime in terms of its restrictions content and
the dimensions and pattern of its use of control and price instruments.
There are broadly five phases. Phase one is characterized by the
systematic and significant imposition of quantitative restrictions (QRs), in
response to an unsustainable balance of payments deficit. Phase two is
characterised by continued reliance upon quantitative restrictions and
generally increased restrictiveness of the entire control system. Phase
three is to systematise the changes, introduced during phase two, and
initiate liberalization .Phase four continues liberalisation introduced in
Phase three and goes a step further. Phase five occurs when the exchange
regime is virtually liberalised. There will be full convertibility on current
account, and quantitative restrictions will not be employed as a means of
regulating the balance of payments
Erfani12 (1999) examined the causal relationship between economic
performance and exports over the period of 1965 to 1995 for several
developing countries in Asia and Latin America. The results showed the
significant positive relationship between exports and economic growth.
This study provides the evidence of export-led growth hypothesis.
24
Rangasamy13 (2008) examined the exports and economic growth
relationship for South Africa, and provides the evidence that the
unidirectional Granger causality runs from exports to economic growth
Raju and Kurien14 (2005) analyzed the relationship between exports
and economic growth in India over the pre-liberalization period 1960-
1992, and found strong support for unidirectional causality from exports
to economic growth using Granger causality regressions based on
stationary variables, with and without an error-correction term
2.2 Studies Related To Economic Union:
The basic frame work for the theory of economic integration was
provided by Jacob Viner. His theory was concerned with a static analysis
of the welfare effects of Customs Union. Viner was of the view that “A
customs Union increases world welfare through free trade. In order to
demonstrate this, Viner has introduced the concept of trade creation and
Trade Diversion, defining trade creation as a shift in trade from a high
cost to a low cost producer and trade diversion as a shift in the reverse
direction.”15
Mikesell has stated that “the criterion of a customs Union or free
trade area involves relatively long time periods for fruition so that the
initial impact and perhaps the most important one, is on expectations
regarding future market opportunities rather than on existing trade
patterns”16
According Myrdal “Integration can be regarded as a social and
economic process destroying the barriers between the participants’
economic activities. The economy is not integrated unless all events are
25
open to everybody and remunerations paid for the productive services’
are equal, regardless of social and cultural differences.”17
According toTinbrgen “International cooperation is possible in
almost every field of human activity. Economic cooperation is only one
of its aspects. It sometimes is the basic aspect. International economic
integration relates to the optimum of international economic
cooperation.”18 He further discuss current transactions, international
movements of factors of production like labour, capital, mechanism of
financial transactions, balance of payments etc.
According to Meade, regional trading arrangement is more likely to
increase economic welfare, if the economies of the members are very
competitive, bur potentially very complementary.19
Hansen indicate that the backwash effect and the tendency to
aggravate existing disparities in levels of development in Latin America,
Africa and Asian regional economic integration experiment indicate
“over politicization20.
Triffin considers economic cooperation also as integration. It is
rather an advanced type of cooperation as distinguished from the term
“harmonization” which refers to a mutual consultation on important isues
of economic policy. Integration is a process which brings about a greater
degree of unity
2.3 India-EU Economic Relations:
Jain17 expresses that after nine summits, India and the European
Union are gradually getting used to working together. There is a widening
and deepening of political dialogue and variety of consultation
26
mechanisms on around 45 issues, which have enabled the two sides to
better understand and appreciate each other's positions, perspective and
perceptions. However, shared values do not necessarily translate into
greater cooperation one needs to have shared interests and priorities.
Mutual long-term interest is going to be in areas like scientific and
technological cooperation, movement of skilled persons etc. The time to
build and enhance existing frame work in now.
Priyadarshi18 makes an attempt to understand that after the Free
Trade Agreement (FTA) between India and European Union coming into
for what will be the positive and adverse effects on IPR laws and the
condition of common man in India.
Sachdeva19 in his study analysis how trade and economic ties have
formed the core of India-Europe relations so far with more than US$90
billion bilateral trade, the EU is India's largest trading partner. Foreign
Direct Investment (FDI) in India from the countries of the EU is higher
than investments from the US and Japan put together. Similarly, Indian
companies are also buying many European firms. Encouraged by positive
trends, both the EU and India are negotiating for a broad-based bilateral
trade and investment agreement. The main challenge facing policy
makers on both sides is how to conclude a broad based trade and
investment agreement in an increasingly uncertain European economic
climate.
Chakraborthy and Animesh Kumar20 in their study throw the light
on the importance of Regional Trade (RTA) Agreement and on Bilateral
Trade and Investment Agreement (BTIA). The urge to enhance market
access has therefore forced both developed as well as developing
countries to further trade objectives through RTA's, and the tendency has
become more accentuated, especially over the last couple of years. The
27
EU is the largest trading bloc in the world and has forged links with a
number of developing countries through trade and partnership
agreements. The proposed EU-India BTIA has many potential benefits,
but it is also rife with latent problems for India. India's approach to
negotiating with the EU should therefore be based on broad policies. The
sector identified by NMCC (National Manufacturing Competitiveness
Council) could be considered as a guideline in this context.
Nataraj21 studies the effect of FTA between India and EU. The
welfare effects amount to an additional 0.3 percent growth for the Indian
economy in the short run and 1.6 percent growth in the long run. In
negotiating any bilateral trade agreement with EU the Indian government
should tread cautiously so as to safeguard domestic concerns and the
public interest. If FTA structured well, the agreement could push India's
growth for the next decade. If structured poorly, it could de-rail it for just
as long.
Khorana and Perdikis22 suggested to maximize potential benefits
of FTA (free trade agreement, trade barriers (tariff and non tariff) in
goods and services sectors should be addressed. This must be
complemented by a mutually agreeable time frame to conclude
negotiations in areas where interests of the partners vary
Neogi23 explains the causes behind the delay EU-India free trade
agreement and suggests how two side can forge cooperation in global
peace-keeping missions and co-operation to develop civil nuclear energy.
Upadhyay24 studies the energy sector and scope of EU's investment
in it. Investment in India’s renewable market would not only promote
energy access and help fight climate change, but would also be rewarding
28
in terms of appreciation. India offers a huge and sustainable market for
European Companies.
Khandekar and Sengupta25 view that the BTIA will not only help
alleviate the effects of the unprecedented financial crisis, but also bolster
the global case for economic cooperation against protectionism.
Tharoor,26 in his article, studies the hurdles of FTA between India
and EU. The main stumbling block is that India prefers bilateral
arrangements with individual members states to dealing with the EU
collectively because of lack of cohesion on strategic questions.
Singh27 states that services are important for both India and EU.
Since the 1990s, the rapidly expanding services sector has been
contributing more to economic growth than any other sector. The services
sector contributes nearly three quarters of Gross Domestic Product (GDP)
for EU and nearly 55% of GDP for India.
Sachdeva28 observes that trade and economic relations with Europe
have always been very important for India. In the last two decades, the
process of European Economic integration and economic liberalization in
India has created tremendous opportunities for Europe and India. Despite
many positive development in the economic sphere, Indian policy makers
are still sceptical of Europe’s role as a major strategic player in Asia. The
European Union (EU) has not been able to put together a common foreign
and security policy. As a result, the EU has not been able to move
strongly on sensitive-issues with India. If Europe wants to be relevant in
the emerging Asian architecture, it has to make some hard strategic and
political choices.
Bhattacharya29 analysises the effects of the reduction of EU's tariff
and non tariff barriers on India's exports. An enlarged EU appears with
plenty of opportunities for India. An enlarged Union means more demand
29
for India goods in European market. But this opportunity has been marred
by the labyrinthine of NTBs, erected by EU on its imports from India.
Sikdar30 in a study, attempt to explore the potentials of having free
trade between India and the EU and aims at identifying the possible gain
that would accrue to each of the economies.
Pascal Lamy31 states that the economic link is a cornerstone in the
relationship between the EU and India, the largest economic area and the
fourth largest economy respectively. By comparison, both China and
ASEANS exports are each about five times the volume of India's exports
to the EU. The EU's exports to India are also well below the EU's usual
performance in similar markets and regions. So there is room for
improvement.
Keukeleire and Bas Hoojimaaijers32 reflect on the relations between
the European Union and India. It questions whether the strategic
partnership between the EU and India is truly strategic. The article points
to the EU's and India's different views about the principles and values that
are to be upheld in global governance, about their different positions in
the WTO, on the United Nations (UN), with special attention to the
voting behavior, India and the EU at the UN General Assembly, and to
the explanations for the lack of voting cohesion between the EU and
India.
Jean-Lcu Racine33 reveals in a study that enhancing India-EU
cooperation in critical areas of non-traditional security issues is an
obvious necessity. There is already a sound basis for expanding existing
cooperation. What is lacking perhaps is a comprehensive framework
under the existing agenda, to promote bilateral debate not just about the
various issues already identified but also about the correlations between
them, and between (NTS) Non Traditional Security and other fields that
30
are crucial to the strategic partnership, be they trade or traditional
security.
Kastner34, states that EU and India both are sharing many common
values, on which the strategic partnership formally is founded, the
investigation revealed common interest, primarily economic interest as
the driving force behind the partnership rather than common values.
Boillat35 view’s that cooperation between India and EU cannot
challenges around them especially in the medium range. In this regard,
the future of Africa is a source of challenges and opportunities for both
partners. Each partner of course has specific interests with regard to the
African continent, but across-analysis of the three continents shows that
there are probably many complementarities between India and EU vis-a-
vis Africa and that there are good reasons to initiate triangular
cooperation in many areas, as already observed in the private sector.
Price36 states that there is a clear-cut desire within the EU, and ti's
member states, to engage more closely with India. He explores the
opportunities for enhanced cooperation between the EU and India within
the framework of the G-20. There are specific issues for which the G-20
could provide a forum for Europe and India to set the agenda. If Europe
and India are to deepen their engagement, this engagement will need to
offer clear benefit to India.
Joao Cravinho37, Ambassador, Delegation of the EU to India speech
at Hyderabad, PTI Oct 21, 2013, is very optimistic about FTA between
India and EU. The bilateral trade between India and EU may touch $200
billion over the next 4-5 years. The negotiations for a bilateral FTA
between India and the EU covering foreign investment, competition
policy and government procurement additional to trade .
Harling38 states that within the framework of the Global Europe
strategy of the European Union (EU) wants to enable European
31
enterprises to gain access to new and profitable markets in emerging
nations by negotiating Free Trade Agreements (FTA), as over the next 10
to 15 years, 90% of the world demand will be generated outside Europe.
The currently negotiated FTA between India and EU can be regarded as a
in goods and services started in June 2007. Until 2012, 14 rounds of
official negotiations took place after the 12th summit held in New Delhi
on 10th Feb. 2012, both parties developed an idea that more works are
needed to be done in order to make the FTA acceptable.
Economic Times Bureau39 Jun 15, 2012. EU Crisis: Impact on India
what corporate have to say: The Euro-Zone crisis has eliminated the
benefits of a weak rupee, which is down 20% in a year. If the Euro zone
crisis is not averted, India which has about a sixth of its total exports to
the European Union, will face un- employment in the lower income
category, such as textile, one of the biggest employers.
Singh40 in his article, expresses his views that Trade with the EU
represents almost a quarter of Indian's exports and imports. But it is just
1.6% of total EU imports of goods and 0.8% of import of services. But
EU invests 10 times more in China and its trade is 5 times larger than
India.
32
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5 R Bhardwaj
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Case of South Africa’,Journal of International Development, 21, 5,
pp. 603-617
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regional arrangements among Developing countries” in International
Trade theory in a Developing world, Harrod and
Hague,London,1963.
17 Myrdal Gunnar, An International Economy, New York,1956.
18 Jan Tinbergen,International Economic Integration,Elsevier,1954.
19 Mikesell, R. F, op cit.
20 Regional integration: reflection of decade of theoretical efforts
“world , January, 1969
34
17 R.K. Jain, "India and European Union : Perceptions and Policies" -
paper presented at Asia-Europe Institute, University of Malaysis,
Kuala Lumpur, 19 June 2009.
18 Vaibhav Priyadarshi, "Analysing of free Trade Agreement between
India and EU and its impact on the IPR laws in India"
19 Gulshan Sachdeva, "India-EU Economic tias : strongthening the care
of the strategic partnership" - Institute for security studies European
Union (www.iss.eurioa.eu).
20 Debashis Chakraborthy and Animash Kumar, "EU-India Bilateral
Trade and Investment Agreement opportunities and challenges" in
Luis Learl and Vijay Sakhuja ed. The EU-India partnership time to
go strategic pp. 57-74 pub. by ISS.Paris.
21 Geetanjali Nataraj, "Why can't India and the EU sign and FTA's -
East Asia Farum 14th June.
22 Sangeeta Khorna and Nicholas Perdikis, "EU-India Free trade
Agreement Deal or No Deal?" South-Asia Economic Journal - Sep.
2010-Vol.-11 No. 181-206.
23 Prabhuddha Neogi, "India Europe relations the way Ahead) June 24.
24 Dinoj Kumar Upadhyay, "EU-India partnership time to go strategic-
e-by Luis Learl of Vijay Sakhuja P75-86, ISS-Paris.
25 Gauri Khandekar and Jay-shree Sengupta, "EU India Free Trade
make or break" AGOAR, Asia-Europe, 10 June 2012. ISSN : 2254-
0482.
26 Shashi Tharoar, "www.Project-syndicate.org. 20th.
27 Kavaljit Singh, "India-EU Free Trade Agreement : Should India
open up Banking Sector" 2009.
35
28 Gulshan Sachdeva, "India and European Union "Broadening
strategic partnership Beyond Economic link ages" Sage publication
(2008) p- 341-3567.
29 Swapan Kumar Bhattacharya, "India and The European Union -
Trade and Non-Tariff Barriers" Aakar Publication 2005.
30 Chandrima Sikdar, "Free Trade between India and European Union
15 : A Theoretical and Emperical Analysis" The ICFAI_Journal of
Applied Economics, Vol. VII, No. 1, 2008.
31 Pascal Lamy, "The EU-India Economic Relations" Speech at the
EU-India Busness Summit on 22nd November at New Delhi India.
32 Stephan Kaukelere and Bas Heejimaaijers, FPRC-Journal-2013 (1)
ISSN 2277-24647 "EU-India relations and multilateral governance
where is the strategic partnership".
33 Jean-Luc Racine, "The EU-India and Non-Traditional Security :
Convergences and Challenges" Edit-by L. Pearl and V. Sakhuja,
ISBN-978-92-9198-208-0".
34 Sebastian Kastner, "Beneath Potentials EU-India Relations) 2007.
35 Jean-Joseph Boillat, "The potential for triangular cooperation
between Europe, India and Africa "ISBN-97892-9198208-0-P-87-
99.
36 Gareth Price, "The Scope for economic cooperation within the G-20"
Institute for security studies European Union Paris. iss. Europe-EU.
37 Joao Cravinho, Ambassador, "Speech at Hyderabd, PTI, Oct. 2013.
38 Hike Harling, "Negotiations Analysis : The Free Trade Agreement
Between the European Union and India". 20 Sep. 2013.
36
39. Economic Times Bureau, June 14, 2012, "EU crisis Impact on
India".
40 K. Gajendra Singh “India & the European Union - New Strategic
Partnership SOUTH ASIA ANALYSIS GROUP-2004.
37
Chapter-3
Background Inter linkages of India and European Union
3.1 Theoretical Exposition of Economic Union:
The theory of economic integration refers to the commercial policy
of discriminatively reducing or eliminating trade barriers only among the
nations joining together. The degree of economic integration ranges from
preferential trade arrangements to free trade areas, customs union,
common markets and economic unions.
3.1.1 Preferential Trade Arrangements :
It provides lower barriers on trade among participating nations than
on trade with nonmember nations. This is the loosest form of economic
integration.
3.1.2 Free Trade Area :
It is the form of economic integration wherein all barriers are
removed on trade among members, but each nation retains its own
barriers to trade with nonmembers. The best examples are EFTA formed
in 1960 by UK, the NAFTA formed by United States, Canada and
Mexico in 1993and the southern common market (mercosur) formed in
1991.
38
3.1.3 Customs Union:
In customs union no tariff or other barriers on trade among
members (as in a free trade area), and in addition it harmonizes trade
policies (such as the setting of common tariffs rates) toward the rest of
the world.
3.1.4 Common Market :
Common market goes beyond a customs union by also allowing
the free movement of labour and capital among member nations. The EU
achieved the status of a common market at the beginning of 1993.
3.1.5 Monetary Union:
Monetary union involves scrapping individual currencies, and
adopting a single, shared currency, such as the Euro. This means that
there is a common exchange rate , a common monetary policy, including
interest rates and the regulation of the quantity of money, and a single
central bank, such as the European Central Bank.
3.1.6 Economic Union:
An economic union goes still further by harmonizing or even
unifying the monetary and fiscal policies of member states. This is the
most advanced type of economic integration.
3.1.7 The supra-national union or Political Union:
Where the respective governments abandon completely their
sovereignty over the policies stated above and a supranational authority
issues binding decisions.
39
The ultimate economic purpose of integration is an acceleration of
growth in the partner countries. The formation of an Economic Union has
two effects on international trade.
1. Trade Diversion: A shift in the pattern of trade from low cost
world producers to higher- cost union members. In general,
trade diversion is viewed as welfare reducing for the world.
2. Trade Creation: Trade creation will occur when there is a
reduction in tariff barriers which lead to an increase in
consumer surplus and economic economic welfare. From a
world welfare point of view, trade creation is good.
3.2 Historical Background of India and European Union:
The trade relationship between India and Europe is running for a
long period. At the end of the fifteenth century, European traders came to
India and began exporting goods from India to Europe and also other
parts of Asia. It has been established that as a result of these interactions,
the Indian economy expanded further and was integrated with the pre-
modern global economy. Slowly India became centre place of European
trading activities in Asia and put the foundation of new trade era through
the Indian Ocean by the Portuguese, Dutch, French and English East
India companies. This market-determined economic relationship between
India and Europe changed with the advent of British colonialism in sub-
continent. At the time of independence in 1947, a major portion of Indian
trade was either with Britain or its colonies and allies. This pattern
continued for few years. After independence, Indian leadership adapted a
policy of “Self reliance”. As independent India established its relations
with other countries’ trade that was diversified1.
40
The creation of the European Economic Community in 1958 did
not have much significance for India. The appeals of the six countries to
Britain in 1951 and 1956 failed to evoke any response and India remained
quite unconcerned. During the cold war period, India adopted a policy of
non-alignment and maintained a close relationship with the former Soviet
Union. As a result, its interactions with Europe became limited.2
India’s first Ambassador H.E. KB Lall presents credentials to the European Commission’s first President Walter Hallstein in 1962.
The relationship between the EU as a block and the republic of
India really took root in their present from in 1963, when India was
amongst the first developing countries to establish diplomatic relations
with the then six-nation European economic community (Subsequently
the European community and since 1992, the European Union) These
relations become closer with the accession of the U.K, India’s traditional
trading partner, to the E.E.C. in 1973. India and EEC signed commercial
cooperation Agreement (CCA) followed by a five year commercial
economic cooperation agreement (CECA) in 1981. The main objective of
41
this new agreement were:(1) developing commercial relations and
intensified economic cooperation.(2) give a new dimension to the mutual
relationship between India EC(3) strengthening economic relationship
based on mutual cooperation and comparative advantage (4) pursuing
economic cooperation in an evolutionary and pragmatic manner(5)
augmenting international economic cooperation commensurate with
human, intellectual and material resources.3 In 1983, European
commission established a delegation in New Delhi, capital of India and in
1985 signed a Commercial and Economic Co-operation Agreement.
European community Investment partner’s scheme is launched in 1991 in
India to provide financing facility to promote EU-India joint ventures
among small and medium sized enterprise. In 1993 India and European
businessmen launched a joint initiative, the joint business forum.
The first India EU summit which took place in Lisbon in June
2000, is generally considered to be a water shed in the evaluation of
strong economical, political and technological ties between India and EU.
Here a decision was taken to hold annual summits. The fifth summit in
2004 which took place at Hague, India and EU agreed to forge a
“Strategic partnership” to enable the partners to better address complex
international issues in the context of globalization 4.
At the six summit held in 2005, both parties adopted the joint
action plan (JAP) for the strategic partnership and agreed to enhance
bilateral trade and economic relations and remove barriers inhibiting
trade and investment. A high level trade groups was setup to suggest the
ways to make the relationship more intense.
At the 7th summit in 2006 held at Helsinki, on the recommendation
of (HLTG) both parties initiate negotiation for a bilateral trade and
42
investment agreement. Following the agreement negotiations for an EU
India (FTA) free Trade Agreement were launched on June 2007 in
Brussels.
The signing of the FTA has been delayed as differences have
cropped up between India and EU over certain issues which would be
kept off the agreement. The completion of FTA remains a strategic
objective for both sides.
The EU as a bloc is India’s largest trading and investment partner.
The bilateral trade constitutes a quarter of India’s total trade and EU is
also India’s biggest partner in development cooperation and second
largest source of foreign direct investment. The EU is accounted for 19%
of India’s total exports and 14% of India’s total imports in 2010. On the
other hand, India accounts for 2.6% of EU’s total exports and 2.2% of the
EU’s imports. India ranked 8th in the list of the EU’s main trading
partners in 2010, up from 15th in 2002.
The EU has been the biggest investor in India with a cumulative
volume of 20 billion Euros since 2000. The key EU member states for
FDI are UK, Germany, the Netherlands, France, Italy and Belgium. Many
reputed European companies are investing in India in diverse areas such
as energy, civil aviation, ports, information technology, automobiles,
financial services pharmaceutical and retail.
EU initiative towards a free trade agreement (FTA) with India is a
key component of its “Global Europe” policy framework based on several
long-term economic and strategic goals. Several rounds of consultation
have been held until now; therefore leaders are also expected to review
progress during the summit.
43
3.3 History before the formation of Union:
The history of Europe was one of a series of wars and conflicts.
The precursor to the European Union was established after World War II,
and efforts are made to unite the countries of Europe to end the period of
wars between neighbouring countries. The necessity of some type of
European integration in a new way to reorder the European political map
became evident.
Great thinkers, like Jean Monnet, felt that another war should be
avoided at any cost. Three different realities evinced the necessity of this
new orientation towards the European integration.
Firstly, the Second World War had put a definitive end to the
traditional European hegemony in the world. The two new super powers,
the USA and the Soviet Union, had a very superior economic, political
and military might than the heterogeneous group of European states.
Secondly, the two world wars had begun as European civil wars
and this continent had been the main battle field in both. Essentially, it
was a question of searching an accommodation between France and
Germany. The European integration will paved the way to guarantee
peace.
Thirdly, the extended desire among many Europeans to create a
freer, fairer and more prosperous continent in which the international
relationship were developed in a framework of concord.5
Former British Prime Minister, Winston Churchill, pronounced a
speech at Zurich University (Switzerland) on September19, 1946.
44
“I wish to speak to you today about the tragedy of Europe. Yet all the
while there is a remedy which, if it were generally and spontaneously
adopted by the great majority of people in many lands, would as if by a
miracle transform the whole scene, and would in a few years make all
Europe, or the greater part of it, as free and as happy as Switzerland is
today. What is this sovereign remedy? It is to recreate the European
family, or as much of it as we can, and to provide it with a structure under
which it can dwell in peace, in safety and in freedom. We must build a
kind of United States of Europe. The first step in the recreation of the
European family must be a partnership between France and Germany".
