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Public Meeting TSIA EU-India Phase 2 Report By: Paul Wijmenga & Koen Berden Brussels, 6 th of November 2008.

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Presentation on theme: "Public Meeting TSIA EU-India Phase 2 Report By: Paul Wijmenga & Koen Berden Brussels, 6 th of November 2008."— Presentation transcript:

1 Public Meeting TSIA EU-India Phase 2 Report By: Paul Wijmenga & Koen Berden Brussels, 6 th of November 2008

2 Overview 1.Introduction 2.Selected sectors 3.Selected horizontal issues 4.FDI, gravity and NTB analysis 5.Consultations with Civil Society 6.Conclusions 7.Policy recommendations PW

3 1. Introduction: 2nd Public Meeting Goals of this meeting 1.Presentation of the second set of study results (Phase 2 – Interim Report); 2.Presentation of gravity estimation results on NTBs, FDI and investments; 3.Getting feedback, comments and suggestions for the study from civil society; 4.Initial discussion on policy recommendations and flanking measures PW

4 1. Introduction: TSIA Methodology TSIA: look at economic, social and environmental sustainability impacts of trade measures negotiated within the EU-India FTA; TSIA quantitative and qualitative approach (CGE, Causal Chain Analysis and expert interviews); The TSIA is 50% modeling and analysis and 50% consultations: Phase 1: screening and scoping (GAR); Phase 2: in-depth studies of screened sectors/issues; Phase 3: policy recommendations and enhancement or mitigating measures PW

5 Phase 2: In-depth studies into sectors and horizontal issues 1.Screening: Size as share of GDP, Expected Economic Impact, Social/Environmental Impact, Civil Society 2.Sectors: Grains, Motor Vehicles & Automotives, Textiles & Clothing, OBS, Financial & Banking services; Horizontal issues: Investment Conditions, Technical regulations Industrial Products, SPS, Trade Facilitation, IPR 3.Changes due to Civil Society comments: include IPR, make CGE more dynamic, more clearly present assumptions and restrictions of CGE, look at poverty aspects, ecological outcomes, horticulture is a case study, CO2 analysis for both EU and India 1. Introduction: TSIA Methodology PW

6 2. Selected sectors - Grains -Overall positive impact economically, socially – small effects – effect on poverty; -CGE outcomes an upper limit (due to inefficiencies, hidden unemployment); -Remaining NTBs related to SPS issues – effect on poverty; -Expected growth in the Indian rice sector as a consequence of liberalisation; -Environmentally: eutrophication, chemicals, pesticides and projected increase in GHG emissions. KB

7 2. Selected sectors - Automotives -Overall small mutually positive impact economically – larger if we factor in FDI flows – larger impacts for India (31% tariff reduced); -Expected reallocation of parts of the (labour-intensive) production process from the EU to India; -Combination of EU investments (including R&D) and Indian cheap labour for (for example) assembly – strong combination; -Issues related to technical regulations – NTBs – if addressed lead to large two-way gains as costs of doing business/trade drop; -Very small negative employment effects in India – efficiency – but: excluding FDI factor; -Environmentally: no significant projected primary impacts – secondary: products produced are polluting. KB

8 2. Selected sectors – Textiles & clothing -Overall effects expected to be modest – regional effects may be more pronounced (lower output and employment in the EU); -Investment flows EU to India expected to increase (for larger EU firms – not SMEs); -Expected further specialisation of EU production into high-end and technical textiles; -Strong positive economic effects in India: output, employment, real income growth; -Positive effects in India for gender equality (female participation) and migrant workers; -Small negative expected environmental impacts through bio- diversity, atmosphere, and water quality (industry) – most impact in apparel that is relatively least polluting KB

9 2. Selected sectors – Finance & banking -Note: with current financial crisis – interpret these conclusions with caution – sector is very much in flux; -Key aspect: to what extent does FTA increase FDI from EU to India in financial & banking? If so, capital and small employment gains (EU) and employment and technology and cost gains (India); -More competitive banking sector in India – lower costs of transactions carry over to sectors in the economy; -Important factor: how do – in parallel to FTA – Indian banks connect to people (especially in rural areas)? KB

10 2. Selected sectors - OBS -Direct economic FTA effects for EU small – crucial is how FDI flows increase because of more integration and Indian openness on some OBS; -Outsourcing and offshoring of EU OBS to India expected to increase pace; -Related to investment is mobility of experts and contract workers with respect to OBS – there is a potential economic impact based on UK example; -Environmental effects expected to be negligible. KB

11 3. Selected HIs: Investment conditions KB -Addressing investment conditions: NTBs (e.g. OBS) -Increased investment flows into India – especially into competitive sectors (e.g. Automotives, financial services, chemicals, textiles) – for EU: firms more market access (not only through trade – also investment); -Positive social impacts – employment generation in sectors (but efficiency vs. more jobs and agriculture not much effect – some growth vs. mechanisation); -Long run: positive R&D and technology effects; -Overall environmental impact is negative: higher national income  more resource consumption  emissions/pollution.

