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'Eliminate tariffs on 95% of goods under India-EU FTA' - FICCI

26 Sep '08

4 min read

FICCI has sought tariff elimination by EU on 95% of the goods under the India-EU Free Trade Agreement (FTA) negotiations. FICCI said that the India-EU High Level Trade Group in its report has set the ambition of tariff elimination for 90% of the trade in goods by both sides under the FTA.

However, FICCI feels that this 90% coverage would not guarantee any real market access for products of export interest to India in EU. Currently, EU has high tariffs on approximately 9% of its overall tariff lines. And if the coverage of trade in goods under the FTA is limited to only 90% for EU, then EU can easily retain practically all its sensitive products under the sensitive list of FTA, noted FICCI.

FICCI further said that in the absence of any effective resolution of issue related to non-tariff barriers faced by Indian exporters in EU there would not be any meaningful gains for Indian exporters from the FTA. Citing an example of REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals Substances) regulation of EU, FICCI said that the regulation requires extensive tests and a very high compliance cost for Indian exporters.

It has been reported that the one-time cost for complying with REACH could be 5 to 10 per cent of the turnover of a manufacturer in addition to significant recurring cost required afterwards, observed FICCI. This has not only affected the chemicals and dyes exporters but also the users of these chemicals like textile industry. Even the textile exporters are required to procure their chemicals from pre-registered entities under REACH regulations, FICCI pointed out.

FICCI further said that exports of textiles and clothing is also becoming difficult for Indian exporters to EU not only because of high tariffs but also because of various certification requirements related to environment, health and labour.

An Indian exporter of textile and garment is required to have number of certificates like OEKOTEX, ISO9001, ISO14001, Certification for Fumigation (ISPM), Certification for Social Accountability Standards for Working Conditions (SA8000), Fair Trade Certifications (for Social & Environmental Standards), etc.

In a survey done by FICCI, it was reported that the OEKOTEX Certificate cost around 1600 Pounds and the Fumigation Certificate cost around 50 Euros per container. The cost related to OEKOTEX Certificate is around 2% of the sale value of an exporters and total compliance cost for various certificates could be as high as 2300 Pounds, noted FICCI. This indeed has made our exports in EU market uncompetitive vis-à-vis exports from EU member-countries.

In case of agricultural products, FICCI has sought simplification of sampling and testing procedures in EU countries. These procedures are not only complex but expensive also for Indian exporters. In addition, EU needs to have harmonized regulation related to Maximum Residue Limits (MRLs) for pesticides. Currently, member-countries of EU have different MRLs for pesticides that make it difficult for the exporters to comply with while exporting to one EU market. All this has discouraged the exports of agricultural products to EU market.

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