Many people considered it as the first step towards European integration
in the post war period. In 1948, the organization for European economic
cooperation (OEEC) was established. This was one of the first institutions
that involved a great part of western European countries. It helped to
liberalise the trade among the member states and enhanced economic
cooperation. In 1948, the Benelux (Customs union between Belgium, the
Netherlands and Luxemburg) had started working by introducing a
common external tariff. The setting up of the council of Europe in 1949
meant another major step forward. The council tried to incite political
cooperation among European Countries6.
The first step in the process of foundation of the European
Community was given by the French Foreign minister, Robert Schuman.
He gave the bright idea to place the entire France and German in
production of coal and steel under a Common High Authority and thereby
the European Coal and Steel Community (ECSC) came into existence in
1952. The view of Jean Monnet inspired the thought of Schuman who
proposed an idea that it is an advisable to neutralize the bone of
contention between Germany and France i.e., coal and steel. The father of
45
the United Europe i.e. Jean Monnet became the first president of this high
authority. The ECSC made remarkable strides in two years with the
abolition of all restrictions on trade in coal and steel among six countries.
That same year the France Government proposed the establishment
of an European Defense Community (EDC). This project was aborted in
1954, when the France parliament vetoed its application. The failure of
the EDC had demonstrated that political and military union was still an
utopian objective. But the thinkers like Jean moment did not keep quiet.
The foreign ministers of the six countries, met at Messina (Italy) on
1 June, 1955 under the chairmanship of Paul Henri Spaak of Belgian. He
was the first president of the UN General Assembly. The agreement, they
reached there meant a definitive step in the European construction. The
25th March, 1957, the six countries signed the treaties of establishing the
European Economic Community (EEC) and the European Atomic Energy
Community (Euro tom).
They came into being on 1st January, 1958 after due ratification by
the parliament of the member countries.
3.4 The Rome Treaty:
The treaty of Rome was signed on 25, March 1957 and it came into
force with effect from 1 January, 1958, creating the European Economic
Community and allowing people and products to make throughout
Europe. It is concluded for an unlimited period of time and contains 248
articles, protocols, annexure and declarations of intentions.
The treaty of Rome is divided into six parts covering principles,
policies of the community, institutions of the community, foundations of
46
the community the association of overseas countries and territories, and
general and final provisions.
3.4.1 Preamble of the Treaty:
Intention of the six signatory countries is “Determined to lay the
foundations of an ever- closer union among the people of Europe”. It was
resolved to ensure the economic and social progress of their countries by
common action eliminating the barriers, constant improvement of the
living and working conditions of their people; steady expansion balanced
trade and fair competition would be guaranteed, differences and the
backwardness existing between the various regions will be reduced to
ensure their harmonious development, progressive abolition of
restrictions on international trade by means of a common commercial
policy, and the intention was to confirm the solidarity which bound
Europe and the overseas countries and the desire to ensure the
development of their prosperity in accordance with the principles of the
charter of the united nation resolved to strengthen peace and liberty by
pooling their resources and calling upon the other people of Europe who
share their ideal to join in their efforts.
Article 9 and 10 mention that the community is based upon a
custom union in which all quantitative restrictions would be abolished,
imposition of import and export duties or charges of equivalent effect
between member states are probhited. The free exchange of goods within
the community would apply not only to the goods produced in the
member states but also to those which have been imported by a member
state from outside the community on which customs duties have already
been paid.
47
Article 19 deals with the common custom tariff. The duties under
the common external tariff were based on arithmetical average of tariff
rates in member states on 1st January, 1957. The detail of this arithmetical
average, is mentioned from list A to list G. List A duties, would the
substituted for the actual duties applied. List B deals to mainly raw
materials for which the common customs tariff may not exceed more than
3%. List C consists of semi finished goods for which the maximum tariff
is 10%. List D consists of tariff headings in respect of which duty under
the common tariff may not exceed 15%. List E mention about organic
chemicals for which tariff may not exceed 25%. Goods on which tariff
have been fixed by mutual agreement is mention in list F. Items for which
duties are to be negotiated is mentioned in list G of article 20. The
Benelux countries were treated as a single unit.
Agriculture is also an important aspect of the Rome treaty and is
mentioned in the article 30 of the treaty. Objectives of the agricultural
policy are the regional development of agricultural production and the
optimum utilization of factor of production, particularly labour.
Article 91 deals, with dumping, 100 to 102 with the approximation
of laws, 103 to 116 with the Economic policy of the community, 108 with
if a member is threatened with serious balance of payment difficulties.
Articles 129 and 130 dealt with the European investment Bank.
Part IV of the Rome treaty deals with the Association of overseas
countries and territories. The basic principle of the association is that the
product of the overseas territories would enter the community on equal
terms with those of member states and each territory, to the extent
possible, apply to all other member states any concession applying to the
country with which it was specially connected. The individual import
48
quotas of the overseas territories were converted into global quota for the
benefit of all those member states with whom the territory in question
was not specially connected.
Any European country can apply for membership of the
community is an important feature of the Rome treaty.
(This map is not to the scale)Source: Map downloaded from www.bbcnews.com
49
Father’s of the European Union
1886 - 1963
Robert Schuman (French Foreign Minister)The architect of the European integration project
Jean Monnet 1888 - 1979
The unifying force behind the birth of the European Union
50
Schuman Declaration 9th May 1950
Information on EU member countries
Name Capital Accession Population Area (km)
Belgium Brussels Founder 11,161,600 30,528
France Paris Founder 65,633,200 674,843
Italy Rome Founder 59,685,200 301,338
Luxembourg Luxembourg Founder 537,000 2,586.4
Netherlands Amsterdam Founder 16,779,600 41,543
Germany Berlin Founder[d] 80,523,700 357,021
Denmark Copenhagen 1 Jan 1973 5,602,600 43,075
Ireland Dublin 1 Jan 1973 4,591,100 70,273
United Kingdom
London 1 Jan 1973 63,730,100 243,610
Greece Athens 1 Jan 1981 11,062,500 131,990
Portugal Lisbon 1 Jan 1986 10,487,300 92,390
Spain Madrid 1 Jan 1986 46,704,300 504,030
Austria Vienna 1 Jan 1995 8,451,900 83,855
51
Name Capital Accession Population Area (km)
Finland Helsinki 1 Jan 1995 5,426,700 338,424
Sweden Stockholm 1 Jan 1995 9,555,900 449,964
Cyprus Nicosia 1 May 2004 865,900 9,251
Czech Republic
Prague 1 May 2004 10,516,100 78,866
Estonia Tallinn 1 May 2004 1,324,800 45,227
Hungary Budapest 1 May 2004 9,908,800 93,030
Latvia Riga 1 May 2004 2,023,800 64,589
Lithuania Vilnius 1 May 2004 2,971,900 65,200
Malta Valletta 1 May 2004 421,400 316
Poland Warsaw 1 May 2004 38,533,300 312,685
Slovakia Bratislava 1 May 2004 5,410,800 49,035
Slovenia Ljubljana 1 May 2004 2,058,800 20,273
Bulgaria Sofia 1 Jan 2007 7,284,600 110,994
Romania Bucharest 1 Jan 2007 20,057,500 238,391
Croatia Zagreb 1 Jul 2013 4,262,100 56,594
Source: European Commission Services
3.4 Institutions of the Community:
The European Union is supranational in character and a unique
entity in the world. The EU is run not by one institution but by a series of
institutions with their own remit mentioned in Article 4 of part one of the
Rome treaty.
3.4.1 Assembly (European Parliament):
Article137 to 144 of the Rome treaty deals with the EU parliament.
Initially members of the parliament were designated by the respective
parliaments from among themselves in accordance with the procedure
laid down by each member states. The Tindemans report in 1976 strongly
recommended direct election of the parliament. The direct election to the
52
EU parliament has now become a reality. The European parliament is
directly elected by the citizens of the EU. It is based in Strasburg,
members of it are known as members of European parliament (MEP) and
they are elected by voters within a member state. The current parliament
has 736 members from all 27 countries and they are elected for 5 years.
The latest election took place in June 2009. The more populated member
states have been allocated higher numbers of seats, ranging from 99 for
Germany to 5 for Malta. It has the theoretical power to approve or reject
the nomination of commissioners and the power to censure the
commission as whole if 2/3 of MEPs vote for this.
It has also the right to give or withhold its assent on the accession
of new member states, conclusion of international agreements and the
association of third countries.
The parliament can reject the annual budget of the EUP, but now
with a centralised currency, this would bring to a halt and bring the whole
concept of a Europe working together in disrepute.
3.4.2 The Council:
This is the EU’s most powerful and main decision making body.
The foreign ministers of the member states generally constitute the
council. Other ministers from member states may have an input in topics
relevant to their expertise. As a rule, the council only acts on a proposal
from the commission. The work of the council is prepared by the
committee of the permanent representatives of the member states
(COREPER). Up to four times a year the president/prime ministers of the
member states together with the president of European commission, meet
as the European Council. In Brussels each EU member states has a
53
permanent team that represents and defends its national interest at EU
level.
3.4.2.1 Qualified Majority Voting :
Before 1986, just one country represented in the council could veto
a policy but in 1986 QMV was introduced. This is a system whereby each
country has been given a block of votes dependent on its size Germany,
France, Italy and UK as the largest member have 29 votes each. Malta
has 3 votes. In total, there are 345 votes and 255 are needed to secure a
majority.
In some sensitive areas such as taxation, asylum, common foreign
and security policy, enlarge membership of the union council decisions
have to be unanimous.
3.4.2.2 President Trios :
When the council was established, it’s work was minimal and the
presidency rotated between each of the then six members every six
months. However as the work load of the council grew and the
membership is increased, the lack of co-ordination between each
successive six month presidency hindered the development of long-term
priorities for the EU. The presidency is not a single president but rather
the task is undertaken by a national government. Three successive
presidencies, known as presidency trios, cooperate to provide additional
continuity by sharing common political programmes. This was
implemented in 2007 and formally laid down in the EU treaties in 2009
via the treaty of Lisbon.”
54
3.4.3 The European Commission:
The European commission is the highest executive body of the EU.
The commission is comprised of 27(yet to be 28) members each member
state therefore nominates one member. A new commission is appointed
every five years, within six months of the elections to the European
parliament. Jose, Manuel Durao Barroso heads the EU executive as
president of the European commission since February 2010. The
commission staff is divided into various departments known as
Directorates General.
The commission is important in the sense that it alone has the
powers to initiate proposal and can revise it’s own proposals. Hundreds of
proposals are submitted by the commission to the council every year. As
the executive body of the EU, commission is responsible for the
management and implementation of the EU budget and various funds like
European Agricultural guidance and guarantee fund, regional
development fund etc. It also negotiates treaties with other countries and
participates in the meetings of the international organizations. It also
insures that member states implement the community decisions.
Commission can drags both the member states, individuals or companies
to the court of justice if any decision of the commission or the treaty
provisions are infringed after giving due opportunity to explain. It’s head
office is in Brussels.
3.4.4 The court of Justice :
The European court of Justice is consists of 27 Judges appointed by
the member states, the members are appointed for a renewable period of
six years. The function of the court is to apply the laws and direction that
come from the commission. It also tasked with providing unambiguous
55
interpretations of the provisions of the treaties, with aim of preventing all
the members from interpreting EU law differently. The court can also
hear cases against member states and the commission itself. The number
of judges in a given case depends on the importance and impact of the
case. It is located at Luxembourg. Since 2004, there has been a
specialised tribunal that only handles disputed between the EU and its
staff the European Union Civil Services Tribunal (Belgian Press Con.).
3.4.5. The European Court of Auditors :
The establishment of the European Court of Auditors was laid
down in the treaty of Brussels back in 1975, although it has become an
institution by itself in the treaty of European Union. It is given the
important task of monitoring the financial management of the European
Union. It submits reports which form the basis of the parliament debates.
The numbers of members is equal to the number of community members
i.e. 27,one per member. It is located at Luxembourg. The term of its
members are six years, they elect a president from amongst for three
years.
In addition to these institutions the EU has a number of other
bodies which play a vital role in functioning of EU e.g. Economic and
Social Committee that represents civil society, the European Investment
Bank that finances EU investment projects and European Central Bank,
which is responsible for EU monetary policy.7
56
India Map (Political)
Source: Survey of India, (www.surveyofindia.gov.in)
3.5 Brief Political Economic History of India:
A review of India’s economic and trade policies over the last 60
years reveals a pattern of conceptual economic theory moderated by
pragmatic political and economic considerations. Major shifts in
57
economic policy were typically initiated with significant changes and
then followed by a period of gradual adjustments.
Following its independence in 1947, the government of Prime
Minister Jawaharlal Nehru of the Indian National Congress Party (INC)
adopted an economic policy emphasizing rapid industrialization, import
substitution, and relatively high levels of government participation in
economic production. Monopolies were granted to state enterprises in a
number of industries considered of economic or strategic importance.
Private companies in other industries were often subject to licensing
requirements and legally constrained in their size of operation. The
agricultural sector was a key focus of the First Five Year Plan, with the
implementation of various subsidy programes, food price controls, and
restrictions on the transport of agricultural crops. Labour laws provided
workers with protection from managerial misconduct, but also
significantly reduced labour mobility. Both exports and imports were
controlled by licenses and tariffs. Foreign direct investment was also
severely restricted both by industry and size.
Successive Indian governments, still headed by Prime Minister
Nehru, remained relatively true to these policies for both its First and
Second Five Year Plans (1951- 56 and 1956-61) with moderately
successful results. Real GDP grew at an average annual rate of 3.6% for
the First Five Year Plan, and 2.5% for the Second Five Year Plan.
Agricultural production rose 44% and manufacturing output increased
144%. However, the economic policies were also leading to growing
merchandise trade and current account deficits that were depleting India’s
foreign reserves.
58
For the Third Five Year Plan (1961-66), Prime Minister Nehru and
the INC made an adjustment in its economic policies, shifting focus away
from “rapid industrialization” over to a program of “self sustained
growth.” At the same time, India’s trade policy shifted from “import
substitution” to “efficient substitution of imports,” which in effect opened
up new trade opportunities for goods considered crucial to economic
growth and development. This adjusted economic policy remained in
effect until the end of the Seventh Five Year Plan in 1990.
In 1990 and 1991, India was struck by a number of political and
economic shocks. During the political tumult of 1990 and 1991, the
combined effects of rise in oil prices (precipitated by Operation Desert
Storm in the Persian Gulf) and the demise of the Soviet Union, a major
trading partner and a key source of foreign aid, led to a rapid devaluation
of the rupee, a depletion of India’s international reserves, and fears of an
impending severe recession. In response, Prime Minister Rao made a
major and controversial change in economic policies designed to restore
faith in the rupee, replenish the nation’s international reserves, and
stimulate economic growth. These reforms were overseen by his finance
minister, Dr. Manmohan Singh.
The initial round of reforms included several elements. First,
efforts were made to reduce India’s perpetual fiscal deficits at both the
federal and state levels. Second, the number of sectors reserved solely for
the public sector were reduced from 18 industries to just three — military
aircraft and warships, nuclear energy generation, and railway transport.
Third, India liberalized international trade by reducing import tariffs,
eliminating import restrictions, and opening up India to foreign direct
investment. Fourth, India liberalized its financial markets, by dismantling
59
its interest rate controls, reducing government regulations and permitting
greater competition.
Following the initial round of economic reforms, India’s real GDP
growth rate accelerated from around 3-4% per year in the 1980s to 5-7%
during the early 1990s. However, toward the end of the decade, India’s
economic growth began to slow. Some analysts attributed the economic
slowdown to a failure of the federal government to continue and to
complete the economic reforms initiated at the beginning of the decade.
Other analysts argued that economic problems generated by the reforms
were creating structural barriers to continued growth.
The ensuing debate over the merits of the 1991 reforms contributed
to a second period of gradual economic reform in the second half of the
1990s and into the current decade. Since 1991, India has made a number
of significant changes in the structure of its economy, including:
1. The termination of state monopolies for all but three industries;
2. The elimination of the “License Raj” — prior to the reforms, there
was a rather elaborate system of licenses and regulations governing
the establishment of a business in India, making it a very timely
and expensive process to start a new concern;
3. The abolition of import licenses for most commodities;
4. A major reduction in average and peak tariff rates for imports;
5. A reduction in domestic price controls for key consumer goods;
and
6. A restructuring of many of the nation’s various subsidy programs.
However, some analysts argue that many Indians are skeptical
about economic reforms in general, thus posing a “marketing” problem
for the government in a democratic system. Some suggest that even
60
segments of the private sector oppose reform efforts8. Still,
representatives of the Indian business community insist that all of New
Delhi’s progress in economic reform has been voluntary and is not made
under external pressure, and that the general path of liberalization will
continue to be followed regardless of what party or coalition is in power.
3.6 India’s Trade Policies:
India’s trade policies have generally been coordinated with its
overall economic policies. Prior to the economic reforms of the 1990s,
India utilised a fairly comprehensive import licensing system to control
the import of goods. The import of a number of products was banned and
over 1,400 products faced quantitative restrictions.
With the advent of the economic reforms, India started a gradual
process of transforming its import control mechanisms from quantitative
restrictions to a tariff based system that favored the import of some types
of products, but deterred the import of other types of products. In some
cases, tariff rates were significantly raised when the import restrictions
were lifted. A side effect of the change in trade policy was the rising
importance of import tariffs for India’s federal budget. In fiscal year
1996/97, tariffs provided one third of India’s gross tax revenue9
Over the last few years, India has been simplifying its import
policies by lowering tariffs, reducing the variation in tariff rates, and
eliminating import licensing requirements. The stated goal is to reduce
tariffs towards levels found among Association of South East Asian
Nations (ASEAN) members.10
However, while India has been lowering its various import barriers,
it has become a leading nation in the filing of antidumping measures with
61
the WTO. Following the passage of the 1995 amendment to its 1975
Customs Act, which established India’s antidumping and countervailing
duty procedures, India began filing a large number of antidumping
notifications. Between 1995 and 2001, India made 250 such
notifications11.
3.7 Tariff Rates and Enforcement:
India’s tariff system has long had a reputation of being complex
and opaque. Besides having a comparatively high average tariff rate,
India also had a more dispersed range of tariff rates, even among similar
types of products. Moreover, India had many exemptions or exceptions
to the standard “most favored nation” (MFN) tariff rate, making it
difficult for foreign companies to determine the correct tariff rate for their
exports. Finally, there were frequent reports of uneven enforcement of
existing tariff laws, as well as claims of arbitrary evaluation of imported
goods.
Most of these perceived problems with India’s tariff system have
improved with the lowering of its average tariff rate and the
simplification of its tariff schedule. In fiscal year 1991/92, just before the
start of its economic reforms, India’s average tariff rate was almost
130%. According to the WTO, in fiscal year 1997/98, India’s average
tariff rate was 35.3%, with a peak rate of 260%, but by fiscal year
2001/2002, the average rate had declined to 32.3%, with a peak rate of
210%. By 2005, India’s average tariff rate was down to 19.5%.12
Two product categories that remain exceptions to India’s tariff
reduction and simplification are textiles and clothing. Prior to the
elimination of import licenses for textile and clothing imports in April
2001, India introduced specific duties for a range of fabrics and apparel.
62
These duties generally involved the imposition of the higher of two tariffs
— one calculated on a percentage basis; the other calculated by a fixed
amount per kilogram or square meter. According to one estimate,
depending on the unit price of the imported textile or garment, the
implicit tariff rate could be as high as 63%.77 in fiscal year 2006/07,
many products in HS chapters 50 to 63 still face this two-track duty
system.13
63
References
1 Gulshan Sachdeva “India and the European Union:Broadening
Strategic Partnership Beyond Economic Linkages” Swage
Publications,April,2008.
2 G.Sundaram “India and The European Union ”Allied Publishers Limited,2002.
3 Commission of the European Union Committees, Ibid no 4.
4 Kavaljit Singh “India-EU Free Trade Agreement: Should India
Open Up Banking Sector?”madhyam, 2009.
5 G. Sundram Ibid, p.5
7 Treaty of Rome,1957.
8 Pranab Bardhan, “Why is Reform Unpopular?,” Outlook (Delhi),
October 6, 2006; V.Jayanth, “Why Economic Reforms Are
Unpopular,” Hindu (Chennai), January 21, 2006; N.Chandra
Mohan, “The Anti-Reform Mindset,” Outlook (Delhi), November
10, 2005.
9 “Trade Policy Review - India,” WTO Trade Policy Review Body, May 22, 2002, p. 31
10 Ibid, p. 25.
11 “Semi-Annual Report under Article 16.4 of the Agreement -
India,” WTO Committee on Anti-Dumping Practices, November
27, 2006.
12 “India & Bangladesh: Bilateral Trade,” The World Bank, December 2006, p. 10.
64
13 “Trade Policy Review - India,” WTO Trade Policy Review Body, May 22, 2002, p. 31.
14 “2007 Trade Policy Agenda and 2006 Annual Report,” Chapter II - World Trade Organization, p. 7.
15 Michael F. Martin, K. Alan Kronstadt “India-U.S. Economic and Trade Relations” August 31, 2007
65
Chapter-4
Analytical Framework of Bilateral Trade Relation
In this section, we look at the trade relationship between the EU and
India. In addition, we look to Foreign Direct Investment (FDI) flows and
service sector. Before we discuss the trade relation with EU, We will
analysis India’s global trade position.
4.1 Trade Trends of India’s Merchandise Global Trade:
In the post liberalization period India’s trade has increased many
folds. In 2012, India’s merchandise global trade has increased to
791137.21 millions $ from 95096.74 millions $ in 2000. Although
India’s share in the world trade is still small yet it has improve over the
years. Table 4.1 shows India’s trade in goods from 2000to 2012. In 2000
India’s merchandise export was $ 44560.29 million and in 2012 it
increased to $300400.58 million. India’s merchandise export recorded
negative growth in 2001, but after that it was increasing regularly and
remains positive except 2009 and 2012. In 2010 it rose to highest level at
40.49percent. India’s imports have also increased since 2000. It increased
to $490736.65 million in 2012 from $50536.45million in 2000. The table
4.1 show deficit in the balance of trade and it is has been increasing
continuously. The prime reason for this deficit is the high import bill of
petroleum products. India’ growth rate in total trade was increasing and in
2004 it was highest at 37.37 percent. After 2004 growth rate was not
66
smooth it has some ups and down. The reason of these ups and down was
melt down in European Union and in the leading economies of the world.
Table 4.1 Trade Trends of India’s Merchandise Global Trade
value in US $ millions
Period
Export Growth%
Import Growth%
Balance Total Growth%
2000 44560.29
50536.45 -5976.16
95096.74
2001 43826.72
-1.65 51413.28
1.74-7586.56 95240 0.150
2002 52719.43
20.29 61412.14
19.45-8692.71
114131.6 19.83
2003 63842.55
21.10 78149.11
27.25 -14306.5
6141991.
7 24.412004 83535.9
430.85 111517.
4342.7 -
27981.49
195053.4 37.37
2005 103090.53
23.41 149165.73
33.76-46075.2
252256.3 29.32
2006 126414.05
22.62 185735.24
24.52 -59321.1
9312149.
3 23.742007 163132.
1829.05 251654.
0135.49 -
88521.83
414786.2 32.88
2008 185295.36
13.59 303696.31
20.68-118401
488991.7 17.89
2009 178751.43
-3.53 288372.88
-5.05 -109621.
5467124.
3 4.472010 251136.
1940.49 369769.
