Looking beyond apes and peacocks

The European Union is India8217;s biggest trading partner, but it is partly because of this convergence on traditional products and familiar markets that it has always managed to keep the balance of trade in its favour. It is impossible for India to improve its performance in gemstones, say, because Indian players have had a strong presence in Antwerp for decades and have been operating at peak levels. In fact, this is the only sector in which India8217;s market share in the EU has actually fallen in this decade. Having plateaued, the curve can hardly rise again.

The prospects for other traditional exports like carpets, textiles and garments are better, but all of them are rendered a little uncertain by child labour issues. A contravention by a single manufacturer has implications for the whole industry. This week, a British importer discovered that the Indian-made footballs it supplies to Manchester United are stitched by children. So the sports goods sector, which had been growing at just short of 20 per cent, could also face a slowdown till manufacturers provide adequate guarantees. But Indian business has begun to realise that the going is far easier in non-traditional areas, like high-technology and capital goods. It is impossible for a mere child to operate a wave-soldering machine, so there is little chance of getting tainted by the child labour problem. And it would be very difficult to impose an aroma criterion on power transformers, like the US did to harm Indian basmati exports to the EU. Not surprisingly, electronics is the fastest growing sector in Indo-EU trade at 45 per cent.

Apart from exploring new product categories, the Indian trader also has to open up new markets, something that Maastricht has made as easy as pie. Now that most of Europe8217;s borders are porous, an external trader needs only one base camp on the Continent, and one point of entry for his goods. It is no longer necessary to take clearances from Madrid in order to deal with Spain. It is done just as easily in Brussels or Luxembourg. In fact Luxembourg, despite its small size, holds a great deal of promise for India. It is indeed possible to drive right across the country in under an hour, but this year, the Grand Duchy enjoys a level of influence in Europe quite out of proportion with its size or inherent resources. Next month, it gets the Presidency of the Union, which is rotated every year among member states. Meanwhile, Luxembourg strongman Jacques Santer remains President of the European Commission. This coincidence does not, of course, imply that Luxembourg will be setting the agenda or making external policy for the Union. However, it does mean that it will be in a stronger position from which to steer agendas and influence opinion.

This could be to India8217;s benefit, because Luxembourg Prime Minister Jean-Claude Juncker is far more interested in establishing ties with India than with the other option in Asia, China, which most members of the Union prefer as a trading partner. It isn8217;t that he is more confident that India can deliver the goods. It8217;s just that he has a healthy regard for democracy. Other members do pay lip service to democracy and have heart-warming things to say about India, but when it comes to trade issues, they tend to plonk political preferences on the back seat. So this year, and right into next summer, a window of opportunity will remain open for India. But trade cannot take advantage of it without policy initiatives, which will have to come from the ministries and the chambers of commerce. Then, if they get their act together in time, Indian exporters can begin to look beyond the perils of unbleached cotton grey fabrics.