New Delhi: India and Japan will start a fresh round of talks on a free trade agreement on 29 September after discussions in January remained inconclusive because the countries failed to find common ground on a few contentious issues.
India wants greater market access for its pharmaceutical firms, while Japan has been pressing for a bilateral agreement on government purchases.
But India is unlikely to agree to a mutually preferential treatment in government procurement, as a study by the United Nations Conference on Trade and Development (Unctad) commissioned by the commerce ministry has found that Japan would hold a comparative advantage in this regard. “Though a final decision is yet to be taken, in view of the Unctad study, we may not negotiate on the government procurement front,” a commerce ministry official said on condition of anonymity.
The government procurement market in India has been estimated at 5.8% of gross domestic product, according to Unctad, which translates into some $34.22 billion (Rs1.6 trillion) worth of contracts every year.
Japan is a signatory to a voluntary multilateral agreement on government procurement brokered by the World Trade Organization (WTO). India has not signed this agreement.
It essentially means that—if government procurement is included in the bilateral trade agreement—Japanese companies will be treated at par with Indian firms when the Indian government calls for bids. But when the Japanese government does so, Indian firms will have to not only compete with Japanese firms but also with companies from all those nations that are part of the WTO agreement, including the European Union, the US and South Korea.
Smoother access for Indian drug companies in the Japanese market is also expected to figure prominently in the forthcoming talks later this month.
“Easier access for Indian pharmaceutical companies to the Japanese markets remains a major unresolved issue as Japan does not recognize US Food and Drugs Administration certification for Indian drugs,” said Manav Majumdar, who looks at trade issues at industry lobby group Federation of Indian Chambers of Commerce and Industry. “It is still stressing on clinical trials to be carried out in Japan before the drugs are imported from India.”
Discussions between the two countries on a comprehensive economic partnership agreement began in January 2007 and they have since held 11 rounds of talks, the last being in January this year. The negotiations have been delayed because national elections were held in both India and Japan, in April-May and August, respectively.
Besides government procurement and medicine market access, issues regarding technical barriers to trade and sanitary and phytosanitary measures also remain unresolved. Technical barriers to trade refer to regulations and voluntary standards that set out specific characteristics of a product, such as its size, shape, design and packaging, before it enters a marketplace. Sanitary and phytosanitary measures are meant to ensure food safety and animal and plant health measures.
The Unctad study has also found that Japan’s gains in a bilateral trade agreement are expected to be concentrated in sectors such as paper and paper products, chemicals, industrial machinery, batteries, electrical appliances, communication equipment, electronic equipment, motor vehicles, railways, construction services, transport services and financial services.
India could get market access into sectors such as farm, mineral and pharma products, rubber, plastic and wood products, textiles and clothing, ceramics, iron and steel products, non-ferrous metal and products, architectural services, engineering services, communication and information services, among others, the study said.
In 2007, imports in India from Japan were valued at $6.1 billion and India’s exports to Japan were $4.1 billion.