1328.23 -
118632.9
620905.3 32.92
2011 305963.92
22.48 489319.49
32.33 -183355.57
795283.41
28.08
2012 300400.58
-1.82 490736.65
0.26 -190336.07
791137.21
.521
Source: Own calculations from Export Import Databank, DGFT, Govt. of India
Table 4.2 Share of India in the World Total Trade
67
Year 2000
2001
2002 2003
2004
2005 2006 2007 2008
2010
2012
Total export
Value US$billion
95.
1
95.2
4
114.1
3
141.
1
195.
1
252.2
5
312.1
5
414.7
9
488.
1
620.
1
791.0
3
Export% 0.68
0.74 0.80 0.82 0.86 0.99 1.03 1.05 1.11 1.5 1.6
Source: Ministry of Commerce & Industry, Government of India and Export Import Databank.
India’s share in global exports rose from 0.68% in 2000 to 1.6% in
2012. India now ranks as 19th largest global exporter, up from 32nd
position in 2000 .India has overtaken Australia, Brazil, Thailand,
Malaysia and Indonesia, among others . India’s total merchandise trade
increased from US$ 95.1 billion in FY 2000 to US$ 791.03 billion in
FY2012.China with 11.1 percent share is worlds leading exporter
followed by USA-8.4, Germany -7.6 and India occupied 19th rank with
1.6 percent as is clear from the table 4.3.
Table 4.3 Leading Merchandise Exporters in the World (FY-2012):
Exporter Share in RankChina 11.1 1USA 8.4 2Germany 7.6 3Japan 4.3 4Netherlands 3.6 5France 3.1 6South Korea 3.0 7Russia 2.9 8Italy 2.7 9Hong Kong 2.7 10UK 2.6 11India 1.6 19
68
Source: Ministry of Commerce & Industry, Government of India and Export Import Databank.
India’s exports cover a wide range of items Major commodities that
have registered a significant growth in their share in global exports
include: mineral products, textile and textile articles, gems and jewellery,
chemicals and related products etc.
69
Table 4.4-Share of India in the World service Trade (FY- 2012)
Country Share rank
USA 14.6 1
UK 6.5 2
Germany 6.1 3
France 4.9 4
China 4.3 5
India 3.3 6
Japan 3.3 7
Spain 3.1 8
Netherlands 3.0 9
Hong Kong 2.8 10
Source: Ministry of Commerce & Industry, Government of India and Export Import Databank.
India has emerged as a major global player in services exports.
India’s share in global services exports rose from 1.1% in 2000 to 3.3%
in 2012 .India now ranks as 6th largest global exporter, up from 25th
position in 2000 .India way ahead of Thailand, Australia, Brazil,
Malaysia and Indonesia in the service sector.
70
Figure-1 Trade Trends of India’s Merchandise Global Trade
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-200000
-100000
0
100000
200000
300000
400000
500000
600000
700000
800000
ExportImportTotalBalance
4.1.2 Top Ten Export Destination of India in 2012:
Over the years there have been changes in India’s export and import
destinations. The export and import destinations in 2012 are in given in
Table 4.5. The EU has traditionally been India’s leading export
destination but its share is falling. India’s export market is now more
diversified and it is a conscious decision of the government to diversify
the export markets. In the case of imports, China has emerged as the main
destination while the share of EU has declined.
71
Table 4.5 Top Ten trading partners of India- 2012
IMPORT EXPORT TOTALSN.
Partner Percentage
SN.
Partner percentage
SN.
Partner Percentage
1 EU 11.1 1 EU 16.7 1 EU 13.22 China 10.7 2 UAE 12.3 2 UAE 9.53 UAE 7.8 3 USA 12.2 3 China 8.54 Saudi
Arabia6.8 4 China 5 4 USA 7.8
5 Switzerland
6.2 5 Singapore
4.9 5 Saudi Arabia
5.3
6 USA 5.1 6 Hong Kong
4.1 6 Switzerland
4
7 Iraq 3.8 7 Saudi Arabia
2.9 7 Singapore
2.8
8 Kuwait 3.6 8 Japan 2.3 8 Indonesia
2.6
9 Qatar 3.3 9 Brazil 2.1 9 Iraq 2.610 Indonesi
a2.9 10 Indones
ia2 10 Hong
kong2.5
Figure-2 Top Ten trade destination of India in 2012
EU; 13.2
UAE; 9.5
China; 8.5USA; 7.8
Saudi Arabia; 5.3
Switzerland; 4
Singa-pore; 2.8
In-done-sia; 2.6
Iraq; 2.6 Hong kong; 2.5
Figure3-India’s Major Import Destination in 2012
72
EU; 11.1
China; 10.7
UAE; 7.8
Saudi Arabia; 6.8
Switzer-land; 6.2
USA; 5.1
Iraq; 3.8
Kuwait; 3.6
Qatar; 3.3
Indonesia; 2.9
Figure 4 -Top Ten Export Destination of India in 2012:
EU; 16.7
UAE; 12.3USA; 12.2
China; 5
Singapore; 4.9
Hong Kong;
4.1
Saudi Arabia;
2.9
Japan; 2.3
Brazil; 2.1
Indonesia; 2
73
4.2 India -EU Trade:
The EU is India’s largest trading partner in goods and second
largest trading partner in services (after the US). It accounts for around
one-fifth of India’s merchandise trade (17.18 per cent in export and 11.62
in import in 2011), whereas India contributes to only around 2.6 per cent
of total EU trade and is its 8th largest trading partner.1 (Eurostat 2008,
http://ec.europa.eu/trade/issues/bilateral/countries/india/index_en.htm) )
4.2.1 Trends of India’s Merchandise Trade with the EU since it’s formation to 1969:
The trend in India’s trade with the community since its
formation is more important and significant. Data of table 4.6 shows that
the exports remained more or less at the same level since the formation of
the community till 1968-69. The percentage share of India’s export to the
community of total exports remained almost static at 7.8 percent in 1959-
60 to 8.1 percent in 1968-69.
Table 4.6-Indo-EC Trade during (1959-69)
(Value in RS million)
Year India’s exports to EEC
India’s total export
Exports to EEC as % of total export
India’s imports from EEC
India’s total imports
Imports from EEC as % of total imports
1959-60 492 6299 7.8 1911 9608 19.9
1960-61 494 6324 7.8 1959 11216 17.5
1961-92 507 6552 7.7 1912 10901 17.5
1962-63 465 6781 6.9 1580 11315 14.0
1963-64 606 7893 7.7 1410 12229 11.5
1964-65 565 8132 6.9 1724 13490 12.8
74
1965-66 469 6835 6.9 1793 12104 14.8
1966-67 887 11528 7.7 2983 20784 14.4
1967-68 884 11928 7.4 2561 20076 12.8
1968-69 1108 13563 8.1 2336 18616 12.8
Source: Compiled from UN commodity Trade Statics and EEC Analytical tables
The main reason of this static situation was that during this
period Britain, and not the EEC, which was India’s principal trading
partner till at the middle of the 19601. “In 1960-61, West European
countries accounted for about 37% of India’s total trade. A large amount
of this trade was till with two countries, the U.K. and West Germany. The
U.K. Accounted for about 27% of total exports and 20% of total
imports”2.
India’s foreign trade over the period was quite erratic while trade
with the community was steadily increasing as indicated in table 4.3.
Because of the Government effort and the commercial cooperation
agreement, exports started looking up.
During the period of 1976-77 first times since the formation of the
community Indian exports exceed the imports. Despite the increase in our
exports to and imports from the EEC, our share in the EEC’s exports and
imports remained stagnant over the years.
The Commercial Cooperation Agreement (CCA) was signed by
India and EEC on 17th December 1973 and came into existence on 1st
March 1973.3 It was the first ever trade agreement by the EC with any
other Asian developing country. Both sides felt the need to diversify,
deepen and diversify their commercial and economic relations to the full
75
extent of their growing capacity to meet each other’s requirement on the
basis of complementarity”.
Functioning of the (CCA) had all along been reasonably
satisfactory which is revealed from the table 4.7 that since 1973-74,
India’s exports to the EC had been increasing satisfactorily. Since 1973-
74, India has been importing mainly capital goods, machinery (electrical
and mechanical chemical and sophisticated instruments) etc. as a move to
strengthen it’s industrial base4.
TABLE-4.7-Indo - EC trade 1969-1979
Year India’s exports to EEC
India’s total export
Exports to EEC as % of total export
India’s imports from EEC
India total imports
Imports from EEC as % of total imports
1969-70 2748 14139 19.3 2792 15823 17.6
1970-71 2796 15352 18.2 3187 16342 19.5
1971-72 3036 16082 18.8 4777 18245 26.1
1972-73 4077 19708 20.7 5764 18674 30.8
1973-74 6089 25234 24.1 7040 29253 24.0
1974-75 6894 33041 20.8 8390 44967 18.6
1975-76 8209 38631 21.5 10443 50179 20..8
1976-77 13935 51432 27.1 9650 50738 19..0
1977-78 13900 53630 25.9 15180 60260 25.19
1978-79 15760 57260 27.5 20820 68030 30..6
1979-80 66820 64270 26..2 21200 86880 24.4
Source: Compiled from UN commodity trade statistics and EEC Analytical Tables.
76
The steady growth of India’s exports was uninterrupted except in
1977-78, when this upward movement was arrested temporarily. Since
the conclusion of the CCA, India’s exports and imports increasing
reasonably well, but its imports have surpassed its exports, resulting in a
chronic balance of trade deficit. This is shown in 4.7.
4.2.2 Trend in Indo-EC Trade (1980-2000)
Table 4.8- Trend of Indo-EC Trade (1980-2000) value in million us$
Year EU’s export
change over Previous. year
EU’s import
change over Previous. year
1980 2298 5 1799 -2.0
1981 3363 46 1880 4.0
1982 3991 19..0 2572 37.0
1983 3823 -5 2196 -15.0
1984 4629 21.0 2905 32.0
1985 5560 20.0 2672 -8.0
1986 5705 3.0 2395 -12.0
1987 5678 -0.5 2761 15.3
1988 5673 00 3256 18.1
1989 7085 24.90 4180 28.4
1990 5997 -15.3 4541 8.64
1991 5219 -13.00 4557 4.75
1992 5244 0.5 4877 2.52
1993 6229 18.80 5882 20.60
1994 7053 12.91 6913 18.74
1995 9943 40.97 7794 12.74
1996 9895 4.80 8588 10.19
1997 10208 3.16 9465 10.21
77
1998 9539 -6.55 9790 3.43
1999 10344 8.43 10020.00 2.34
2000 13303 28.60 12341.00 12.16
Source: Calculations based on DGFT Data Bank, Ministry of Commerce
and Industry, Govt. of India. http/commerce.nic.in
After the expiry of the CCA, India and the EC decided to start fresh
negotiations with a view arriving at a new agreement in the light of the
experience gained till then. After prolonged negotiations, India and the
EC agreed to conclude a new agreement which was concluded on 23 June
1981, known as commercial and Economic Cooperation Agreement
(CECA).5
The new agreement extended the horizon and scope of it’s
economic and commercial cooperation. The CCA of 1973 continued up
to 1980. Between 1973 and 1980, India’s exports to the EC increased by
210% on the other hand, imports also grew remarkably by 284%. The
compound growth rate of India’s exports was 17.55 against the import
growth of 21.22% during the same period.
Though CECA was much diversified than CCA but it’s
performance on the external sector was quite lackluster during this
period. During CECA, exports grew 9.54% at compound rate and imports
growth was 7.97% one interesting feature of this period was that export
growth was higher than import growth.6
The percentage change in India’s import over the previous year
which was 5% in 1980 rose to 18.80 in 1993. India’s import from the EC
at 2298 million US$ in 1980 had increased to 6229 million US$ in 1993.
Similarly Indian exports to the EEC were 1799 million US$ in 1980;
78
which increased 5882 million US$ in 1993 and percentage change from
2% in 1980 to 20.6% in 1993. The Table 4.8 shows trend in Indo –EEC
Trade (1980-2000).
The European community has a share about 30% of India’s export
and import. Both way Indo-EC trade was no more than 1.11% of EC’s
external trade in 1992. One could easily observe that India has not been
able to realize its economic potential for exports to the member of the EC.
One plausible reason may be the in ability of the Indian exporter to
conform to the European specifications and fast changing market-trends.
In order to capture the European market, quality is the most important
determinant rather than cost-competitiveness. In India, we often neglect
quality aspect and tend to give greater importance to the price factor.7
4.9 Bilateral merchandise Trade between India and EU-27 (2000-2012)
Year
Export %share
%change
Import % Share
% Change
BOT Total Trade with EU
2000 10694.16
23.9993
10.64 10675.01
21.1234
-4.13 19.15 21369.17
2001 10155.37
23.1716
-5.04 10648 20.7122
-..25 -493.43 20804.17
2002 11886.41
22.5465
17.05 12834.46
20.8989
20.52 -948.05 24720.87
2003 14516.50
22.7380
22.13 15074.77
19.2898
17.46 -558.28 29591.27
2004 18249.02
21.8457
25.71 19302.08
17.3086
28.04 -1053.06
37551.1
2005 23228.84
22.5325
27.29 25998.21
17.4291
34.69 -2769.37
49227.05
2006 26834.45
21.2251
15.51 29856.24
16.0746
14.84 -3024.79
56687.69
79
2007 34535.37
21.1702
28.71 38450.10
15.2790
28.78 -3914.73
72985.47
2008 39351.43
21.2371
13.95 42733.41
14.0711
11.14 -3381.98
82084.84
2009 36028.05
20.1554
-8.45 38433.12
13.3276
-10.06 -2405.07
7446.17
2010 46039.38
18.3324
27.79 44539.93
12.0453
15.89 1499.45
90579.31
2011 17.18 11.62 109428
2012 16.7 11.1 102696p
Source: Calculations based on DGFT Data Bank, Ministry of Commerce and Industry, Govt. of India. http/commerce.nic.in
As table 4.9 indicates that in recent years India’s total trade with
combined EU-27 have increased from about US$ 21.36 billion in 2000 to
about US$ 102.7 billion in 2012 out of which export to combined EU27
have increased from about US$ 10.7 billion in 2000 to about US$ 46
billion in 2010-11. Similarly Indian imports from the EU-27 have grown
from about US$ 10.67 billion in 2000 to US$ 44.5 billion 2010-11. Data
of above table (4.9) shows that although in absolute terms, India’s trade
with the EU-27 has increased in relative terms as a percentage of India’s
total export and import, it has declined consistently in the last decade. As
indicated in table 4.8 in 2000, share of EU-27 in export was about 24 %
and in import was21.12%. However in 2012 it declined to its lowest level
i.e. export 16.7 percent and import 11.1 percent as shown in table 4.9. In
comparison, during this period India’s trade with various other countries
grow significantly. For example India-US trade grows at an average rate
of 26.3% and its trade with china registered a growth of nearly 53% per
year. This rising level of trade with other regions indicate that the
80
European economies have not been able to take full advantage of an
expanding economy8
Figure-1EU’s Share in Total Indian trade
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
5
10
15
20
25
30
23.99 23.17 22.54 22.7421.85 22.53
21.23 21.17 21.2420.16
18.3317.18 16.7
21.12 20.71 20.8919.29
17.31 17.4216.07 15.28
14.07 13.3312.05 11.62 11.1
Export Import
4.2.3 Indian Share in EU’s merchandise trade:
In 1957 India’s share in EEC’s total import was 0.06 and in import
was 1.09 in 1980 it was 0.35 percent of total import and 0.48 of export.
India’s export and import to the EEC are hardly one percent of total extra
–EEC export and import in 1980.
Table 4.10 Indian share in total EU trade (%)
year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Exp
ort
1.6 1.5 1.6 1.7 1.8 2 2.1 2.4 2.4 2.5 2.6 2.6
Impo
rt 1.3 1.4 1.5 1.5 1.6 1.6 1.7 1.9 1.9 2.1 2.2 2.3
Source: Calculations based on DGFT Data Bank, Ministry of Commerce and Industry, Govt. of India. http/commerce.nic.in
81
82
After post liberalization India-EU trade had shown impressive growth
over the last years. However India accounts for 2.6% of EU’s total
exports and 2.3% of the EU’s total imports in 2011. Although the share of
India in EU’s total export and import is increased 1.3% in 2000 to 2.3%
in 2011 in import and 1.6% in 2000 to 2.6% in 2011 in export. This
growth is not satisfactory and indicates that India has not been able to
take the full advantage of the enlargement of EU-27.
4.3 Trade in services between EU and India:
There is no denying fact that services are assuming centre stage in
the economies of both India and the European Union in recent years.
Since the 1999, the rapidly expanding services sector has been giving
more contribution to economic growth than any other sector. Over the
years, the share of agriculture and manufacturing in India’s GDP is
declining while the share of services is rapidly increasing. Financial
services, Tourism, Transport and communication services have been
experiencing double-digit growth since 2002.Share of the service sector
in the GDP of Indian economy rises from 44.6 percent in 1991 to 58.2
percent in 2012. EU is the biggest global player in international trade in
services. India is also becoming a significant player in global trade in
services. As it can be seen from table 4.11 between 2000-2012, trade in
services almost increased five times. Data’s in table 4.11 shows that from
2000-2004, balance was in the favour of India, but since 2005-2011 trade
was in the favour of EU. India does not report bilateral trade in services
data but Eurostat data shows that India has closed to one percent share in
EU trade in services, which is lower than many Asian countries. Bilateral
trade in services between India and the EU has increased from $7.9billion
in 2004 to $28.9 billion in 2012 and the EU is India’s largest trading
83
partner in services. In 2010, the EU contributed 11 percent to India’s
services trade, followed by the US (10 per cent) 15. In 2006 India was put
in the 6th rank, behind EU-27, the US, Japan, China and Canada. As far as
export of services is concerned, the UK remained India’s biggest market
within the EU followed by Germany and France.
Table4.11-Bilateral Services Trade between India and EUEuro Billions
yearEU’s export to India
EU’s import from India Balance
2000 2.5 2.6 -0.12001 2.7 3 -0.32002 2.6 2.7 -0.12003 2.8 3 -0.22004 3.8 4.1 -0.32005 5.4 5.1 0.32006 7.5 5.8 1.62007 8.7 7.2 1.52008 9 8.1 0.82009 8.9 7.4 1.52010 10 8.2 1.82011 10.7 9.7 1.12012 14.1 14.8 -0.7
Source: http://epp.eurostat.ec.europa.eu/portal/page/portal/-statistics/themes
*EU’s exports are Indian import and EU’s import is Indian export.
84
Figure-2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-2
0
2
4
6
8
10
12
14
16
Trade in Services
EU’s export to India EU’s import from India Balance
4.3.1 Importance of Services Trade in India and the EU:
Services trade contributes a significant share in total trade (including
merchandise and services trade) of India and the EU. Contribution of
service sector in 2000 was 27.6 and 20.8 in India and EU’s total trade. In
2011, services trade contributed 27.3 per cent and 21.2per cent in India
and EU’s total trade, which is higher than global share of 18.4 per cent.
Table also shows that while, over time, share of trade in services in
India’s total trade has increased, there has not been much improvement in
share of services trade in total trade for the EU.
85
4.3.2- Per cent Share of Services Trade in Total Trade - India and the EU
year India EUExport import Service
tradeExport import Service
trade2000 28.8 27.1 27.6 21.1 20.6 20.82001 28.6 28.5 28.5 21.6 21.5 21.62005 34.5 24.9 29.2 22.8 20.8 21.82008 35.5 21.6 27.5 23.4 20.2 21.82009 36.1 24 29.2 25.5 22.6 24.12010 35.9 26.2 30.4 23.9 20.9 22.42011 33.3 22.6 27.3 22.8 19.6 21.2
Source:http://unctadstat.unctad.org/ReportFolders/reportFolders.aspx
4.4 Foreign Direct Investment (FDI)
International capital movements, especially cross-border direct
investment inflows popularly known as foreign direct investment (FDI).
FDI plays vital role in the economic growth of a nation. According to
UNCTAD’s World Investment Reports (2004, 2005, 2006, 2008), FDI
inflows from developing and transition economies reached record levels
in the year 2007 contributing to their economic growth. According to
Reserve Bank of India (RBI), Indian FDI equity inflow increased from
2,347 million USD in January 2000 to 22,789 million USD in December
2012. The cumulative FDI inflows from all countries in India during this
period from January 2001 to December 2012 were 188.47 billion USD as
shown in the table 4.15 . This indicates that foreign companies are
investing in India to access key resources of host country and to enter into
the bigger South Asian Countries market.
86
4.4.1 Foreign Direct Investment Inflows from EU to India:
The EU is India's largest source of foreign direct investment with a
stock of 34.4 billion Euros and India's investments in Europe is also fast
reaching 7 billion Euros. "European FDI in India for instance is half the
amount of that in China, or a quarter of that in Russia, or a fifth of that in
Brazil16.The main sectors which attracted FDI from European Union were
electrical equipments, fuels, transportation industries, chemicals and
services. In 2007, the EU’s investment flows to India gained momentum
and increase from about 2.5 billion Euros in 2006 to about 4.6 Euro in
2007. In fact, India overtook China as the leading destination for FDI
inflow from the EU in 2007.However, Indian FDI in the EU also
increasing. The UK has been a major attraction for Indian companies
where more than 500 companies have invested. The Netherlands and
Cyprus have also received substantial Indian FDI.17
Table 4.13-FDI flows between EU and India
Euro billion
Year Outflows From India to EU Outflows From EU To India2000 0.2 0.72001 0.1 0.42002 0.1 1.12003 0.6 0.82004 0 1.62005 0.5 2.52006 0.5 2.52007 1.2 4.62008 3.5 3.32009 0.8 3.12010 0.6 3
Source: Eurostat
87
Figure-3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
inflow from india to EU out flow from EU to India
4.4.2 Country wise FDI inflow from European Union:
The top most investing countries in India from 2001 to 2012 are
given in table 4.14. Among the EU member countries, the UK accounted
for the highest FDI inflows followed by Netherlands, Cyprus, Germany
and France.
88
Table4.14 Country wise FDI inflow from European Union during 2001-2012
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 total
European Union
303 474 457 561 450 2 761 2 385 4 266 4 120 3 966 7 241 5 310 32294
Austria - - - - - - - - - 43 20 41 104
Belgium - - - - - - - - - 34 40 33 107
Cyprus - - - - 13 58 570 1 211 1 623 570 1 568 415 6028
Denmark - - - - - - - - - 69 23 83 175
Finland - - - - - - - - - 22 15 3 40
France 88 53 34 44 12 100 136 437 283 486 589 547 2809
Germany 74 103 69 143 45 116 486 611 602 163 368 467 3247
Greece - - - - - - - - - 1 - 2 3
Ireland - - - - - - - - - 33 1 1 35
Italy 28 - - 24 39 57 21 249 - 119 152 63 752
Luxembourg - - - - - - 15 23 40 248 89 34 449
Malta - - - - - - - - - - 3 - 3
Netherlands 68 94 197 196 50 559 601 682 804 1 418 1 301 1 713 76836
Poland - - - - - - - - - - 10 517 527
Portugal - - - - - - - - - 2 2 11 15
Romania - - - - - - - - - 2 4 - 6
Slovakia - - - - - - - - - 1 - - 1
Spain - - - - - 62 48 363 125 183 251 348 1380
Sweden - - - 70 30 - - - - 34 43 10 187
United Kingdom
45 224 157 84 261 1 809 508 690 643 538 2 760 1 022 8741
Source: UNCTAD FDI/TNC database, based on data from the Reserve Bank of India.
89
4.4.3 Total FDI Equity Inflow to India during 2001 to 2012:
The FDI equity inflows from EU to India increased from303 million
US$ in the year 2001 to 5310 million US$ in the year 2012. FDI equity
inflow from EU to India is approximately 24 percent during the period
January 2001 to December 2012.Table 4.15 shows the FDI inflows from
EU to India during 2001 to 2012.