12 3. Selected HIs: Technical regulations industrial products KB -Overall EU effects small – regional impacts to manufacturing industries (e.g. Automotive, machinery); -In India: lack of awareness of (EU) technical regulations – improve awareness and understanding; -TIDP – EU provides assistance to India to help upgrade TBT; -Potential economic gains for Indian manufacturing (not so much agriculture) are large – more trade with EU (market access); -Social gains may follow economic gains: cleaner technologies, higher quality products, cleaner production environment, etc. -No direct environmental impacts, but indirectly – if TR cause growth in manufacturing industries, negative impacts may follow (wastewater, air pollution).

13 3. Selected HIs: SPS KB -Large divergence in SPS standards between the EU and India – large NTB in agricultural sector; -SPS harmonisation gains: EU: market access processed foods; India: market access for raw agricultural materials and primary products; -More beneficial effects for India than EU (based on trade flow analysis that relates to SPS); -Primary social impact small, but secondary effect substantial since it lowers health risks (food safety higher, lower chance for diseases); -Issue: base SPS standards on scientific evidence; -FTA can make contribution to SME growth in agriculture (major achievement!) if SPS harmonisation occurs and SMEs are allowed to benefit; -Issue: implementation & enforcement

14 3. Selected HIs: Trade facilitation KB -EU advanced in aspects related to trade facilitation – if addressed, Indian exports expected to benefit much more than EU exports (in size) – EU: very small production effects (in sectors where trade with India is relatively larger); -The more ambitious the FTA, the more positive the economic potential effects are (both EU/India); -In India some social impacts (employment) in sectors that benefit from lower transport costs and shorter waiting lines (e.g. fresh fruits, fisheries); -Environmental impacts are considered negligible;

15 3. Selected HIs: IPR KB -Issue: regulation, but also implementation and enforcement; -Direct economic impact for EU very small; -In longer run: dynamic effects through higher incentive to invest in R&D – positive; -For EU services and industry: more ‘fair’ level playing field internationally (against counterfeiting); -For India IPR enforcement among Indian firms can lead (LR) to higher TFP growth through enhanced innovation and R&D;

16 4. FDI, investment and NTB analysis (1) KB -Strongly increasing FDI into India (e.g. €13.6 bn – 2005 – lower estimate) and much lower back (€200mln average); RankSectorShare of total FDI inflow (%) 1Services sector (financial and non financial; other than computer services, construction and telecomm.) 20 2Computer software and hardware16 3Telecommunications8 4Construction activities5

17 4. FDI, investment and NTB analysis (2) KB

18 4. FDI, investment and NTB analysis (3) KB

19 5. Consultations with civil society (1) 1.Formal parts from ToR of the TSIA EU India: Public Meeting 1 (GAR), Workshop Delhi, Public Meeting 2 (Phase 2) 2.To come: Public Meeting 3 (Phase 3) 3.Website consultations – feedback, online visits, consultation round (6th – 27th November 2008) 4.Report and survey designed – will be sent out for comments (in EU & India) – to European Services Forum, Business Europe, Bureau Europeen des Unions des Consommateurs, etc. etc. + to those who ask for it via Public Meeting or website (list going around to sign up) PW

20 5. Consultations with civil society (2) 5.Face-to-face meetings (upcoming based on Phase 2 report) : a.In India with: UNDP, Center Int Trade - Agri, Federation of Trade Unions, Federation Indian SMEs, NASSCOM, Energy & resources Institute, etc. b.In the EU with: Business Europe, Foreign Trade Association, EU business & industry associations, Various DG experts Comments deadline Phase 2: 13th of November – through; Comments deadline Phase 3: 27th of November – through PW

21 6. Contact For more information or giving feedback, contact us: Website: Email address: THANKS FOR YOUR ATTENTION PW


23 7. Policy recommendations For Phase 3: policy recommendations and flanking measures (enhancing mitigating). We launch an official consultation round for comments on policy recommendations from 6 th November – 27 th November 2008 To address the following questions: 1.How can the strengths of the FTA (see Phase 2 report) be enhanced by further policy action? 2.How can the negative impacts of the FTA (see Phase 2 report) be mitigated by additional policy action? 3.What other policy recommendations do you have (at sector level!) to maximise the potential gains from the EU-India FTA? Go to: - to give your replies. We send you the final TSIA EU-India report in response to your comments. PW

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