Table 4.15 FDI Equity Inflows
Year FDI Equity Inflow from world (million USD)
Growth Rate
FDI Equity Inflow from EU Countries (million USD)
Growth Rate
FDI Equity Inflow from EU as Percentage of Total FDI inflows (%)
2001 3,520 303 8.612002 3,359 -4.57 474 56.43 14.12003 2,079 -38.1 457 -3.58 22.02004 3,213 54.54 561 22.75 17.52005 4,355 35.51 450 -19.78 10.32006 11,120 155.33 2,761 513.55 24.82007 15,921 43.17 2,385 -13.61 15.02008 37,096 133. 4,266 78.86 11.52009 27,044 -27.09 4,120 -3.42 15.22010 21,007 -22.32 3,966 -3.73 18.92011 34,621 64.8 7,241 82.57 20.92012 22,789 -34.1 5,310 26.66 23.3Cumulative Total
188,471 32,294 17.1
Source: Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India.
90
4.4 A Time Series analysis of India and European Union Trade Pattern
The EU is India’s largest trading partner followed by US and
China. Presently the EU’s contribution to India’s trade (both export and
import) is about one third of the total.
4.4.1 Trends of EU’s World Imports:
Let us first see the growth scenario of the EC’s world
imports. In 1981, the EC’s total imports were 581 billion ECU which
increased to 1255 billion ECU in 1994. The compound growth rate of
EC’S total import was 6.09 percent from 1981to1994. The rate varies
across from one member state to another.9 Almost all member states have
shown higher import growth over the years. In table 4.16 we have shown
that EU’s (extra) growth of imports from 2000-2012. During this period
Slovak republic showed the highest growth rate of 16.1 percent per
annum, followed by Lithuania 16.0 percent and romania 15.0 percent.
Bulgaria and Latvia both has 14.4 percent growth rate. For other member
countries rates of growth of imports vary between 5 and 9 percent except
Ireland whose performance is lackluster 1.8 percent respectively. Every
other member state has much higher import growth rate.
91
TABLE 4.16- Trends of EU’s World Imports(Value in million US$.)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CAGR
Belgium 176991 178698 198095 234922 286478 319085 353094 413036 466338 354586 391256 466349 437883 7.8
France 303758 293866 303831 362517 434242 475857 529902 611364 695004 540502 599172 700852 663269 6.7
Italy 238069 236127 246609 297403 355267 384836 442565 511823 560960 414784 486984 558832 489104 6.2
Luxembourg 10592 11188 11529 13646 16772 17586 19640 22289 25498 18771 20400 25972 24011 7
Netherland 198927 195562 194115 233997 284014 310591 358510 421368 494937 382190 439987 492838 501134 8
Germany 500830 486022 490450 601761 718150 779819 922213 1059308 1204209 938363 1066817 1260298 1173288 7.4
Denmark 44533 44625 49285 56227 66845 72716 84187 97445 109166 80364 83162 96437 92297 6.3
Ireland 50649 51376 52214 53782 62345 70284 76621 87045 84953 62566 60550 67171 63100 1.8
UK 374703 358703 NA 425369 502886 528461 614812 679918 705344 522042 627618 717606 689137 5.2
Greece 29487 28434 31299 44855 52810 54894 63739 76099 89302 67192 63942 60832 62341 6.4
Portugal 39879 39456 40032 47166 68222 61167 66694 78326 90106 69985 75572 80324 72293 5.1
Spain 152898 154993 165920 208549 259265 289611 329976 391237 418728 287502 315547 362835 325835 6.5
Austria 68374 70492 72796 91595 111261 119950 134356 156056 175026 136418 150593 182350 169663 7.8
Finland 33886 33268 33440 41572 50658 58473 69427 81576 92190 60830 68767 83862 76089 6.9
Sweden 72767 63536 67121 84199 100833 111351 127101 152823 168982 119949 148788 176945 162709 6.9
Cyprus 6382 7046 8749 10849 7933 8645 4789 7377 5.5
Czech Republic 76527 93429 116822 141834 104850 125691 150813 139727 13
Estonia 11018 14641 16665 17335 11360 13197 18963 19750 12
Hungary 65920 76979 94660 108785 77272 87432 101370 94266 9.3
Latvia 8770 11427 15185 15775 9337 11143 15431 16082 14.4
Lithuania 15704 19388 24445 31295 18341 23378 31801 32238 16
Malta 3865 4396 4947 5141 4034 5732 7396 7896 7.3
Poland 101539 125645 164172 210479 149570 174128 209192 191430 12.1
Slovak Republic 34226 44759 59208 72612 55160 64382 76690 76859 16.1
Slovenia 19626 23013 29476 33986 23902 26592 31237 28383 9
Bulgaria 30085 37015 23341 25360 32494 32743 14.4
Romania 69946 82965 54256 62007 76365 70260 15
EU-27 2472185 2435413 2174803 3065837 3717949 4056883 4687935 5474073 6148814 4595400 5226842 6090044 5719164
SOURCE: World Integrated Trade Solution (WITS) www.wits.com.
92
Table 4.16 revealed an interesting phenomenon that the former
communist countries or the east European countries like Slovak Republic,
Lithuania, Latvia and Estonia shows the highest import growth rate per
annum. The growth rate of these countries varies between 9 to 16 percent.
On the other hand big countries like Germany, France and Spain had
import growth between 6 to 7 percent.
Table 4.17 shows the time series trends of the EU’s imports from
India. Against the compound growth rate of 14 percent of India total
export to the EU, the rate was highest in case of Estonia. India’s export to
Estonia grew by 31 percent per annum and 25.8 percent to Slovak
Republic for Estonia it was 23.6 percent, to Spain 5.2 percent during the
same period. Compared to smaller countries, India’s export performance
to the largest member states has been some rather what disappointing
except The Netherland .If we judge India’s export performance by growth
rate only, it was below average in case of Belgium11.6 percent, Germany
11.8 and Italy 11.6 percent. Rate of growth to Denmark 12.4 percent and
to U.K. it was 11.6 percent during the same period. Top ten partners of
India in European Union, except France and The Netherland whose
growth rate was 14.4 and 23 percent respectively, has lower import
growth rate then the average growth rate i.e. 14 percent during the same
period.
93
TABLE4.17:-Trend of India’s Export to the European Union (Value in US$ Million)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CAGR
Belgium 1470.6 1390.6 1661.8 1805.7 2509.7 2871.2 3478.2 4207.1 4480.3 3759.3 5784.4 7160.8 5507.3 11.6
France 1020 945 1074.1 1280.9 1680.9 2079.6 2103.3 2599.6 3020.9 3819.8 5209.6 4558.1 4986 14.1
Italy 1308.8 1206.5 1357.1 1729.4 2286 2519 3584.7 3914 3824.6 3400.3 4551.6 4883.1 4372.6 10.6
Luxembourg 5.58 4.47 9.14 14.19 11.64 10.67 16.92 11.7 11.56 4.78 18.76 9.1 8.2 3.2
Netherland 880.09 863.88 1047.9 1289.1 1604.9 2474.8 2674.6 5249.1 6348.7 6397.6 7677.6 9151.3 10565 23
Germany 1907.6 1788.4 2106.7 2544.6 2826.3 3586.1 3984.8 5121.5 6388.5 5412.9 6751.2 7942.8 7246.2 11.8
Denmark 174.38 151.86 183.67 241.89 305.74 410.28 458.06 496.57 583.66 580.42 690.74 757.51 707.29 12.4
Ireland 103.18 102.38 135.81 150.93 211.99 279.77 226.08 314.47 449.77 260.57 270.34 380.26 386.69 11.6
UK 2298.7 2160.9 2496.4 3023.3 3681.1 5059.3 5622.9 6705.5 6649.5 6221.4 7285 8589.9 8612.5 11.6
Greece 113.49 106.53 148.7 200.04 306.34 564.09 670.71 530.38 874.43 452.8 364.88 790.06 300.13 8.4
Portugal 146.7 147.84 162.12 169.89 223.17 260.89 366.99 495.91 440.44 374.57 526.84 525.27 528.46 11.3
Spain 666.25 677.21 810.49 1002.6 1389.4 1605.7 1878.7 2293.6 2538.2 2029.3 2565.3 2999.3 2865.8 5.2
Austria 81.02 76.33 81.11 106.38 117.15 132.47 132.01 183.41 490.67 252.74 593.7 341.82 328.58 14.4
Finland 58.31 69.75 71.14 111.27 143.54 204.69 194.36 239.74 264.89 208.36 254.92 314.34 317.27 15.2
Sweden 176.16 154.27 176.29 219.88 241.8 326.39 387.7 544.19 566.69 476.63 627.73 825 686.15 11.9
Cyprus 32.41 33.39 47.91 250.01 46.82 43.31 56.62 54.99 4.5
Czech Republic 96.87 102.66 180.28 183.3 177.76 215.77 271.85 251.4 14.6
Estonia 13.86 28.24 68.63 49.31 28.92 52.91 116.48 91.88 31
Hungary 84.16 103.8 230.41 439.69 269.68 212.85 316 323.74 21.2
Latvia 28.39 39.81 59.5 44.93 47.17 103.19 96.18 104.08 20.4
Lithuania 33.45 40.61 59.18 60.26 66.39 83.3 134.89 147.43 23.6
Malta 121.31 60.8 34.61 100.08 708.85 746.78 848.99 398.22 18.5
Poland 226.96 306.57 447.45 518.45 421.13 666.22 787 810.85 19.9
Slovak Rep 21.41 36.24 47.46 35.83 35.76 59.47 94.36 107.01 25.8
Slovenia 76.6 88.63 119.47 160.7 192.58 187.42 227.02 273.79 19.9
Bulgaria 71.12 73.69 50.89 69.71 108.77 156.98 20.8
Romania 170.46 262.55 498.41 330.81 426.03 269.54 0.9
EU-27 10411 9845.9 11522 13890 17540 23120 26621 34443 39112 36196 45944 52713 50408 14
SOURCE: World Integrated Trade Solution (WITS) www.wits.com* India’s export to European Union means union’s import from India. ** Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic, Slovenia and Bulgaria became members from 2004.*** Bulgaria and Romania became members from 2007.
94
Import growth rate of the former communist countries like
Estonia31percent, Lithaunia23.6 percent, Poland 19.9 percent is higher
than the western countries of the EU like Belgium 11.6,Italy10.6, and
Germany 11.8 percent.
Table 4.17 shows that India’s share in the EU’s total import’s has
been abnormally low over the years but has been improving later on.10
The share of India has been increasing but remains below 1 percent
during the same period. It’s share in EU’s total import was 0.45 percent
in 2000, which increased to 088 percent in 2012. There may be several
reasons as to why Indian share in the EU market has been always at a low
level. Inspite of having several supply problems, demand side factors, are
not less important. Factual evidence shows that since mid seventies the
EC has become more protectionist towards India especially in areas of
labour intensive goods with less value addition.11 All imports of textiles
and garments have been under stringent quota restrictions since 196112.A
part from high tariff, it’ market is well-protect by a plethora of non tariff
barriers. Non- transparent barriers hurt more severely than tariff barriers.
High tariff can be absorbed through efficient production but non tariff
barriers are difficult to deal with them because in most of the cases they
are non transparent. Trade distortionary effects of NTB’s are much more
prominent than higher tariffs.13
95
TABLE4.18-India’s share in EU’s Total Import Country wise (%)
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
BELGIUM 0.83 0.78 0.84 0.77 0.88 0.90 0.99 1.02 0.96 1.06 1.48 1.54 1.26
France 0.34 0.32 0.35 0.35 0.39 0.44 0.40 0.43 0.43 0.71 0.87 0.65 0.75
ITALY 0.55 0.51 0.55 0.58 0.64 0.65 0.81 0.76 0.68 0.82 0.93 0.87 0.89
LUXEMBOURG 0.05 0.04 0.08 0.10 0.07 0.06 0.09 0.05 0.05 0.03 0.09 0.04 0.03
NETHERLAND 0.44 0.44 0.54 0.55 0.57 0.80 0.75 1.25 1.28 1.67 1.74 1.86 2.11
GERMANY 0.38 0.37 0.43 0.42 0.39 0.46 0.43 0.48 0.53 0.58 0.63 0.63 0.62
DENMARK DO 0.39 0.03 0.37 0.43 0.46 0.56 0.54 0.51 0.53 0.72 0.83 0.79 0.77
IRELAND 0.20 0.02 0.26 0.28 0.34 0.40 0.30 0.36 0.53 0.42 0.45 0.57 0.61
UK 0.61 0.44 NA 0.71 0.73 0.96 0.91 0.99 0.94 1.19 1.16 1.20 1.25
GREECE 0.38 0.02 0.48 0.45 0.58 1.03 1.05 0.70 0.98 0.67 0.57 1.30 0.48
PORTUGAL 0.37 0.03 0.40 0.36 0.33 0.43 0.55 0.63 0.49 0.54 0.70 0.65 0.73
SPAIN 0.44 0.14 0.49 0.48 0.54 0.55 0.57 0.59 0.61 0.71 0.81 0.83 0.88
AUSTRIA 0.12 0.02 0.11 0.12 0.11 0.11 0.10 0.12 0.28 0.19 0.39 0.19 0.19
FINLAND 0.17 0.01 0.21 0.27 0.28 0.35 0.28 0.29 0.29 0.34 0.37 0.37 0.42
SWEDEN 0.24 0.03 0.26 0.26 0.24 0.29 0.31 0.36 0.34 0.40 0.42 0.47 0.42
CYPRUS 0.82 0.01 0.57 0.63 0.51 0.51 0.47 0.55 2.30 0.59 0.50 1.18 0.75
CZECHREPUBLIC 0.12 0.01 0.12 0.17 0.13 0.13 0.11 0.15 0.13 0.17 0.17 0.18 0.18
ESTONIA 0.07 0.00 0.07 0.08 0.11 0.13 0.19 0.41 0.28 0.25 0.40 0.61 0.47
HUNGARY 0.13 0.01% 0.13 0.19 0.18 0.13 0.13 0.46 0.40 0.35 0.24 0.31 0.34
LATIVA 0.43 0.00 0.22 0.31 0.24 0.32 0.35 0.39 0.28 0.51 0.93 0.62 0.65
LITHUNIA 0.16 0.10 0.13 0.18 0.25 0.21 0.21 0.24 0.19 0.36 0.36 0.42 0.46
MALTA 0.31 0.44 1.14 3.47 0.76 3.14 1.38 0.70 1.95 17.57 13.03 11.48 5.04
POLAND 0.18 0.22 0.19 0.20 0.20 0.22 0.24 0.27 0.25 0.28 0.38 0.38 0.42SLOVAK REPUBLIC
0.08 0.06 0.07 0.07 0.08 0.06 0.08 0.08 0.05 0.06 0.09 0.12 0.14
SLOVENIA 0.15 0.28 0.22 0.26 0.36 0.39 0.39 0.41 0.47 0.81 0.70 0.73 0.96
BULGARIA 0.18 0.11 0.14 0.23 0.17 0.13 0.17 0.24 0.20 0.22 0.27 0.33 0.48
ROMANIA 0.10 0.08 0.06 0.11 0.15 0.26 0.17 0.24 0.32 0.92 0.53 0.56 0.38
*Table 4.18 is compiled from table 4.16 and 4.17.
Table 4.18 gives detailed information of India’s share in EU’s
import over the years both in average and individual states. India’s share
was the lowest in case of Luxembourg, Slovak Republic, and Czech
Republic. In 2012 only.03, 0.14 and 0.18 percent respectively of their
total import came from India. Picture more or less same in case of Austria
where India’s share was 0.19 percent of it’s total imports during the same
period. India’s share was highest in case of Malta, where India’s
contribution was 5.4, India’ share in Belgium’s total import was 12.6
percent and with Italy it was 0.75 percent during the same period. India’s
share to The Netherland’s total import was 2.11 percent and to the UK it
was 1.25 percent respectively during 2012.It is also evident from the table
96
that our export performance to some of the EU member countries has
improved in recent years, which is reflected in India’s improved share in
the countries market. From 2000 to 2012, India’s export performance to
countries of EU was fluctuating, but the long run effect shows that it has
improved significantly.
TABLE4.19 EU-27 Compound Annual Growth Rate of import (CAGR)
Table4.19 Based on table 4.16and4.17
97
World IndiaBelgium 7.8 11.6France 6.7 14.1Italy 6.2 10.6Luxembourg 7 3.2Netherland 8 23Germany 7.4 11.8Denmark 6.3 12.4Ireland 1.8 11.6UK 5.2 11.6Greece 6.4 8.4Portugal 5.1 11.3Spain 6.5 5.2Austria 7.8 14.4Finland 6.9 15.2Sweden 6.9 11.9Cyprus 5.5 4.5Czech Republic 13 14.6Estonia 12 31Hungary 9.3 21.2Latvia 14.4 20.4Lithuania 16.0 23.6Malta 7.3 18.5Poland 12.1 19.9Slovak Rep 16.1 25.8Slovenia 9 19.9Bulgaria 14.4 20.8Romania 15.0 0.9EU-27 na 14
Figure-7
Belgium
Italy
Netherl
and
Denmark UK
Portuga
l
Austria
Swed
en
Czech Rep
ublic
Hungary
Lithunia
Poland
Slove
nia
Romania
0
10
20
30
40
50
60
70
CAGR from india CAGR from world
4.3 Composition of Indian Export to the European Union: A Sectoral Analysis:
Historical trends of the composition of the India’s export to
the European Union shows that India has never been a very prominent
exporter of hi-tech items. A close look at the composition of her exports
reveals that rather she has been exporting primary and labour intensive
low value- added manufactured goods. This is the basic feature of India’s
export pattern to the European Union in particular western countries in
general14.For analytical purpose; we have aggregated all sectors into 16
major groups. Sixteen major groups are as follows:
98
Sr.n
o
Sectors Group
1 1-5 Animal
2 06-15 Vegetable
3 16-24 Food Product
4 25-26 Minerals
5 27-27 Fuels
6 28-38 Chemicals
7 39-40 Plastic or Rubber
8 41-43 Hides and Skin
9 44-49 Wood
10 50-63 Textile and Clothing
11 64-67 Footwear
12 68-71 Stone and Glass
13 72-83 Metals
14 84-85 Machine and Electronic
15 86-89 Transportation
16 90-99 miscellaneous
99
TABLE4.20 India’s Export to European Union 2000-2012
(Percentage Share of different Product Group)
Year 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Animal 2.08 2.19 2.49 2.68
2.14 2.05 2.22 1.93 1.65 1.92 1.65 1.57 1.71
Vegetable
8.22 6.89 6.04 5.53
5.5 4.97 4.51 4.24 5.03 4.57 4.35 4.53 5.23
Food Prod
1.43 1.63 1.45 1.09
1.1 1 1.13 1.41 1.53 1.52 1.37 1.51 1.74
Minerals 2.04 1.86 2.03 1.92
1.95 1.76 1.64 1.47 1.18 0.78 0.8 0.73 0.8
Fuels 0.32 1.09 0.79 1.19
2.34 4.64 4.5 5.68 7.73 7.11 14.22
12.53
13.49
Chemicals
8.02 8 9.1 9.51
9.28 9.23 9.55 9.84 9.94 10.88
10.78
11.39
12.69
Plast iRub
1.72 1.73 1.85 1.98
2.3 2.9 2.73 3.04 2.78 2.4 2.65 3.07 3.05
Hides Skin
7.15 7.76 7.16 6.09
4.98 4.62 4.22 3.91 3.77 3.82 3.39 3.29 3.44
Wood 0.58 0.6 0.68 0.78
0.77 0.73 0.66 0.61 0.55 0.6 0.52 0.43 0.49
TextCloth
31.78
31.72
30.75
29.4
27.28
27.66
26.68
23.41
20.82
23.51
19.68
18.58
16.81
Footwear 3.95 4.59 4.53 4.24
4.26 3.84 3.94 3.72 3.41 3.86 3.59 3.28 3.05
StoneGlas
13.16
12.07
13.28
12.1
11.89
11.59
10.85
9.64 8.6 7.85 8.38 8.84 8.24
Metals 5.53 5.01 5.47 6.04
8.73 8.33 10.59
12.73
11.94
6.8 6.72 8.17 7.78
MachElec
6.82 7.88 8.43 9.19
9.52 9.53 10.02
10.57
12.88
12.36
12.55
11.84
12.08
Transport 2.52 1.98 2.38 3.23
4.35 3.7 3.34 4.05 4.54 8.16 6.19 6.11 5.07
Miscellan 3.34 3.46 3.58 3.52
3.56 3.31 3.3 3.59 3.46 3.55 3.04 3.92 3.94
Source: Calculations based on DGFT Data Bank, Ministry of Commerce and Industry, Govt. of India. http/commerce.nic.in
100
During 2000 textile has the highest share i.e. 31.78 percent in the
export followed by stone and Glass products having a composite share of
13.16 percent, Vegetable with a share of 8.2 percent was on the third
place. Other important categories in the export were chemicals8.02 and
Hides and skin 7.15 percent. Share of mach&Elect was 6.82percent and
Metals had the share of 5.53 percent of the total exports.
In 2012 the scenario is completely different Share of Textile
and Clothing has been declining since 2000 and has declined to
16.81percent during 2012. Nearly one third of India’s to the EU market is
composed of textile and clothing. Declining in share may be due to fierce
competition arising from other textile exporting countries like China ,
Pakistan ,Bangladesh etc .Secondly most of the quota free items are not
of any interest to India. The third reason behind such declining trend may
be attributed to child labour issue. In carpet sector Iran and China
emerges as a new competitor from the developing countries.
During this period the share of two groups declined significantly are
Stone and Glass and Hides and Skin. Export share of Stone Glass had
declined from 13.16 percent during 2000 to 8.24 percent during 2012.
The rationale behind such declining trend may be the emergence of new
competitors like Israel, Brazil etc. Share of Hides and Skin has been
declining since 2000 and had declined to 3.44 percent during 2012.
Similar to Hides Skin share of Vegetable Food products and Minerals
has also declined during this period. Miracle is done by Fuel product
during this period share of fuels has increased tremendously during this
period. Its share was 0.32 percent in 2000, which increased to 13.49
101
percent during 2012. This shows that it is one of the most potential items
in Indo-EU trade. Machine, Electronics goods, Metals and Transport
items has shown significant improvement during this period. The share of
Mach&Elec has increased from 6.82 percent in 2000 to 12.08 percent
during 2012.Similarly the share of Transport items increased from 2.52
percent in 2000 to 5.07 percent in 2012. Export of Metals increased from
5.53% in 2000 to 7.78 percent in 2012. Share of Vegetable, Minerals and
Animals products has declined during this period. This simply because of
two reasons. First is that the agricultural sectors is heavily protected by
the subsidies given in “AMBER BOX*,GREEN BOX**” and “BLUE
BOX”***. The EU has been giving heavy subsidies to protect it’s farm
sector from external competition. Secondly EU frequently uses stringent
sanitary and Phyto sanitary Standards (SPS) against its import of
agricultural items from India.
102
References
In WTO terminology, subsidies in general are identified by “boxes”
which are given the colours of traffic lights: green (permitted), amber
(slow down — i.e. be reduced), red (forbidden). The Agriculture
Agreement has no red box.
TheseBoxes denote different kind of domestic subsidies provided in a
country. The three boxes are; Amber , Blue and green boxes.
Amber box*:- All domestic support measures considered to distort
production and trade (with some exceptions) fall into the amber box.
Blue box**:- “Amber box with conditions” It includes aid that is
linked to production limitation programmes and calculated to a fixed
production data from an earlier period.
Green box***:- It contains fully authorized aid, takes in subsidies that
do not distort trade.
1 (AK Banerji – From mutual Indifference to co-operation EEC
priorities and the evaluation of Indo-EEC economic relation) Allied
publishers 1983-P-76).
2 Gulshan Sachdeva, “India and European Union, Broadening Strategic
Partnership Beyond Economic Linkages” Sage Publication (2008).
3 Commission of the European Commission, Commercial Cooperation
Agreement,(Brussels),1973.
4 K.G. Ramanathan, “Indo-EC Trade under CCA” – in K.B. Lall,
Wolfgang Ernst and H.S. Chopra (eds) “India and the EEC”, (New
Delhi, 1984) P. 142
5 Commission of the European Committees, 1 bid no. 4.
103
6 S.K. Bhattacharya “India and European Union Trade and non-Traffic
barriers” New Delhi 2005.
7 Commission of the European communities. The cost of non-European
Basic-studies : Executive summary, (Brussels, 1985), Vol. I. P. 21).
8 Business standard, 29Aug 2008.
9 Commission of the European communities; “Eurostat”-several issues.
10 SK.Bhattacharya ibd.
11 Alexander J Yeats “Trade Barriers Facing Developed Countries,
Commercial Policy Measures And Shipping” McMillan
Press,1979pp.104-43”.
12 Sam laird and Rene Vassenaar, “why should we worried about non
tariff measures”, Information Commercial Esponola, spl. Issue on non
tariff Barriers , oct.1991.pp 135.
13 Laired sam, “Quantifying Commercial Policies”, in Applied Trade
Policy Modelling.(Cambridge University Press,1995)pp1-45.
14S.K.Bhattacharya,“IndianExportPerformance:AsectoralanalysisICRIER
,workingPaper” .60,ICRIER,NewDelhi,1990.
15 The share is calculated from UNCTAD Statistics on International
Trade:Services; and OECD Statistics on International Trade in
Services by Partner Country (EBPOS 2002)’, OECD Statistics.
16 Central Statistical Organisation (CSO) (2012), ‘Economic Survey of
India - 2011-12’ Central Statistical Organisation, Ministry of Statistics
104
and Programme Implementation,Government of India,
http://exim.indiamart.com/economic-survey/, Banga, Rashmi and
Bishwanath Goldar (2004), “Contribution of Services to Output
Growth and Productivity in Indian Manufacturing: Pre and Post
Reforms”, ICRIER Working Paper No. 139, July 2004.
17 S Havlik, Peter (2006), “Economic restructuring in the new EU
Member States and selected Newly Independent states: Effects on
Growth, Employment and Productivity, February, Vienna Institute for
International Economic Studies, Austria
http://indeunis.wiiw.ac.at/index.php?action=content&id=publications
18 Arpita MukherjeeEnhancing Bilateral Trade, Investment and
Collaboration in Services: India and European
Union,November,2012.ICRIER.
19 Kemekleine, Gintare, Connolly, Heather, Keune, Maarten and Watt,
Andrew (2007),“Services Employment in the Europe: Now and in the
Future”, European Trade Union Institute (ETUI) and Research,
Education and Health and Safety (REHS), Brussels
20 Kemekliene, Gintare and Andrew Watt (2010), “GATS and the EU”
Impacts on Labour Markets and Regulatory Capacity”, Report 116,
European Trade Union Institute(ETUI), Brussels
21 " European Commission President Jose Manuel Durao Barroso said at
a conference 'EU-India: A strategic relationship in an evolving
world'organised by FICC.
22 Government of India website: http/www.dipp.nic/fdi-statics/india—
fdi-index.htm.
105
Chapter-5
Shifting Paradigm of Trade Diversion
It is expected that as a country progresses on the path of
development, the comparative advantage shifts from the production of
goods requiring the use of natural resources to those requiring a higher
level of technology. In the fourth chapter, we have analyzed the growth
scenario of Indian trade to European Union as a whole and also to its
members In that section we have shown the direction of exports without
showing there composition. Trade patterns are argued to be no longer
determined by resource endowment and factor content of trade of
respective countries. Rather they are dictated by trade policies. In our
study we intend to prove hypotheses on Indian and European Union
Bilateral trade:
Contribution of the commodities in total export to European
Union is decreasing in which India has higher comparative
advantage.
.
106
5.1 Revealed Comparative Advantage (RCA) of India and European Union:
In order to analyses the comparative advantage of Indian and EU
exports in the world market, we have calculated International Revealed
Comparative Advantage (IRCA) for both India and EU by using the
Balassa index. This index measures the share of a commodity in the total
exports of a given country, divided by the share of the same commodity
in total world exports. The higher the ratio is above one, the stronger is
that economy's comparative advantage in a particular commodity.
Likewise, the lower the RCA below one, the weaker is that economy’s
comparative advantage in that commodity. When RCA equals one, the
country’s specialisation in a commodity is identical with the world
specialisation in that commodity. The Balassa Index is calculated as
follows:
RCAij=(xij/Xit)/(xwj/Xwt)…………………….........................…(1)
Where xij and xwj are the values of country i’s exports of product j
and world’s exports of product j and where Xit and Xwt refer to the
country’s total exports and world’s total exports. Based on similar logic,
we also propose to calculate RCA between two countries (RCA) i.e. India
and EU. It is a modified form of RCA looking at bi-lateral comparative
advantage between countries. This index will reflect the competitiveness
of both countries in each other’s market in comparison to the rest of the
world. The RCA of India and EU in each other’s market can be calculated
as follows:
107
India’sRCAin EU
(RCAijE)=(xijE/XitE)/(xwjE/XwtE)………....................................(2)
EU’sRCAinIndia(RCAEji)=(xEji/XEti)/(xwji/Xwti).......................(3)
Where
xijE= India’s export of commodity j to European Union.
XitE= Total exports of India to European Union
xwjE = World’s export of commodity j to European Union
XwtE= Total exports of World to European Union
xEji=EU’s export of commodity j to India
XEti =Total exports of EU to India
Xwji=world’s export of commodity j to India
Xwti=Total exports of world to India.
Selective Review of Literature:
Several studies have been undertaken using the concept of revealed
comparative advantage. A majority of these studies use data on export
shares. Balassa (1977) has undertaken an analysis of the pattern of
comparative advantage of industrial countries for the period 1953 to
1971. The evidence provided in the paper supports the available evidence
on trade in research intensive products, indicating the continuous renewal
of the with the degree of technological development a reversal takes place
at higher levels1 product cycle, with the US maintaining its ever
increasing technological lead. Based on the standard deviation of the
RCA indices for different countries an association is also seen to hold
between size and diversification of exports. Balassa’s results show that
while the extent of export diversification tends to increase
108
Li and Bender (2003) however argued that instead of complimenting
or substituting exports, the change in comparative advantage of the
country, leads to gain as well as loss for the country. They studied the
RCA of manufacture exports over the period 1981-1999 of eight country
groups incorporating 40 economies and put forth the view that a pattern
of relative comparative advantage existed2.
Yue (2001) uses the RCA index to demonstrate the fact that China
has changed its export pattern to coincide with its comparative advantage
and that there are distinct differences in export patterns between the
coastal regions and the interiors in China3.
Smyth (2005) analyzed the change in Irelands RCA over the period
1997 to2002. The study sheds light on the changing structure of the Irish
economy as indigenous industries lose their comparative advantage to
high tech sectors driven byFDI4
Karakaya and Özgen (2002), by employing RCA approach,
investigate the potential trade creation and diversion effects of economic
integration for Turkey and the EU. They also use the RCA index to
examine if Turkey’s accession will jeopardize the trade for southern
members, i.e. Greece, Portugal, and Spain. Results confirm that the
export structures are remarkably different among Turkey and the EU. It is
pointed out that Turkey, probably, does not change the EU position
significantly since country’s low trade volume with respect to the EU.
Results indicate that Turkey’s accession to the EU market with no trade
barriers may hamper the export position of the southern EU countries.5
Batra and Khan (2005) analyzed RCA at sector and product level.
This study made comparative analysis through RCA and structure
changes across sectors in China and India for the period from 2000 to
109
2003. By considering Balassa’s (1965) to measure performance of
industry and commodities at HS 2-digit and HS 6-digit level of
thesecountries.6
Bhattacharyya (2011) investigated comparative advantage and
competitiveness for horticultural products of India. This study compared
the advantage in these commodities with major rivals of these
commodities such as North American, Asian and European Union
markets. This Study concluded that India had a comparative advantage in
fruits and vegetable sectors.7
5.2 India’s Revealed Comparative Advantage in Exports in EU Market:
At the most aggregated level of the Sections, one observes that India
enjoyed comparative advantage in the exports of 9 out of the total 16
Sections in 2002 (Table5.1)however, in the year 2005and 2011, the figure
went up marginally to 10. Hides and Skin, Textiles and Clothing and
Footwear enjoyed the maximum comparative advantage in the year2002.
Textiles, has been India’s largest export earners since time-immemorial.
The availability of a variety of raw materials has enabled the industry to
produce a range of natural and artificial fibers. So also, the prevalence of
cheap labour and domestic availability of fabrics have enhanced India’s
advantage vis-à-vis the rest of the world. India is thus, one of the best
candidates for a thriving textile industry since the sector requires only
semi and unskilled labour to mass produce many of its items. Thus, a
developing country like India with a rich tradition is bound to enjoy a
comparative advantage. However, China is fast overtaking India and
110
hence domestic policies need to be spruced up if India has to compete
with China (Prasad and Chandra 2005).
The RCA Index of all sectors except Plastic or Rubber declined
continuously during the study period. Hides and Skin which was 6.74 in
2002 declined to 4.59in 2012, Textiles and clothing declined from 4.71 to
3.39, footwear 4.27 to 3.06, Stone and Glass3.07to 1.54,Minerals 1.5
to .49 respectively.
In the Animal, Chemical and Metals sectors RCA remains almost
constant during the period of the study. India is gradually gaining
advantage in food products, fuels, Machine and Electronics but RCA
index is less than one. Only Plastic and Rubber has increased its RCA
from .74 to 1.14 during the period. Continuous decrease in RCA index of
sectors like textiles, Stone and Glass and Hides and Skin is really a matter
of inspection.
5.3- EU’S Revealed comparative Advantage in Export in India’s Market:
In 2002 total 11 sectors had RCA greater than 1 out of 16 sectors.
Except three years2003,2005,and2009 every year RCA of EU was greater
than 1 in 11 sectors out 16 sectors .If both the countries had greater than 1
RCA in the same sector it means inter industry trade is possible between
the two countries. It is clear from the observation of the table 5.2.
111
TABLE 5.1-India’s Revealed ComparativeAdvantage in Merchandise Export in EU’s Market (Sector wise)
Sector 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Animal 1.55 1.68 1.45 1.43 1.57 1.43 1.35 1.33 1.27 1.24 1.47
Chemical 1.17 1.23 1.17 1.25 1.31 1.34 1.40 1.33 1.38 1.45 1.61food products 0.54 0.41 0.44 0.44 0.05 0.66 0.70 0.57 0.60 0.66 0.77Footwear 4.27 3.92 3.98 3.62 3.82 3.64 3.52 3.29 3.22 3.14 3.06Fuels 0.05 0.72 0.12 0.19 0.17 0.25 0.28 0.33 0.60 0.45 0.47hides & skin 6.74 6.15 5.53 5.56 5.14 4.71 5.03 4.96 4.42 4.28 4.59Mach&Elec 0.32 0.36 0.37 0.39 0.43 0.46 0.61 0.57 0.55 0.57 0.61Metals 1.16 1.23 1.45 1.44 1.48 1.58 1.70 1.4 1.20 1.34 1.50Minerals 1.5 1.48 1.26 1.07 0.92 0.80 0.64 0.61 0.45 0.38 0.49Miscellaneous 0.31 0.31 0.44 0.44 0.45 0.37 0.35 0.27 0.33 0.46 0.43Plastic or Rubber 0.74 0.77 0.90 1.16 1.08 1.12 1.09 0.95 0.96 1.06 1.14Stone and Glass 3.07 3.11 3.37 3.62 3.52 3.04 3.01 2.66 1.82 2.62 1.54Textile and Clothing 4.71 4.54 4.34 4.73 4.69 4.2 4.03 3.84 3.55 3.37 3.39Transportation 0.27 0.36 0.50 0.45 0.46 0.63 0.79 1.31 0.92 1.13 0.95Vegetable 1.99 1.85 1.9 1.86 1.78 1.48 1.63 1.41 1.49 1.43 1.67Wood 0.27 0.33 0.33 0.34 0.33 0.29 0.30 0.34 0.3 0.268 0.33number of section with RCA>1 9 9 9 10 9 9 9 9 8 10 9
Source: Calculations based on World Integrated Trade Solution (WITS) www.wits.com, DGFT Data Bank, Ministry of Commerce and Industry, Govt. of India. http/commerce.nic.in
TABLE5.2-EU’S Revealed comparative Advantage in Merchandise Export in India’s Market (Sector wise)
112
Sector 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012ANIMAL 0.99 1.56 1.78 1.60 1.40 1.67 1.59 1.81 0.81 2.70 1.55CHEMICAL 1.07 0.967 1.00 0.88 0.91 0.78 0.74 0.92 1.23 0.99 1.09FOODPRODUCTS 1.26 1.30 0.68 0.86 2.15 2.23 2.06 0.70 1.07 2.17 1.78FOOTWEAR 2.52 2.18 2.06 1.85 1.46 1.55 1.60 1.79 1.21 1.02 0.81FUELS 0.016 0.011 0.01 0.01 0.01 0.01 0.01 0.02 0.01 0.02 0.02HIDES & SKIN 1.62 1.78 1.84 1.70 2.15 1.94 2.14 2.25 2.16 2.25 2.47MACH&ELEC 1.85 1.61 1.82 1.68 1.91 1.78 2.50 1.92 2.15 2.24 2.17METALS 1.40 1.46 1.47 1.62 1.42 1.49 1.75 2.08 1.99 2.02 2.03MINERALS 0.18 0.22 0.17 0.19 0.09 0.08 0.10 0.22 0.14 0.18 0.182MISCELLANEOUS 1.34 1.41 1.65 1.49 1.53 2.45 1.55 2.22 1.94 1.77 1.94PLASTIC OR RUBBER 1.35 1.25 1.43 1.41 1.47 1.07 1.33 1.43 1.32 1.51 1.74STONE AND GLASS 1.86 2.06 1.73 1.85 1.92 1.62 1.71 0.96 1.02 1.13 1.30TEXTILE AND CLOTHING 0.56 0.58 0.59 0.58 0.62 0.57 0.61 0.57 0.66 0.69 0.73TRANSPORTATION 2.19 1.10 1.30 1.90 1.67 2.77 1.33 1.83 2.13 2.44 2.75VEGETABLE 0.13 0.063 0.06 0.06 0.28 0.09 0.11 0.07 0.07 0.07 0.01WOOD 4.60 1.03 1.15 1.32 1.39 1.30 1.83 1.89 1.69 1.57 1.63Number Of Section With RCA>1 11 10 11 10 11 11 11 9 11 11 11
Source: Calculations based on World Integrated Trade Solution (WITS) www.wits.com, DGFT Data Bank, Ministry of Commerce and Industry, Govt. of India. http/commerce.nic.in
113
At a slightly disaggregated level of chapters, India displayed RCA in 45 chapters, out of the total 98 in 2002.
By 2006,about 49, chapters enjoyed comparative advantage. But after 2006 chapters enjoyed comparative
advantagedecreased to 42 in 2010. But after that there in 2012 chapters enjoyed comparative advantage increased
to 48. In fact, out of these, it is primarily 40 chapters, which have maintained comparative advantage throughout
the period of study. A look at the table 5.3 suggests that during study period from 2002-2012out of 98 chapters 19
chapters shows decreasing comparative advantage , out of these 19 chapters 3 chapters RCAI decreased below 1
percent. Chapter NO.8 RCAI was 1.37 % in 2002 decreased to 0.9% in 2012, similarly C-46, and C-60has 1.55
and 2.44 RCAI in 2002 respectively decreased to 0.7 and 0.24 in 2012.
A look at the table 5.3 shows that During study period C-57 displayed highest comparative advantage ie.19.43
percent followed by C-50 and C-53 ie.18.18 and12.84 percent respectively in 2002.After 2006 RCAI of C-57
decreased continuously from 20.58 to 12.85 percent in 2012 and same trend is displayed by C-50 and C-53, RCAI
in C-50 and C-53 decreased from 18.18percent and 12.84 percent in 2002 to 5.44 and 8.66 percent in 2012
respectively. Nine chapters out of 99 chapters shows increasing RCAI. Out of these 9 chapters six chapters i.e. C-
11,C-30,C-38,C-56,C-87 and C-99had their RCAI less than 1% in 2002, but during the study period all these
sectors improve their situation and RCAI of these sectors reached above 1% in 2012.
114
TABLE 5.3-India’s Revealed Comparative Advantage (at 2 digits) in Merchandise Export in EU’s Market
code
CHAPTER2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1 Live animals. 0.00043
0.0009
0.0056
0.005
0.00024
0.0007
1.070.00120
30.00
10.00361
90.004
9
2 Meat and edible meat offal. 4.540.001
3NA
0.003
0.00011
0.0009
NA 5.80 NA 1.67 NA
3 Fish and crustaceans, molluscs and other aquatic invertabrates. 2.13
2.3065
1.9726
1.999
2.14541
1.9548
1.785381.79065
21.65
71.71437
81.987
3
4 Dairy produce; birds' eggs; natural honey; edible prod. Of animal origin, not elsewhere spec. Or included.
0.62186
0.9059
1.2643
1.094
1.25362
0.9554
0.863390.69652
90.48
90.14896
10.254
4
5 Products of animal origin, not elsewhere specified or included.
1.55138
1.7197
1.6334
1.625
2.29785
1.7679
1.838371.71907
91.50
71.12881
61.420
1
6 Live trees and other plants; bulbs; roots and the like; cut flowers and ornamental foliage.
0.9680.899
10.915
70.95
10.9604
10.904
10.80622
0.628071
0.617
0.568510.643
4
7 Edible vegetables and certain roots and tubers.
1.29417
1.191.120
91.26
81.2909
40.926
11.18906
1.160415
1.261.25986
41.345
7
8 Edible fruit and nuts; peel or citrus fruit or melons.
1.37202
1.1141
1.0531
1.283
1.25576
0.9365
0.890070.88973
80.79
10.73632
90.903
5
9 Coffee, tea, mate and spices. 4.57988
4.0287
3.9754
3.304
3.65647
3.0185
2.760912.23452
12.17
92.37007
92.621
7
10 Cereals. 3.25865
3.4158
2.9577
3.899
4.29699
2.1753
2.637674.06386
63.44
81.99154
43.371
4
11 Products of the milling industry; malt; starches; inulin; wheat gluten.
0.68359
0.9299
0.8571.72
51.5653
51.407
81.75827
2.244165
2.25 1.509421.696
8
115
12 Oil seeds and olea. Fruits; misc. Grains, seeds and fruit; industrial or medicinal plants; straw and fodder.
0.82305
0.7941
1.2487
1.095
1.05865
0.8447
1.025560.88549
20.78
10.76644
90.762
13 Lac; gums, resins and other vegetable saps and extracts.
8.15018
8.6017.568
57.54
98.3893
67.328
96.23225
6.035385
8.356
7.697174
11.043
14 Vegetable plaiting materials; vegetable products not elsewhere specified or included.
6.73666.977
45.966
6.345
5.03654.270
32.98457
2.896924
4.027
4.532381
7.924
15 Animal or vegetable fats and oils and their cleavage products; pre. Edible fats; animal or vegetable waxex.
2.25583
2.1906
2.7537
2.079
1.15909
1.181 1.499240.88026
11.31
81.36606
71.097
4
16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates
0.16577
0.1955
0.2214
0.298
0.34712
0.3015
0.327680.34801
40.31
80.27205
70.279
7
17 Sugars and sugar confectionery.
1.90106
0.6345
0.4573
0.267
0.86403
2.8519
1.829030.32609
90.53 1.10644
1.8886
18 Cocoa and cocoa preparations. 0.00624
0.0030.039
40.01
20.0189
60.068
70.02658
0.029383
0.028
0.069464
0.0434
19 Preparations of cereals, flour, starch or milk; pastrycooks products.
0.21877
0.2507
0.5174
0.662
0.68726
0.6262
0.997980.90864
70.55
90.51230
70.479
20 Preparations of vegetables, fruit, nuts or other parts of plants.
1.09294
0.0011
1.0435
1.167
1.38575
1.2966
1.192591.29826
11.37
81.15382
41.305
9
21 Miscellaneous edible preparations.
1.01068
1.0461
1.1494
1.184
1.34467
1.4137
1.403081.35548
51.37
71.19867
41.487
3
22 Beverages, spirits and vinegar. 0.03544
0.0185
0.021 0.020.0411
20.079
10.14534
0.084338
0.055
0.052736
0.0443
116
23 Residues and waste from the food industries; prepared animal foder.
0.20093
0.0524
0.1330.06
60.0528
80.122
70.5004
0.268851
0.107
0.572565
0.6542
24 Tobacco and manufactured tobacco substitutes.
1.48915
1.4979
1.7195
1.859
2.24895
1.9929
2.43822 NA3.35
22.84602
42.869
6
25 Salt; sulphur; earths and stone; plastering materials, lime and cement.
4.42908
4.1073
3.4028
3.387
3.40843
3.1122
2.249922.46781
22.00
41.84792
82.168
8
26 Ores, slag and ash. 0.33621
0.4988
0.5826
0.459
0.40415
0.2781
0.236670.12530
60.15
90.11601
80.188
4
27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes.
0.04804
0.0728
0.1210.19
80.1808
50.239
40.27002
0.310873
0.567
0.437314
0.437
28 Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, or radi. Elem. Or of isotopes.
0.41688
0.4373
0.3662
0.320.3619
40.501
30.30862
0.449467
0.341
0.297808
0.3367
29 Organic chemicals 1.94815
2.0499
1.9161.91
22.2021
2.0398
2.41692.49240
42.17
32.45267
72.695
3
30 Pharmaceutical products 0.42231
0.4403
0.5504
0.705
0.68424
0.8464
0.783110.63296
40.91
10.97350
21.036
31 Fertilisers. 0.09613
0.0264
0.0306
0.024
0.0306 0.033 0.02389 0.045160.03
10.03500
50.021
8
32 Tanning or dyeing extracts; tannins and their deri. Dyes, pigments and other colouring matter; paints and ver; putty and other mastics; inks.
3.64163.597
53.530
23.65
83.7636
44.124
44.22992
3.568613
3.928
3.924175
4.1778
33 Essential oils and resinoids; perfumery, cosmetic or toilet
1.30757
1.2178
1.2399
1.235
1.36446
1.2959
1.367791.02866
31.06
61.28306
91.406
5
117
preparations.34 Soap, organic surface-active
agents, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring prep.
0.39073
0.3849
0.3213
0.430.6149
10.653
50.66754 0.62774
0.666
0.825204
0.809
35 Albuminoidal substances; modified starches; glues; enzymes.
0.91062
0.6164
0.6682
0.747
0.66555
1.2603
1.51716 0.933331.50
50.97144
80.870
4
36 Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations.
0.39713
0.2489
0.2161
0.315
0.36791
0.5689
0.474890.77169
10.48
80.39092
90.440
6
37 Photographic or cinematographic goods.
0.08340.073
40.054
90.08
50.0553
90.075 0.07687
0.085944
0.092
0.059668
0.0387
38 Miscellaneous chemical products.
0.66348
0.8548
0.7159
1.191
1.16009
1.0163
1.168781.05894
61.04
20.94945
21.036
6
39 Plastic and articles thereof. 0.59142
0.5844
0.7461
1.093
0.96515
1.0407
0.88198 0.74680.83
41.02902
50.964
7
40 Rubber and articles thereof. 1.16158
1.1872
1.2365
1.408
1.46442
1.3846
1.503841.48759
21.21
61.16949
41.541
4
41 Raw hides and skins (other than furskins) and leather
4.48931
4.0919
3.7021
4.063
4.01247
3.6353
3.944943.42367
63.04
3.162941
3.6988
42 Articles of leather,saddlery and harness;travel goods, handbags and similar cont.articles of animal gut(othr thn silk-wrm)gut.
8.59006
7.7259
6.9067
6.777
6.40963
5.6589
5.664295.60855
25.06
75.07875
5.3391
43 Furskins and artificial fur, manufactures thereof.
0.46813
0.2716
0.3196
0.373
0.29675
0.2873
0.224460.29400
80.26
30.16107
30.200
1
44 Wood and articles of wood; 0.3176 0.311 0.262 0.25 0.2449 0.201 0.22445 0.24100 0.20 0.17516 0.243
118
wood charcoal. 8 7 8 9 5 4 1 2 2 5
45 Cork and articles of cork. 0.00573
0.0032
0.1504
0.129
0.12909
0.0648
0.05177 0.056710.04
50.08922
40.098
7
46 Manufactures of straw, of esparto or of other plaiting materials; basketware and wickerwork.
1.55236
1.7502
1.8065
1.433
1.38875
1.0519
0.886510.83054
50.75
50.66204
40.702
47 Pulp of wood or of other fibrous cellulosic material; waste and scrap of paper or paperboard.
0.00385
0.0023
0.0091
0.002
0.00314
0.0006
0.002570.00098
60.00
20.00044
10.000
7
48 Paper and paperboard; articles of paper pulp, of paper or of paperboard.
0.26562
0.4016
0.4511
0.528
0.55665
0.4717
0.44550.44696
40.41
50.40557
60.465
49 Printed bookds, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans.
0.49663
0.5301
0.6871
0.770.7327
10.700
40.67302
0.779887
0.794
0.724111
0.8921
50 Silk 18.1841
18.648
19.291
17.79
14.9242
14.194
11.768411.0899
88.44
45.91840
45.445
51 Wool, fine or coarse animal hair, horsehair yarn and woven fabric.
1.74072
1.2155
1.5796
1.699
1.78703
1.7551
2.032772.83346
92.28
62.17732
52.538
3
52 Cotton. 7.41392
6.8585
7.0673
7.716
8.36081
7.5361
7.01892 6.642197.08
26.46674
37.200
3
53 Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn.
12.8416
10.914
8.7916
8.417
9.58773
9.0314
9.699299.86446
49.03
38.23116
78.660
4
54 Man-made filaments. 2.48142.465
82.225
42.18
92.2975
12.078
62.31434
2.043247
2.309
2.165294
2.3834
119
55 Man-made staple fibres. 5.75039
5.5934
5.5562
4.474
4.94295.154
74.69564
4.041942
4.444
4.540294
4.1102
56 Wadding, felt and nonwovens; spacial yarns; twine, cordage, ropes and cables and articles thereof.
0.66195
0.9643
0.7477
0.853
0.85706
0.8445
1.044290.96550
30.97
1.068774
1.2742
57 Carpets and other textile floor coverings.
19.4344
NA19.75
220.4
20.5808
19.555
18.668316.4398
914.1
813.2619
912.85
3
58 Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery.
5.36361
7.1333
5.7654
6.686
6.10728
5.4227
5.942495.36514
74.65
74.47403
44.554
7
59 Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use.
1.4421.549
81.214
91.42
1.29564
1.2568
1.134821.13961
90.96
51.02234
51.304
2
60 Knitted or crocheted fabrics. 2.44531
0.0003
2.6039
1.463
1.31568
0.7212
0.500330.38204
10.39
40.39064
50.248
6
61 Articles of apparel and clothing accessories, knitted or corcheted.
3.85065
3.6893.754
44.23
24.3497
63.830
43.51233
3.409321
2.828
2.683719
2.7048
62 Articles of apparel and clothing accessories, not knitted or crocheted.
4.05162
3.7642
3.3384
4.213
4.31645
3.5105
3.415373.66070
93.37
73.30112
43.271
8
63 Other made up textile articles; sets; worn clothing and worn textile articles; rags
9.28443
8.6673
8.5736
8.626
7.79653
7.0595
6.327675.79686
95.17
45.54116
95.644
9
64 Footwear, gaiters and the like; parts of such articles.
5.01804
4.4344.592
84.19
34.4655
14.181
53.91823
3.750682
3.602
3.636778
3.5017
65 Headgear and parts thereof. 0.36360.369
80.344
50.34
0.37845
0.3792
0.364480.35941
60.34
10.35215
30.380
5
120
66 Umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips,riding-crops and parts thereof.
0.05888
0.0748
0.0608
0.074
0.07490.061
50.05646
0.055215
0.067
0.039896
0.0432
67 Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles of human hair.
0.43737
1.7052
2.3132
2.824
2.78344
2.2191
2.418842.39032
62.09
41.44922
11.612
9
68 Articles of stone, plaster, cement, asbestos, mica or similar materials.
6.43723
6.5314
6.0337
5.998
5.99151
5.3548
5.20399 5.344994.90
34.44806
94.746
5
69 Ceramic products. 0.66470.721
30.703
40.59
70.5155
30.520
40.48871
0.445928
0.576
0.635927
0.8457
70 Glass and glassware. 1.44835
1.4995
1.3541.32
21.4668
11.359
81.22079
1.116044
1.039
0.098081
1.1866
71 Natural or cultured pearls, precious or semiprecious stones,pre.metals,clad with pre.metal and artcls thereof; imit. jewlry; coin.
3.22675
3.2266
3.6473.59
22.9154
12.520
13.19457
1.480784
1.792
1.741311.460
1
72 Iron and steel 1.16376
1.4315
2.2466
1.989
2.37074
2.4441
2.659162.12477
71.79
32.05938
52.269
73 Articles of iron or steel 2.11212
2.1629
2.2723
2.472
2.28663
2.2136
2.258192.05077
22.04
72.24306
52.609
2
74 Copper and articles thereof. 0.67987
0.7262
0.5140.50
40.7466
10.442
20.39438
0.375993
0.285
0.284338
0.3655
75 Nickel and articles thereof. 0.03770.031
40.043
90.05
80.0420
30.036
30.03547
0.047099
0.033
0.041999
0.062
76 Aluminium and articles thereof.
0.24231
0.250.269
30.29
20.3116
90.423
90.38466
0.321221
0.263
0.383966
0.3356
78 Lead and articles thereof. 0.03322
0.0342
0.2370.12
30.2158
90.221
60.14623
0.064155
0.071
0.084359
0.0673
121
79 Zinc and articles thereof. 0.27903
0.2438
0.1780.75
55.3230
64.488
71.30538 2.67402
0.436
0.669211
0.6162
80 Tin and articles thereof. 0.10726
0.0507
0.0805
0.159
0.06159
0.1162
0.063450.16336
70.05
50.29101
60.129
7
81 Other base metals; cermets; articles thereof.
0.09214
0.1201
0.0876
0.180.2427
20.199
10.21518
0.175556
0.212
0.237058
0.3473
82 Tools implements, cutlery, spoons and forks, of base metal; parts thereof of base metal.
1.51971.512
11.453
61.61
61.5873
41.401
51.29059
1.202041
1.205
1.190471
1.2859
83 Miscellaneous articles of base metal.
4.49765
4.0991
3.8133.83
53.3525
62.850
12.57707
2.184624
2.068
2.000036
2.165
84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof.
0.28394
0.3059
0.3338
0.382
0.41780.491
90.57635
0.528172
0.491
0.599965
0.6472
85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts.
0.38787
0.4281
0.4210.42
80.4922
10.448
20.64927 0.62088
0.624
0.587173
0.5907
86 Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical
0.05319
0.0637
0.1003
0.133
0.20688
0.2127
#######
0.421199
0.604
0.386030.431
1
87 Vehicles other than railway or tramway rolling stock, and parts and accessories thereof.
0.45311
0.5540.802
60.79
50.7343
30.760
4######
#2.25215
41.82
41.87616
71.623
5
88 Aircraft, spacecraft, and parts thereof.
0.15959
0.2419
0.2664
0.137
0.06650.401
70.28363 0.06795 0.12
0.127757
0.1555
122
89 Ships, boats and floating structures.
0.01696
0.0382
0.0023
0.001
0.14216
0.0896
0.0092 0.11345 0.070.03540
30.000
8
90 Optical, photographic cinematographic measuring, checking precision, medical or surgical inst. And apparatus parts and accessories thereof;
0.21641
0.2237
0.2355
0.24 0.25760.328
70.28945
0.266758
0.272
0.284012
0.336
91 Clocks and watches and parts thereof.
0.07839
0.0806
0.0874
0.083
0.06297
0.0503
0.053460.03967
20.03
90.03410
20.035
6
92 Musical instruments; parts and accessories of such articles.
0.36046
0.3113
0.6113
0.558
0.48861
0.2096
0.197390.18224
10.17
40.18205
20.210
2
93 Arms and ammunition; parts and accessories thereof.
0.07210.214
30.380
20.12
70.1663
80.175 0.36841 0.21243
0.189
0.115315
0.1663
94 Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishing; lamps and lighting fittings not elsewhere specified or inc
1.64956
1.5281.467
51.42
71.4048
91.264
21.12734
1.070686
0.931
0.909947
1.0403
95 Toys, games and sports requisites; parts and accessories thereof.
0.35038
0.3008
0.3437
0.305
0.32033
0.212 0.188950.17143
10.19
20.17557
10.237
5
96 Miscellaneous manufactured articles.
1.79092
1.6508
1.4888
1.508
1.49318
1.3526
1.310111.08317
10.99
90.96949
71.044
97 Works of art collectors' pieces and antiques.
0.04382
0.0454
0.0557
0.054
0.13366
0.1699
0.21042 0.123670.14
50.14397
80.097
3
98 Project goods; some special uses.
NA NA NA NA NA NA NA NA NA NA NA
99 Miscellaneous goods. 0.0611 0.6080.148
7NA
0.09422
0.1995
0.409580.31712
90.44
11.46946
41.051
3
123
No. Of Chapters with RCA>1 45 41 46 49 49 47 49 44 42 45 48
124
In 2002 European Union has comparative advantage in 52 sectors out
of 98 sectors as shown in Table no 1 of Appendix. Every year its
comparative Advantage is increasing .It increased to 62 sectors in
2008.European Union has comparative advantage in more sectors than
India. In some sectors both the countries shows comparative Advantage.
When both the Economies have comparative advantage in same sector it
means inter industry trade (IIT) is possible.
5.4: India’s Top 20 Export Commodities To European Union:
The RCA analysis of India’s top 20 export commodities group(at two
digit level) to EU shows that Natural or Cultured Pearls, Precious & semi
precious Stones(HS-71) had been the topmost commodity group in the
Indian export basket to EU till 2004.The second most important export
group was Articles of Apparel and Clothing Accessories (HS-62)
followed by (HS-61), Organic Chemicals (HS-29),Articles of
Leathers(HS-42). After 2004 Mineral Fuels and Related products (HS-27)
have become very prominent in India’s export to EU and take first place
in 2007. During study period Indian export to EU changed their position
some time HS-71 on second position HS-62 on third position and in
another year HS-62 on first and HS-71 on second place similarly HS-84,
HS-29,HS-62,HS-61 changed their position year to year but remained in
top 10. But after 2006 Mineral Fuels and Related products (HS-27)
undisputedly remains on the first place. The strange fact about (HS-27) is
that in 2002, it was not even in top 20 commodities export by India to
EU.
125
TABLE 5.4- India’s Top 20 Export commodities to EU-27
SN
O.
HS
Cod
e
2002
-20
03
HS
cod
e
2003
-20
04
HS
Cod
e
2004
-20
05
HS
Cod
e
2005
-20
06
HS
Cod
e
2006
-20
07
HS
Cod
e
2007
-20
08
HS
Cod
e
2008
-20
09
HS
Cod
e
2009
-20
10
HS
Cod
e
2010
-20
11
HS
Cod
e
2011
-20
12
HS
Cod
e
2012
-20
13
total
11,886.41
14,516.50
18,249.02
23,228.84
26,831.45
34,535.37
39,351.43
36,028.05
46,039.38
52,556.24
50,421.74
1 71 1,397.70 71 1,473.45 71 1,845.79 27 2,478.77 62 2,222.75 27 4,091.24 27 4,238.89 27 6,141.61 27 8,700.17 27 7,822.22 27 9,206.10
2 62 1,165.19 62 1,255.88 62 1,421.96 62 2,264.78 71 2,070.96 71 2,663.61 71 3,326.26 62 2,850.74 62 3,253.83 71 4,822.68 71 3,329.10
3 61 1,070.44 61 1,205.64 61 1,250.60 71 2,045.69 27 2,003.13 62 2,406.74 61 2,712.01 87 2,503.42 71 3,151.34 62 3,654.31 62 3,077.11
4 29 570.39 29 722.8 72 1,088.71 61 1,649.77 61 1,782.91 61 2,231.95 62 2,711.82 71 2,404.58 85 3,122.35 85 2,905.31 29 2,937.40
5 42 524.24 42 637.99 29 860.9 29 1,094.03 72 1,617.42 72 2,225.01 72 2,311.62 61 2,396.09 87 2,321.04 29 2,878.23 85 2,495.44
6 64 463.04 63 611.47 27 810.27 84 998.5 29 1,407.81 84 1,816.81 85 2,304.91 29 1,814.40 61 2,225.25 61 2,624.94 61 2,430.07
7 52 442.88 64 595.64 63 761.52 63 898.88 84 1,243.98 29 1,774.53 87 2,057.65 85 1,688.28 29 2,216.59 84 2,571.08 84 2,359.64
8 85 435.02 87 572.93 84 743.66 42 796.12 85 1,005.23 85 1,443.42 29 2,016.39 84 1,544.38 84 1,911.22 87 2,179.22 87 2,242.14
9 63 431.44 85 569.71 87 705.2 64 788.57 64 968.9 64 1,178.20 84 1,976.44 64 1,209.73 72 1,853.32 72 1,984.58 72 1,718.03
10
99 405.36 84 557.2 42 704.07 85 738.45 63 847.56 87 1,173.60 64 1,177.67 42 1,005.03 64 1,380.15 73 1,690.16 73 1,632.08
11
84 369.6 52 447.75 64 698.84 72 695.15 87 830.86 73 1,059.49 73 1,145.72 30 829.36 73 1,245.84 64 1,600.42 64 1,446.44
12
3 304.19 27 408.56 85 576.18 87 676.14 42 816.23 42 979.02 42 1,089.50 73 805.8 42 1,079.41 42 1,345.18 30 1,418.75
13
87 248.98 73 325 73 486.95 73 579.39 73 730.38 63 894.18 30 949.27 63 792.47 30 976.59 30 1,296.52 42 1,321.14
14
73 235.45 57 304.41 52 420.21 52 465.34 52 573.7 30 658.66 63 856.94 72 783.33 63 958.02 63 1,179.85 63 1,033.58
15
57 231.2 3 287.95 39 377.53 57 463.18 39 540.52 39 646.93 89 752.79 3 511.26 39 833.17 39 917.6 39 941.1
16
9 224.44 30 265.02 30 356.32 30 404.98 3 499.73 52 554.87 39 572.78 39 465.58 88 638.6 9 838.13 9 772.54
17
30 213.85 72 252.81 3 350.3 3 400.51 57 495.57 3 535.13 88 563.17 88 454.29 9 636.98 3 749.83 3 749.79
18
41 204.06 9 244.11 57 338.28 39 361.89 30 451.82 57 520.72 38 487.74 57 442.29 52 628.65 88 723.82 40 626.05
126
19
39 170.48 39 220.04 9 252.77 9 331.78 79 432.58 9 461.72 9 483.92 89 433.41 3 602.01 52 683.22 38 617.27
20
32 166.08 97 194.09 8 228.15 8 286.67 9 389.52 32 420.47 3 444.69 38 413.33 32 499.03 40 635.66 88 610.1
Source: Own calculation based on World Integrated Trade Solution (WITS) www.wits.com,UNCOMTRADE and DGFT Data Bank, Ministry of Commerce
and Industry, Govt. of India. http/commerce.nic.in
127
5.5 RCA and Percentage in Total Export of Top 10 commodities export to EU:
In 2002 Natural or Cultured Pearls, Precious & semi precious
Stones(HS-71) was on top with a share of 11.75 percent with 3.2RCA
followed by Articles of apparel and clothing not knitted (HS-62) with a
share of 9.8 percent and (HS-61) with 9 percent share in total export.(HS-
99) miscellaneous goods was on 10th place . RCA of two commodities
Electrical Machinery (HS-85) and (HS-99) out of the top ten is less than
unity in 2002. Share of top 10 commodities in total export was 58.04
percent in 2002. IN 2205 (HS-71) the top most exported commodity to
EU slashed to third position with a share of 8.8percent and 3.6 RCA.
Mineral fuels and product of their distillation (HS-27) took first place
with 10.67 percent in total export.The Product group of (HS27) has
become the most important export item from India as it’s share
increased .83percent in 2002 to 18.25percent in 2012.followed by HS-
71,HS-62 and HS-29. The share of top 10 commodities in total export
was58.4 percent in 2002 increased to 62.26 percent in 2012.But its RCA
is less than unity i.e. 0.44percent. It shows that India has become less
competitive in this sector. Three commodities have their RCA value less
than unity.
128
TABLE5.5-RCA and Percentage in Total Export of Top 10 commodities export to EU
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
RANK.
HSC
RCA
% HSC
RCA
% HSC
RCA
% HSC
RCA
% HSC
RCA
% HSC
RCA
% HSC
RCA
% HSC
RCA
% HSC
RCA
% HSC
RCA
% HSC
RCA
%
1 71 3.2
11.75
71 3.22
10.15
71 3.64
10.11
27 0.2
10.67
62 4.31
8.28
27 0.23
11.84
27 0.3
10.77
27 0.31
17.04
27 0.57
18.89
27 0.44
14.88
27 0.44
18.25
2 62 4.1
9.8 62 3.76
8.65
62 3.33
7.79
62 4.2
9.74
71 2.91
7.71
71 2.52
7.71
71 3.2
8.45
62 3.66
7.91
62 3.37
7.06
71 1.74
9.17 71 1.46
6.6
3 61 3.9
9 61 3.68
8.3
61 3.75
6.85
71 3.6
8.8
27 0.18
7.46
62 3.51
6.96
61 3.5
6.89
87 2.25
6.94
71 1.79
6.84
62 3.3
6.95 62 3.27
6.1
4 29 1.9
4.79
29 2.04
4.97
72 2.24
5.96
61 4.2
7.1
61 4.34
6.64
61 3.83
6.46
62 3.4
6.89
71 1.48
6.67
85 0.62
6.78
85 0.59
5.52 29 2.69
5.82
5 42 8.6
4.41
42 7.72
4.39
29 1.91
4.71
29 1.9
4.7
72 2.37
6.02
72 2.44
6.44
72 2.7
5.87
61 3.4
6.65
87 1.82
5.04
29 2.45
5.47 85 0.59
4.94
6 64 5 3.89
63 8.66
4.21
27 0.12
4.44
84 0.4
4.29
29 2.2
5.24
84 0.49
5.26
85 0.6
5.85
29 2.49
5.03
61 2.82
4.83
61 2.68
4.99 61 2.7
4.81
7 52 7.4
3.72
64 4.43
4.1
63 8.57
4.17
63 8.6
3.86
84 0.41
4.63
29 2.03
5.13
87 NA
5.22
85 0.62
4.68
29 2.17
4.81
84 0.6
4.89 84 0.65
4.67
8 85 0.4
3.65
87 0.55
3.94
84 0.33
4.07
42 6.8
3.42
85 0.49
3.74
85 0.44
4.17
29 2.4
5.12
84 0.52
4.28
84 0.49
4.15
87 1.87
4.14 87 1.62
4.44
9 63 9.3
3.629
85 0.428
3.92
87 0.8
3.86
64 4.2
3.39
64 4.46
3.61
64 4.18
3.41
84 0.6
5.02
64 3.75
3.35
72 1.79
4.02
72 2.05
3.77 72 2.69
3.4
10 99 0.1
3.41
84 0.305
3.83
42 6.9
3.85
85 0.4
3.17
63 7.79
3.15
87 0.76
3.39
64 3.9
2.99
42 5.6
2.78
64 3.6
2.99
73 2.24
3.21 73 2.61
3.23
58.049
56.46
55.81
59.14
56.48
60.77
63.07
65.33
65.41
62.99
62.26
Source: Own calculation based on World Integrated Trade Solution (WITS) www.wits.com,UNCOMTRADE and DGFT Data Bank, Ministry of Commerce and Industry, Govt. of India. http/commerce.nic.in
129
5.6 Top ten commodities having highest RCA:
If RCA of a particular commodity is greater than unity it means that
country has comparative advantage in the production of that
commodity.It is clear from the analysis of table 5.6 that in 2002 (HS-57)
on the top with the highest RCA 19.4 followed by (HS-50)18.2,(HS-
53)12.8,(HS-63)9.2. Fifth and sixth place was occupied by (HS-
42)and(HS-13) with 8.5 and 8.1RCA.Tenth place was occupied by the
(HS-55) with 5.75 RCA. But the strange factor about all the top ten
commodities with highest RCA is that their contribution in total export to
European Union was only 17 percent in 2002.HS-57(Carpets And Other
Textile Floor Coverings) with the highest RCA 19.4 has 1.94 percent
contribution and HS-50 (SILK) has just 0.7 percent in 2002.Out of ten
commodities contribution of five commodities is less than one percent in
total export.In 2003 contribution of top ten RCA commodities is 15
percent. Every year contribution of these commodities is decreasing and
in 2012 it was only 08percentof total export.
There are many reasons of this declining in export of these
commodities.One of the main reason is Non Tariff Barriers introduced by
the European Union.
Non-Tariff Barriers
According to UNCTAD definition that “non tariff barriers encompass
all trade policy instruments that restrict free movement of goods and thus
raise cost of production.”(UNCTAD1988 “Consideration of the question
of definition and methodology Employed in the UNCTAD Data base on
130
Trade Measures”(TD/BAC/42/5)Geneva, UNCTAD. Peter Lloyd defines
NTBs as “non tariff barrier is an omnibus term for the set of government
policy instrument and practices which operate directly to restrain imports
or distort exports”. In a simple language we can say that, any cost
escalating measure apart from customs duties will be treated as non tariff
barriers.
UNCTAD has prepared an inventory of NTBs on the basis of
information received from its member countries. According to UNCTAD
scheme, product specific non tariff measures are grouped into 16 broad
categories (A to P) and each individual chapter is divided into groupings
with depth up to three levels. The UNCTAD classification scheme for
non tariff trade control measures of a product specific nature is described
below.
A-SANITARY AND PHYTOSANITARY MEASURES
A1- Prohibitions/restrictions of imports for SPS reasons
A2- Tolerance limits for residues and restricted use of substances
A3- Labelling, marking and packaging requirements
A4- Hygienic requirements
A5-Treatment for elimination of plant and animal pests and disease-
causing organisms in the final product (e.g. postharvest
treatment)
A6- Other requirements on production or post-production processes
A8- Conformity assessment related to SPS
131
B- TECHNICAL BARRIERS TO TRADE
B1- Prohibitions/restrictions of imports for objectives set out in the
TBT agreement
B2- Tolerance limits for residues and restricted use of substances
B3 -Labelling, marking and packaging requirements
B4 -Production or post-production requirements
B6- Product identity requirement
B7- Product-quality or -performance requirement
B8- Conformity assessment related to TBT
C- PRE-SHIPMENTINSPECTION AND OTHER FORMALITIES
C1- Pre-shipment inspection
C2- Direct consignment requirement
C3- Requirement to pass through specified port of customs
C4- Import-monitoring and -surveillance requirements and other
automatic licensing measures
D -CONTINGENT TRADE-PROTECTIVE MEASURES
D1- Antidumping measure
D2- Countervailing measure
D3- Safeguard measures
E- NON-AUTOMATIC LICENSING, QUOTAS, PROHIBITIONS AND QUANTITY-CONTROL MEASURES OTHER THAN FOR SPS OR TBT REASONS
E1- Non-automatic import-licensing procedures other than
authorizations for SPS or TBT reasons
E2- Quotas
132
E3- Prohibitions other than for SPS and TBT reasons
E5- Export-restraint arrangement
E6- Tariff-rate quotas (TRQ)
F-PRICE-CONTROL MEASURES, INCLUDING ADDITIONAL TAXES AND CHARGES
F1- Administrative measures affecting customs value
F2- Voluntary export-price restraints (VEPRs)
F3- Variable charges
F4 -Customs surcharges
F5- Seasonal duties
F6- Additional taxes and charges levied in connection to services
provided by the government
F7- Internal taxes and charges levied on imports
F8 -Decreed customs valuations
F9 -Price-control measures,
G- FINANCE MEASURES
G1 -Advance payment requirement
G2- Multiple exchange rates
G3- Regulation on official foreign exchange allocation
G4- Regulations concerning terms of payment for imports
H- MEASURES AFFECTING COMPETITION
H1- State-trading enterprises, for importing; other selectiveimport channels
H2- Compulsory use of national services
H9- Measures affecting competitions
133
I- TRADE-RELATED INVESTMENT MEASURES
I1- Local content measures
I2-Trade-balancing measures
I9 -Trade-related investment measures
134
J- DISTRIBUTION RESTRICTIONS
J1 -Geographical restriction
J2 -Restriction on resellers
K -RESTRICTIONS ON POST-SALES SERVICES
L -SUBSIDIES (excluding export subsidies under P7)
M- GOVERNMENT PROCUREMENT RESTRICTIONS
N -INTELLECTUAL PROPERTY
O- RULES OF ORIGIN
P- EXPORT-RELATED MEASURES
P1-Export-license, -quota, -prohibition and other quantitativeRestrictions
P2-State-trading enterprises, for exporting; other selective exportChannels
P3- Export price-control measures
P4- Measures on re-export
P5- Export taxes and charges
P6- Export technical measures
P7- Export subsidies
P8- Export credits
P9- Export measures,
There are other forms of on tariff barriers are sprouting. These are;
environmental clauses, echo labelling social clauses and anti dumping
duties.
Identification of EU's NTBs Affecting Indian Exports:
Tariff rates are not very high in the EU but it protect its market
through different types of NTB’s .In EU, the primary sector is five times
more protected than the manufacturing sector. In many cases, Indian
export products are subjected to multiple NTBs at a time in EU. It is very
135
difficult to identify the non-tariff barriers because these measures often
lack transparency and are not covered under any trade rules (Papillon,
1994).
List of NTBs imposed By European Union in 90s
SI.No Type of NTBs1 Antidumping investigations 2 Antidumping duties 3 Countervailing duties 4 Retrospective Surveillance 5 Prior surveillance 6 Prior surveillance to protect human health 7 Prior surveillance to protect Environment 8 Non-automatic license 9 Authorization to protect environment 10 Authorization to protect wild life(CITES) 11 Authorization to drug abuse 12 Allocated quotas 13 Quota to protect human health 14 Quota to protect environment (Montreal protocol) 15 Prohibition 16 Prohibition on human health protection 17 Prohibition on the basis of origin (Embargo) 18 Technical requirement 19 Product characteristics requirement for human health
protection 20 Product characteristics requirements to ensure human safety 21 Labeling requirements 22 Labeling requirements to protect human health 23 Testing , inspection and quarantine requirements
Source: UNCTAD's TRAINS database, 1990
136
137
Table 5.6-Top 10 Commodities having highest RCA
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012HSC
RCA %
HSC
RCA %
HSC
RCA %
HSC
RCA %
HSC
RCA %
HSC
RCA %
HSC
RCA %
HSC
RCA %
HSC
RCA %
HSC
RCA %
HSC
RCA %
57 19.4
1.94
50 18.6
0.72
57 19.8
1.85
57 20.4
1.99
57 20.6
1.84
5720
1.5
57 18.7
1.12
57 16.4
1.22
57 14.2
1.01
57 13.3
0.82
57 12.9
0.92
50 18.2 0.7
53 10.9
0.37
50 19.3
0.74
50 17.8
0.62
50 14.9
0.51
5014
0.4
50 11.8 0.3
50 11.1
0.23
53 9.03 0.2
53 8.23 0.2
1311
0.45
53 12.8
0.35
63 8.67
4.21
53 8.79
0.31
63 8.63
3.86
53 9.59
0.19
539
0.2
539.7
0.14
53 9.86
0.14
50 8.44
0.18
137.7
0.65
53 8.66
0.17
63 9.28
3.62
138.6
0.42
63 8.57
4.17
53 8.42
0.18
13 8.39 0.3
527.5
1.7
52 7.02 1.1
52 6.64
1.11
13 8.36
0.32
52 6.47
1.29
14 7.92 0
42 8.59
4.41
42 7.73
4.39
13 7.57
0.47
52 7.72 2
52 8.36
2.13
137.3
0.2
63 6.33
2.17
13 6.04
0.23
52 7.08
1.36
50 5.92
0.14
527.2
1.17
13 8.15
0.49
58 7.13
0.21
52 7.07 2.3
13 7.55
0.39
637.8
3.15
637.1
2.6
13 6.23
0.22
635.8
2.19
63 5.17
2.08
63 5.54
2.24
63 5.64
2.04
52 7.41
3.72
14 6.98
0.02
42 6.91
3.85
42 6.78
3.42
42 6.41
3.04
425.7
2.8
58 5.94
0.18
42 5.61
2.78
42 5.07
2.34
42 5.08
2.55
50 5.45
0.11
14 6.74
0.01
52 6.86
3.08
68 6.03
0.69
58 6.69
0.28
58 6.11
0.22
585.4
0.2
42 5.66
2.76
58 5.37
0.15
684.9
0.63
55 4.54
0.64
42 5.34
2.62
68 6.44
0.82
68 6.53
0.85
14 5.97
0.02
14 6.35
0.01
68 5.99
0.94
685.4
0.9
685.2
0.73
68 5.34
0.86
58 4.66
0.12
14 4.53 0
68 4.75
0.61
55 5.75
1.25
55 5.59
1.12
58 5.77
0.21
686
0.76
79 5.32
1.61
555.2
0.8
554.7 0.5
10 4.06
0.18
55 4.44
0.64
58 4.47
0.11
58 4.55
0.12
Total of % 17 15 14 13 14
11 9 9 9 9 8
138
Source: Own calculation based on World Integrated Trade Solution (WITS) www.wits.com,UNCOMTRADE and DGFT Data Bank, Ministry of Commerce and Industry, Govt. of India. http/commerce.nic.in
139
From the observation of table 5.6 it is clear that in the export
basket, commodities with the highest RCA are not very important or we
can say that India is not exploiting the market of these commodities and
has a great potential in these sectors. The above table shows that RCA
index is higher in Textile, Cotton, Silk, Readymade garments and some
promising Agricultural goods and all these goods are low value added
goods.
Table 5.5 and 5.6proves our Hypothesis that in total export to
European Union contribution of those commodities is higher in which
India had less Relative Comparative Advantage and the contribution of
those commodities is decreasing in which India’s Relative Comparative
Advantage is higher. The major conclusion emerged from this chapter
are:
(1) India’s RCA is higher in textile, silk and in some Agricultural
goods where EU does not have any natural advantage
(2) The main Indian export to European Union are low value added
manufactured goods..
(3) The majority of Indian export to European Union is facing tough
competition from other Asian countries like China, Bangladesh,
Pakistan, Iran, Brazil, Indonesia etc.
(4) India’s RCA is higher in Agricultural goods, Silk, Textile and
Garments, Carpets in all these sectors EU has high Tariff rates
and Non tariff Barriers (NTB) e.g. RAGMARK,Green labelAZO
dice etc.
140
(5) EU agricultural sector is heavily protected by subsidies given in
“green box” and “blue box”.
(6) EU frequently uses stringent sanitary and phytosanitary
standards (SPS) against its import of agricultural items from
India.
141
References
1- Balassa, Bela (1977) “'Revealed' Comparative Advantage
Revisited: An Analysis of Relative Export shares of the Industrial
Countries, 1953-1971”, The Manchester School of Economic &
Social Studies, 1977, vol. 45, issue 4, pp. 327-44
2- Li, Kui-Wai and Siegfried Bender, (2003), Relative Advantage of
Manufacture Exports Among World Regions: 1981-1999, APEC
Study Center Consortium Annual Conference, Phuket, Thailand
3- Yue, Changjun (2001) “Comparative Advantage, Exchange Rate
and Exports in China”,paper prepared for the international
conference on Chinese economy, CERDI, France
4- Smyth, Diarmaid Addison (2005), Ireland’s Revealed Comparative
Advantage, QuarterlyBulletin, Central Bank of Ireland, Dublin,
No.1, pp.101-114
5- Karakaya, E. and F.B. Özgen (2002), “Economic Feasibility of
Turkey’s Economic Integration with the EU:Perspectives from
Trade Creation and Trade Diversion”, paper presented at the
METU VI International Conference in Economics, September 11-
14 2002, Ankara
6- Batra and Khan (2005). Revealed comparative advantage: an
analysis for India and China, Working Paper (168). Indian Council
for Research on International Economic Relations.
7- Bhattacharyya, R. (2011). Revealed Comparative Advantage and
Competitiveness: A Case Study for India in Horticultural Products.
International Conference on Applied Economics – ICOAE 2011.
142
Chapter-6
Findings and
Recommendations
6.1 Executive Summary :
Of the three forms of international economic cooperation viz, aid,
investment and trade the last was considered the most beneficial because
its advantage is speeding up the process of establishing new international
economic order. Complementarity of the economies compels a
developing economy to trade with other developed countries, and India is
no exception. Among its major trade partners European Union is selected
for this study, as it has significantly contributed to India’s economic
advancement. Trade experience with European Union is both
encouraging and instructive. The Indo-EU trade relations are sought to be
understood by observing the behavior of commodity groups in export and
import. The overall objective of this study is to analyse the trade trend
and the structure of India’s trade relations with the EU during the period
2000-2012.
Foreign trade plays an important role in the development of a
country because foreign trade is considered as engine of growth. After
watching the European Union and economic benefits reaped through
integration, the developing countries have also started thinking on the
143
same line. Some of the developing countries and also some developed
countries have started aiming at integration or at least economic
cooperation in the interest of overall development of the region. The
review of literature has analysed the role of foreign trade in the
development of a country, studies on economic union and relations of
India with the European Union.
India is a traditional partner of Europe and trade relationship
between both of them is running for a long period. But the relationship
between the EU as block and India really took place in when India was
among the first developing countries to establish diplomatic relations
with the then six nations of European Economic Community (EEC).
These relations become closer with the accession of the UK, India’s
traditional trading partner to the EEC in 1973. In this chapter the
researcher has discussed in detail the process of formation of European
Union, how a group of six countries develop itself into an Economic
Union of 28 countries with a single currency (Euro) in seventeen
countries. All these issues are taken up in detail in chapter III.
The fourth chapter analyses the bilateral trade relations between
India and European Union. Indo-EU trade has many dimensions and the
spectrum of trade includes not only different composition of goods but
also new areas of services and investment. In this chapter the researcher
has discussed in detail the merchandise trade; trade in service and Foreign
Direct Investment (FDI) between India and European Union.
Compounded Annual Growth Rate (CAGR) in percentage was estimated
for value.
144
The fifth chapter basically analyses the effects of tariffs and non
tariff barriers (NTB) on Indian export to EU. Studies in this chapter show
that the share of those commodities in total export is less and decreasing
in which India has a comparative advantage. For this purpose in the study
the researcher has used the Blassa’s Revealed Comparative Advantage
(RCA) method.
The last chapter is Findings and Recommendations. The study
shows that by removing and reducing some of the existing barriers
bilateral trade and investment flows can be enhanced. It will generate
employment, reduce poverty and further strengthen the economic
relationship between India and European Union.
6.2 Findings of The Study :
Bilateral economic relations between India and EU have
strengthened over years. EU’s single market has opened new vistas of
Indo-EU economic relations. It is a unified market of 28 member states .
However, the current size of trade and investment between the two
countries is low compared to the size and structural complementarities of
the two economies. In this context, the present research study analyses
trade, service, investment relations and future areas of co-operation
between India and EU. The increase in merchandise trade between the
two economies has been mainly because of the changing demand
structures and comparative advantages of both economies in
complementary sectors, while India’s exports mainly constitute low
value-added and industrial products. Though both India and European
Union have host of grey areas in their respective trade regime, both the
economies have trade advantages in different sectors. In this context
145
basically an analysis of trade advantages of India is discussed because as
a developed economy European Union has more advantages in different
sectors.
6.2.1 Trade Advantage :
(a) Service Sector :
Services are the fastest growing sector of the Indian economy. It
constitutes approximately 56% of Indian GDP. Bilateral trade in services
between India and the EU has grown impressively - from $6.7 billion in
2003 to $22.7 billion in 2009. The EU is India’s largest trading partner in
services and accounts for around 13 per cent of India’s services trade.
Although India is among the top 8 trading partners of the EU, its share
among EU’s trading partners in services is less than two per cent.
However, this share is increasing. India has a large pool of young,
educated and english-speaking work force who can offer services at
globally competitive rates while the EU is facing a shortage of skilled
work force as the population of the EU member countries is ageing. The
EU companies are facing a saturated market within their home countries,
whereas the Indian market is growing. India has shown high growth in
information technology, medical services and in business services. By
removing the barriers trade can be increased many folds.
(b) Agriculture :
Agricultural sector is an important part of the Indian economy.
This is not necessarily due to its great contribution to the GDP but more
due to its significance for the rural population. India has comparative
advantage in this sector. But EU’s agriculture sector is heavily subsidised
and protected by NTB. Any tariff reduction in this sector have great
146
impact on the Indian agricultural sector. By entering into FTA with EU,
India's export may increase.
-
(c) Textile and Clothing :
India has comparative advantage in the textiles but because of
different types of NTB’s presently, entire trade in textile and garments is
guided by different type of non tariff barriers. Once these barriers
removed India will be in better position to capture the EU market.
(d) Pharmaceutical Industries :
Near about 80% of generic medicines for the treatment of AIDS
are sourced from India. As a result, the cost of treatment fell significantly
from 10,000 to 100 USD per person per year. But, because India does not
always recognize patents, it is believed that pharmaceutical companies
have been pressuring the EU to demand stricter rules on intellectual
property protection. Any extension of the patent and trial data protection
would significantly increase medicine spending.
6.2.2 Restrictions in Economic Relations between India and European Union :
There are several restrictions/barriers in the India–EU economic
relations. The global slowdown affected them at different point in time.
The EU was hit by euro zone crisis and India has been facing high
inflation and other imbalances. Both economies have been facing demand
constraints and have adopted protectionist measures to protect the
domestic industry and circumvent the recessionary trends. There are
147
challenges/restrictions in reaching a consensus in trade goods, services
and investment. Some restrictions are discussed below.
I Restrictions in India :
Indian market is not free from restrictions. Different type of
restrictions in the form of tariff and non tariff barriers are in existence.
Some salient restrictions are discussed below.
Restrictions in Merchandise Trade :
(a) High Tariff :
India’s tariff rates are at very high level on some of the products
categories that constitute a major portion of EU’s exports. In India, the
average tariffs are higher than that of the EU. In India tariff is used as a
tool to protect the domestic industry and it is also a source of revenue. In
agricultural goods tariff level is pretty high. In the automobile and auto-
component sector there is a strong opposition from the domestic industry
and certain industry associations such as Society of Indian Automobile
Manufacturers (SIAM) and Automotive Component Manufacturers
Association of India (ACMA), are against the reduction of import duties
on passenger vehicles and two-wheelers.
Apart from these tariff-related barriers, there are several non-tariff
barriers that exists in India. These include poor infrastructure, the hiring,
management and dispute settlement mechanism in case of labour, high
production cost, credit retrieval, local financing and binding system,
relatively limited demand, high competitiveness, government
intervention, customs and clearance procedures and visa related
problems. Issues related to the Indian government’s development,
148
adoption, and implementation of technical regulations, standards and
conformity assessment procedures have not been very conducive for trade
in several products. There are also concerns regarding India’s notification
process for amendments of certain regulations.
(b) Restrictions in Service Sector :
There have been a plethora of barriers to foreign service providers
on insurance services, banking services, security services, motion
pictures, legal and accounting services and telecommunication services.
Visa related problems, cumbersome bureaucratic procedures and a
clogged judicial system where case can linger on for several years etc
have been most cited barriers to trade in services.
(c) Restrictions in Foreign Direct Investment (FDI) :
India is still not considered as an ideal place for investment. Still
there exists lot of non- transparencies in India’s policy regime for
attracting foreign investment. Frequent changes in policies, lack of proper
infrastructure i.e. power, communication etc are some of the factors
prohibiting European industries to respond favourably to India opening
up to the west.
The largest bottleneck to transfer of new technologies from
European Union to India is the lack of effective protection of intellectual
property rights in India. This often discourages western companies to
transfer their technologies to India. In some sectors, price control
regulations have undermined the incentives for foreign investors to
increase their equity holdings in India. (For instance, some companies
report that they are forced to renegotiate their contracts in the power
149
sector as a result of ruling government changes at the central and state
levels.)
II Restrictions in European Union :
Trade and investment barriers exist in European Union too.
Relatively European Union market is more open than India.
Merchandise Trade :
(a) Tariff Barriers :
European Union maintains high tariffs on several agricultural
products, which are of interest to India and is highly protected through
different forms of subsidies under “green box”, “blue box” and “amber
box”. Within quota, tariff rates are very low but over quota tariff rates are
very high and prohibitive. Another sector of interest to India is textile and
apparel products. Bound tariffs on these products in EU are significantly
high. Also, EU tariff rates are very high on some products where India
exhibits maximum RCA. For example, lac, resins gums and other
vegetable group of products are among the groups with the highest RCA
for India.
Indian companies have raised concern about the higher standards in
the EU which increases the costs of companies, especially small and
medium enterprises, to adhere to those standards. One example is
REACH (Registration, Evaluation, Authorization and Restriction of
Chemical substance).
150
(b) Non Tariff Barriers :
EU has been emerging as one of the most standard-conscious
countries in the world. EU-member states still maintain widely different
standard, testing, and certification procedures for some products. These
differences may serve as effective barriers against the free movement of
products .Many of these NTB’s have adverse impact on India’s export
potentiality to the European Union. Indian companies and industry
associations have pointed out that non tariff barriers in the European
Union have increased after the global slowdown and euro zone crisis.
Another challenge to India’s export in the EU is the emergence of
new issue in the multilateral trade discussions. Recently EU passed
stringent laws on environment and eco-labeling. EU has already banned
some chemicals used in the textile industry. This ban will adversely affect
India’s export prospect in the EU. Emergence of social clause is also
another area of great concern for Indian exporters to the EU.
(c) Restrictions in Services Sector :
Despite the importance of the services sector and its growing share
in bilateral trade between these two partners, there are significant barriers
to services trade between the two.
(d) Visa and Work Permit Related Issues :
There are several visa and work permit related issues, faced by the
Indian service providers. In the EU, member states restrict their intra-EU
mobility. For instance, an Indian software consultant with a work permit
in UK cannot offer services in other EU countries. Although Schengen
visa permits multiple entries for business visitors into the states that are
151
signatories of the accord, but the service providers have to first enter the
country which gives the visa. There are other issues such as changes in
the visa regime and high visa fees.
152
(e) Lack of Harmonisation in EU:
Lack of harmonisation of qualifications and professional standards
have made it difficult for Indian professionals to service the EU markets.
Like goods, the EU does not have a single market for services and most
of the issues related to the movement of people such as work permits and
visas are at the Member State Level. Regulations and conditions differ
across the member states. In an attempt to harmonise the EU labour
market, the Blue Card Directive was introduced in 2009. However, few
member states such as Austria, Cyprus and Greece have not yet
transposed the provisions of the EU Blue Card into their respective
national legislations. There are also issues related to the definition of
professionals under different categories namely four categories of
movement: business visitors, intra corporate transferees, contractual
service suppliers and independent professionals.
(f) Data Protection:
India has not been accorded the status of a data secure nation by
the EU. As a result, the Indian companies and even sub-contracting
parties have to meet the lengthy and cumbersome requirements laid down
under the EU directive on data protection which increase their cost of
operation.
6.3 Recommendations :
Trade and economic relations with Europe have always been very
important for India. In the last two decades, the process of European
economic integration and economic liberalization in India has created
tremendous opportunities for European Union and India. The EU is
153
interested in growing an unsaturated Indian market with investment
potential. Similarly, India is interested in greater investments from the EU
and improved market access for temporary movement of professionals.
The EU can work with India to make necessary changes in the Indian
regulations so that India becomes compliant with the safe harbour nation
requirements for data protection. The EU can take steps to streamline the
work permit and visa regime across member states by implementing
directives such as the proposed directive on conditions of entry and
residence of third-country nationals in the framework of an intra-
corporate transfer. The aim of this Directive is to remove barriers to entry
and movement of intra corporate transferees into and within the EU
member states. The research study has focused on the following
recommendations to further strengthen India-EU trade and economic
relations :
(i) Tariff rates in India are very high, though it has been reduced but
still very high. It should be reduced to more moderate level .
(ii) Indian market and production system are characterized with
large scale piracy of foreign products and technologies by
changing process of production and Indian market is flooded
with spurious and counterfeit goods. India should change its
concept of Intellectual Property Rights (IPR), as because of this,
foreign companies hesitate to invest in India.
(iii) FDI restrictions are very high in India. India has the 4 th highest
levels of restrictions to FDI in the world. Because of these
restrictions inflow of investment is not as much as it should be.
Government should liberalise the policies regarding FDI.
154
(iv) India’s customs valuation methodologies do not reflect actual
transaction values and sometimes increase the effective tariff
rates. Also, due to a complex tariff structure and multiple
exemptions, Indian customs require extensive documentation,
which leads to frequent processing delay and inhibits the free
flow of trade. To avoid these difficulties, the government
policies should be transparent.
(v) Infrastructure in India is weak, government intervention is high,
high cost of production, dispute settlement in case of labour is
cumbersome. Government should try to initiates (a) domestic
reforms (b) regulatory certainty and transparency. It will lead to
inflow of FDI from EU as there is a tremendous scope for EU
companies to participate and collaborate in the infrastructure and
construction sectors.
(vi) With the rise in labour cost in china India with a sound
infrastructure base can offer an alternative manufacturing base
for EU companies. So India should made it’s domestic
manufacturing base sound and competitive.
(vii) There is a tremendous scope in the healthcare sector, tourism,
science and technology, construction and related services and
human resources development where collaborative relations can
further strengthen. There exist tariff and non tariff barriers and
both economies need to remove sector specific barriers to
improve trade and investment relation.
155
Concluding Paragraph :
One of the reasons for the lack of progress in the trade negotiations
has been the slow process of reforms in India. If India has Domestic
Reforms, Regulatory Certainty and a Transparent Regime, this will lead
to inflow of FDI from EU into infrastructure services and manufacturing
and also enable India to become a part of the production network of the
EU companies. The study found that there is significant scope for
enhancing bilateral investment flows between India and European Union,
which will benefit companies from both economies. If recommendations
of the study are implemented, they will not only enhance bilateral
investment flows but also enhance the global competiveness of Indian
companies and increase investment inflows in the manufacturing and
infrastructure sectors, which India needs urgently.
India and European Union have a close diplomatic and economic
relationship and trade and investment flows between the two economies
have increased over time. The two economies are trying to strengthen
their relationship through a comprehensive trade agreement known as the
India-EU BTIA. Once signed, the BTIA will be the EU’s first
comprehensive trade agreement with a large emerging market. If barriers
to trade and investment are removed or even reduced under the BTIA, it
is likely to benefit both Indian and European Union companies in each
other’s market. EU companies can have better access to the large and
unsaturated Indian market. India needs investment in infrastructure and
investment by EU companies in sectors such as green energy,
construction and logistics will be beneficial for India. Despite these
benefits the progress of the India-EU BTIA negotiations is slow, Indian
156
and EU companies face several barriers in each other’s market and
reforms in both economies have slowed down, partly due to the global
slowdown and other macro-economic and political instabilities.
Though foreign investment from EU has increased over years, the
share in total FDI inflows to India has declined. There are opportunities
for small and medium-sized EU companies to synergise with Indian
SMEs in the areas of auto parts, semi-conductors, agricultural
instruments, textiles, plastics, multi-media, software etc. Since,
development of infrastructure in India is a priority and requires both
advanced technology and huge investment, there is tremendous scope for
EU companies to participate and collaborate in the infrastructure and
construction sectors. Further, there is tremendous scope for improving
trade in services between the two countries, particularly for India. There
are areas such as information technology, science and technology,
pharmaceuticals, broadcasting, tourism, healthcare, construction and
related services and human resource development where collaborative
relations can be further strengthened. There exist both tariff and non-tariff
barriers and both countries need to remove sector-specific barriers to
improve trade and investment relations.
157
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Table I: EU'S RCA IN INDIAN MARKET-2002-2012 COMMODITY WISE
HSCode
SECTOR 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1 LIVE ANIMALS. 5.92 10.6 6.23 9.31 6.36 8.57 6.09 10.16 6.83 7.06 5.05
2 MEAT AND EDIBLE MEAT OFFAL. 3.62 0.481 18.98 3.35 3.02 4.89 5.76 5.11 7.05 7.70 4.5
3 FISH AND CRUSTACEANS, MOLLUSCS AND OTHER AQUATIC INVERTABRATES.
0.468 2.31 0.641 0.460 0.352 0.482
0.275 0.509 0.403 0.376 0.520
4 DAIRY PRODUCE; BIRDS' EGGS; NATURAL HONEY; EDIBLE PROD. OF ANIMAL ORIGIN, NOT ELSEWHERE SPEC. OR INCLUDED.
1.161 0.397 3.38 4.08 2.62 2.91 3.48 1.65 0.662 4.51 2.19
5 PRODUCTS OF ANIMAL ORIGIN, NOT ELSEWHERE SPECIFIED OR INCLUDED.
NA 4.10 0.400 0.339 0.322 0.490
1.54 0.843 0.335 0.242 0.605
6 LIVE TREES AND OTHER PLANTS; BULBS; ROOTS AND THE LIKE; CUT FLOWERS AND ORNAMENTAL FOLIAGE.
2.806 0.184 5.41 3.61 4.38 4.84 5.34 4.91 5.7 5.61 7.07
7 EDIBLE VEGETABLES AND CERTAIN ROOTS AND TUBERS.
0.393 0.014 0.108 0.062 0.183 0.132
0.134 0.037 0.043 0.123 0.216
8 EDIBLE FRUIT AND NUTS; PEEL OR CITRUS FRUIT OR MELONS.
0.012 0.056 0.012 0.008 0.015 0.019
0.020 0.025 0.036 0.037 0.052
9 COFFEE, TEA, MATE AND SPICES. 0.017 11 0.074 0.062 0.076 0.114
0.258 0.210 0.220 0.173 0.204
10 CEREALS. 0.492 2.38 1.141 0.167 2.84 0.060
0.007 0.549 0.108 0.898 0.323
11 PRODUCTS OF THE MILLING INDUSTRY; MALT; STARCHES; INULIN; WHEAT GLUTEN.
1.93 0.689 2.71 3.76 2.73 2.93 2.27 0.775 1.0 1.5 1.39
12 OIL SEEDS AND OLEA. FRUITS; MISC. GRAINS, SEEDS AND FRUIT;
1.18 0.597 0.910 0.910 1.21 0.772
0.916 0.888 0.897 0.798 0.984
171
INDUSTRIAL OR MEDICINAL PLANTS; STRAW AND FODDER.
13 LAC; GUMS, RESINS AND OTHER VEGETABLE SAPS AND EXTRACTS.
0.551 0.180 0.604 0.705 0.757 0.844
0.673 0.837 0.818 1.058 1.40
14 VEGETABLE PLAITING MATERIALS; VEGETABLE PRODUCTS NOT ELSEWHERE SPECIFIED OR INCLUDED.
0.496 0.016 0.313 0.062 0.487 0.927
0.649 0.267 0.194 0.14 0.165
15 ANIMAL OR VEGETABLE FATS AND OILS AND THEIR CLEAVAGE PRODUCTS; PRE. EDIBLE FATS; ANIMAL OR VEGETABLE WAXEX.
0.011 6.63 0.026 0.0245 0.036 0.040
0.045 0.0342 0.030 0.029 0.059
16 PREPARATIONS OF MEAT, OF FISH OR OF CRUSTACEANS, MOLLUSCS OR OTHER AQUATIC INVERTEBRATES
1.74 0.878 5.24 5.89 3.28 3.44 4.39 3.14 3.46 2.62 5.27
17 SUGARS AND SUGAR CONFECTIONERY.
0.488 0.81 0.218 0.296 3.085 2.55 2.0 0.151 0.463 2.49 0.701
18 COCOA AND COCOA PREPARATIONS. 0.914 0.649 1.04 0.79 0.979 0.699
1.159 1.04 1.12 1.04 1.31
19 PREPARATIONS OF CEREALS, FLOUR, STARCH OR MILK; PASTRYCOOKS PRODUCTS.
0.479 0.812 1.07 0.898 1.19 2.00 2.79 3.47 3.62 3.65 5.19
20 PREPARATIONS OF VEGETABLES, FRUIT, NUTS OR OTHER PARTS OF PLANTS.
0.737 2.049 0.674 1.52 1.65 1.38 1.78 2.16 2.06 2.27 2.57
21 MISCELLANEOUS EDIBLE PREPARATIONS.
0.559 4.35 2.361 1.59 2.20 2.03 2.28 1.87 2.30 2.21 2.27
22 BEVERAGES, SPIRITS AND VINEGAR. 6.64 0.352 1.24 1.59 4.27 4.45 3.19 1.67 2.95 3.61 3.95
23 RESIDUES AND WASTE FROM THE FOOD INDUSTRIES; PREPARED ANIMAL FODER.
0.774 0.890 0.421 0.410 0.526 0.541
0.653 0.648 0.816 1.06 0.82
24 TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES.
1.10 0.340 0.433 0.553 1.36 1.10 0.77 0.629 0.5805 0.756 1.23
172
25 SALT; SULPHUR; EARTHS AND STONE; PLASTERING MATERIALS, LIME AND CEMENT.
0.288 0.122 0.364 0.338 0.383 NA NA NA 0.559 0.445 0.452
26 ORES, SLAG AND ASH. 0.050 0.011 0.068 0.097 0.0469 0.031
0.049 0.150 0.0135 0.0725 0.036
27 MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION; BITUMINOUS SUBSTANCES; MINERAL WAXES.
0.015 0.293 0.015 0.0139 0.0199 0.012
0.017 0.030 0.0150 0.0226 0.0232
28 INORGANIC CHEMICALS; ORGANIC OR INORGANIC COMPOUNDS OF PRECIOUS METALS, OF RARE-EARTH METALS, OR RADI. ELEM. OR OF ISOTOPES.
0.217 0.847 0.300 0.2611 0.331 0.37 0.362 0.4361 0.650 0.576 0.702
29 ORGANIC CHEMICALS 0.883 3.66 0.908 0.861 0.867 0.834
0.988 1.07 0.925 0.940 1.05
30 PHARMACEUTICAL PRODUCTS 3.15 0.165 4.16 3.33 3.37 2.73 3.51 3.09 3.78 4.17 3.77
31 FERTILISERS. 0.019 1.48 0.155 0.218 0.099 0.007
0.244 0.237 0.326 0.276 0.123
32 TANNING OR DYEING EXTRACTS; TANNINS AND THEIR DERI. DYES, PIGMENTS AND OTHER COLOURING MATTER; PAINTS AND VER; PUTTY AND OTHER MASTICS; INKS.
1.43 2.25 1.57 1.54 1.70 1.73 2.01 1.71 1.84 1.76 2.07
33 ESSENTIAL OILS AND RESINOIDS; PERFUMERY, COSMETIC OR TOILET PREPARATIONS.
1.64 1.81 2.19 2.44 2.49 2.27 2.94 2.64 2.76 2.81 3.034
34 SOAP, ORGANIC SURFACE-ACTIVE AGENTS, WASHING PREPARATIONS, LUBRICATING PREPARATIONS, ARTIFICIAL WAXES, PREPARED WAXES, POLISHING OR SCOURING PREP.
1.55 1.86 2.02 2.06 2.37 2.27 NA 3.04 3.01 3.24 3.5
35 ALBUMINOIDAL SUBSTANCES; 2.14 15.51 1.70 1.99 1.95 2.13 2.18 2.0 2.5 NA 3.20
173
MODIFIED STARCHES; GLUES; ENZYMES.
36 EXPLOSIVES; PYROTECHNIC PRODUCTS; MATCHES; PYROPHORIC ALLOYS; CERTAIN COMBUSTIBLE PREPARATIONS.
1.30 1.0 6.38 4.61 3.34 1.67 1.96 1.62 6.09 7.54 10.74
37 PHOTOGRAPHIC OR CINEMATOGRAPHIC GOODS.
0.864 1.42 1.25 1.00 1.00 1.36 1.2 1.30 1.58 2.12 3.44
38 MISCELLANEOUS CHEMICAL PRODUCTS.
1.2 1.39 1.39 1.58 1.91 1.90 1.64 1.57 1.79 1.78 2.00
39 PLASTIC AND ARTICLES THEREOF. 1.20 0.852 1.62 1.52 1.54 1.27 1.61 1.58 1.52 1.67 1.85
40 RUBBER AND ARTICLES THEREOF. 0.660 1.52 0.953 1.06 1.29 1.09 1.22 1.2 1.15 1.47 1.90
41 RAW HIDES AND SKINS (OTHER THAN FURSKINS) AND LEATHER
1.51 1.26 1.86 1.76 2.30 2.05 2.21 2.36 2.36 2.54 2.94
42 ARTICLES OF LEATHER,SADDLERY AND HARNESS;TRAVEL GOODS, HANDBAGS AND SIMILAR CONT.ARTICLES OF ANIMAL GUT(OTHR THN SILK-WRM)GUT.
1.23 1.89 1.42 1.17 1.18 1.33 1.62 1.61 1.35 1.4 1.45
43 FURSKINS AND ARTIFICIAL FUR, MANUFACTURES THEREOF.
0.730 0.190 2.4 2.03 2.25 2.73 8.96 9.15 4.47 6.89 3.95
44 WOOD AND ARTICLES OF WOOD; WOOD CHARCOAL.
0.240 2.67 0.228 0.301 0.333 0.316
0.434 0.379 0.487 0.466 0.525
45 CORK AND ARTICLES OF CORK. 2.54 0.265 3.21 3.54 4.2 3.15 4.20 4.66 6.39 5.98 5.99
46 MANUFACTURES OF STRAW, OF ESPARTO OR OF OTHER PLAITING MATERIALS; BASKETWARE AND WICKERWORK.
13.9 0.718 0.057 1.24 0.181 0.337
0.520 0.370 0.119 0.141 0.306
47 PULP OF WOOD OR OF OTHER FIBROUS CELLULOSIC MATERIAL; WASTE AND SCRAP OF PAPER OR PAPERBOARD.
0.750 2.08 1.12 1.44 1.68 1.48 2.085 2.17 1.73 1.70 1.94
48 PAPER AND PAPERBOARD; ARTICLES OF PAPER PULP, OF PAPER OR OF
1.84 1.09 2.23 2.07 2.13 2.42 2.55 2.9 2.54 2.27 2.63
174
PAPERBOARD.49 PRINTED BOOKDS, NEWSPAPERS,
PICTURES AND OTHER PRODUCTS OF THE PRINTING INDUSTRY; MANUSCRIPTS, TYPESCRIPTS AND PLANS.
1.0 0.007 1.3 1.94 1.45 1.09 2.82 2.99 2.51 2.76 1.92
50 SILK 0.011 1.0 0.017 0.0122 0.018 0.017
0.018 0.019 0.022 NA 0.035
51 WOOL, FINE OR COARSE ANIMAL HAIR, HORSEHAIR YARN AND WOVEN FABRIC.
0.948 0.458 0.994 0.916 0.821 0.694
0.589 0.585 0.555 0.563 0.648
52 COTTON. 0.255 1.73 0.299 0.342 0.40 0.437
0.391 0.416 0.517 0.539 0.319
53 OTHER VEGETABLE TEXTILE FIBRES; PAPER YARN AND WOVEN FABRICS OF PAPER YARN.
1.37 0.239 1.26 1.77 0.934 0.850
1.28 0.681 0.672 0.436 0.564
54 MAN-MADE FILAMENTS. 0.130 0.804 0.339 0.390 0.399 0.489
0.665 0.582 0.562 0.581 0.763
55 MAN-MADE STAPLE FIBRES. 0.515 1.23 0.957 1.17 0.972 1.11 1.22 1.28 1.61 1.55 1.9756 WADDING, FELT AND NONWOVENS;
SPACIAL YARNS; TWINE, CORDAGE, ROPES AND CABLES AND ARTICLES THEREOF.
1.27 1.89 1.33 1.20 1.55 1.28 1.97 2.05 2.05 2.74 2.53
57 CARPETS AND OTHER TEXTILE FLOOR COVERINGS.
2.35 0.567 1.43 1.33 1.37 1.12 1.29 0.97 1.30 1.24 1.37
58 SPECIAL WOVEN FABRICS; TUFTED TEXTILE FABRICS; LACE; TAPESTRIES; TRIMMINGS; EMBROIDERY.
0.919 0.745 0.622 0.490 0.648 0.605
0.714 0.630 0.869 0.697 0.713
59 IMPREGNATED, COATED, COVERED OR LAMINATED TEXTILE FABRICS; TEXTILE ARTICLES OF A KIND SUITABLE FOR INDUSTRIAL USE.
0.684 1.01 0.750 0.511 0.665 0.638
0.659 0.767 0.745 0.680 0.705
60 KNITTED OR CROCHETED FABRICS. 0.620 0.939 1.10 0.520 0.702 0.387
0.442 0.349 0.407 0.439 0.463
175
61 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNITTED OR CORCHETED.
1.40 0.860 2.03 1.58 1.93 2.09 1.54 1.52 1.94 1.94 2.29
62 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, NOT KNITTED OR CROCHETED.
1.79 0.824 1.73 1.76 1.68 2.06 2.32 2.27 2.43 2.19 2.11
63 OTHER MADE UP TEXTILE ARTICLES; SETS; WORN CLOTHING AND WORN TEXTILE ARTICLES; RAGS
0.755 2.50 0.655 1.06 0.988 0.877
0.775 0.791 0.886 0.856 0.905
64 FOOTWEAR, GAITERS AND THE LIKE; PARTS OF SUCH ARTICLES.
3.11 1.78 2.41 2.10 1.6 1.72 1.69 1.83 1.18 1.05 0.857
65 HEADGEAR AND PARTS THEREOF. 0.960 0.086 0.684 1.11 1.29 2.19 1.11 0.953 0.753 1.58 1.5966 UMBRELLAS, SUN UMBRELLAS,
WALKING-STICKS, SEAT-STICKS, WHIPS,RIDING-CROPS AND PARTS THEREOF.
0.033 0.180 0.010 0.057 0.107 0.057
0.041 0.114 0.146 0.143 0.087
67 PREPARED FEATHERS AND DOWN AND ARTICLES MADE OF FEATHERS OR OF DOWN; ARTIFICIAL FLOWERS; ARTICLES OF HUMAN HAIR.
0.492 2.07 0.160 0.220 0.136 0.257
3.06 3.97 3.28 1.57 0.439
68 ARTICLES OF STONE, PLASTER, CEMENT, ASBESTOS, MICA OR SIMILAR MATERIALS.
2.13 1.91 2.12 1.9 2.20 2.21 2.53 2.12 2.44 2.18 2.38
69 CERAMIC PRODUCTS. 1.74 1.90 1.90 1.89 1.57 1.46 2.15 2.43 2.15 1.96 1.9870 GLASS AND GLASSWARE. 1.81 2.06 2.31 2.14 2.35 1.87 2.12 1.97 2.0 2.32 1.9171 NATURAL OR CULTURED
PEARLS,PRECIOUS OR SEMIPRECIOUS STONES,PRE.METALS,CLAD WITH PRE.METAL AND ARTCLS THEREOF;IMIT.JEWLRY;COIN.
1.71 1.59 1.72 1.89 1.94 1.63 1.70 0.950 1.00 1.12 1.28
72 IRON AND STEEL 1.15 1.61 1.36 1.64 1.32 1.44 1.62 1.9 1.83 2.0 2.06
73 ARTICLES OF IRON OR STEEL 1.50 1.64 2.25 2.18 1.91 1.98 2.20 2.59 2.48 2.09 2.20
74 COPPER AND ARTICLES THEREOF. 1.59 0.579 1.61 1.61 1.52 1.72 2.15 2.26 2.33 2.27 1.78
176
75 NICKEL AND ARTICLES THEREOF. 0.523 1.36 0.683 0.912 NA 1.48 1.89 1.86 1.27 1.45 2.0
76 ALUMINIUM AND ARTICLES THEREOF.
1.36 0.265 1.43 1.37 1.33 1.03 1.59 2.09 2.21 1.84 2.12
78 LEAD AND ARTICLES THEREOF. 0.231 0.915 0.310 0.272 0.155 0.296
1.28 2.77 2.34 1.68 1.86
79 ZINC AND ARTICLES THEREOF. 0.772 0.737 0.857 0.965 0.734 0.929
0.613 0.918 0.938 0.952 0.812
80 TIN AND ARTICLES THEREOF. 1.26 1.49 1.05 0.811 1.05 1.18 1.46 1.45 1.03 0.459 0.27481 OTHER BASE METALS; CERMETS;
ARTICLES THEREOF.1.30 1.91 1.48 1.69 2.01 2.39 1.88 1.31 1.62 1.95 2.06
82 TOOLS IMPLEMENTS, CUTLERY, SPOONS AND FORKS, OF BASE METAL; PARTS THEREOF OF BASE METAL.
1.98 1.49 1.64 1.68 2.32 1.75 2.04 2.95 2.66 2.61 2.42
83 MISCELLANEOUS ARTICLES OF BASE METAL.
1.56 1.94 1.96 2.0 2.0 2.89 3.16 2.49 1.92 2.46 2.23
84 NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANICAL APPLIANCES; PARTS THEREOF.
1.81 1.27 2.12 2.095 2.40 2.33 2.65 2.69 2.88 3.01 2.99
85 ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS,AND PARTS.
1.50 1.93 1.52 1.22 1.34 1.26 1.6 1.34 1.50 1.46 1.31
86 RAILWAY OR TRAMWAY LOCOMOTIVES, ROLLING-STOCK AND PARTS THEREOF; RAILWAY OR TRAMWAY TRACK FIXTURES AND FITTINGS AND PARTS THEREOF; MECHANICAL
NA 1.92 2.42 2.56 3.44 2.14 2.29 3.59 6.14 2.46 3.04
87 VEHICLES OTHER THAN RAILWAY OR TRAMWAY ROLLING STOCK, AND PARTS AND ACCESSORIES THEREOF.
2.58 1.50 1.87 2.27 2.80 2.68 2.73 2.37 2.98 3.32 3.46
177
88 AIRCRAFT, SPACECRAFT, AND PARTS THEREOF.
2.97 0.023 2.38 2.40 2.13 5.37 1.65 2.37 3.13 4.49 8.23
89 SHIPS, BOATS AND FLOATING STRUCTURES.
0.011 1.98 0.053 0.376 0.030 0.215
0.227 0.238 0.068 0.098 0.382
90 OPTICAL, PHOTOGRAPHIC CINEMATOGRAPHIC MEASURING, CHECKING PRECISION, MEDICAL OR SURGICAL INST. AND APPARATUS PARTS AND ACCESSORIES THEREOF;
1.83 0.188 2.23 2.28 2.62 2.41 2.90 2.85 3.07 3.50 3.63
91 CLOCKS AND WATCHES AND PARTS THEREOF.
0.192 0.411 0.187 0.270 0.290 0.346
0.341 0.244 0.304 0.209 0.238
92 MUSICAL INSTRUMENTS; PARTS AND ACCESSORIES OF SUCH ARTICLES.
1.0 9.0 0.288 0.302 0.641 0.467
0.526 0.260 0.344 0.303 0.265
93 ARMS AND AMMUNITION; PARTS AND ACCESSORIES THEREOF.
5.02 2.18 11.62 40.81 54.70 41.59
21.62 24.29 65.54 12.37 1.69
94 FURNITURE; BEDDING, MATTRESSES, MATTRESS SUPPORTS, CUSHIONS AND SIMILAR STUFFED FURNISHING; LAMPS AND LIGHTING FITTINGS NOT ELSEWHERE SPECIFIED OR INC
1.80 0.449 1.63 1.62 1.62 1.62 2.17 2.57 2.31 2.37 2.43
95 TOYS, GAMES AND SPORTS REQUISITES; PARTS AND ACCESSORIES THEREOF.
0.555 1.024 0.367 0.756 0.456 0.479
0.815 0.797 0.651 0.493 0.743
96 MISCELLANEOUS MANUFACTURED ARTICLES.
1.34 4.31 1.38 1.08 1.34 1.32 1.73 1.38 1.60 1.546 1.370
97 WORKS OF ART COLLECTORS' PIECES AND ANTIQUES.
2.32 NA 7.33 2.58 2.13 1.24 2.45 1.18 9.33 0.910 3.90
98 PROJECT GOODS; SOME SPECIAL USES.
NA 0.318 NA NA NA NA NA NA NA NA NA
99 MISCELLANEOUS GOODS. NA NA 0.440 0.154 0.147 0.278
0.423 0.254 0.211 NA 0.181
RCA>1 52 51 55 56 59 59 62 57 58 60 60
178
179