The EU and India in Search of a Partnership
Chapter 7: Preparing for an India–EU Trade Agreement
7. Preparing for an India-EU Trade Agreement As indicated by the results of the surveys presented in Chapter 6, NTBs are a prevalent feature of current India-EU trade relations. Barriers to trade arise in multiple forms and venues including different national product standards, testing and certification requirements as well as packaging and labelling specifications. Given that NTBs evolve primarily from differences in regulatory regimes in the EU and India, the importance of identifYing and addressing existing NTBs assumes an important role in any potential preferential trade agreement. This chapter also draws on the report by Khorana et al. (2008). 7.1 ECONOMIC ISSUES FOR THE PROPOSED INDIA-EU PTA A preferential trade agreement (PTA) between India and the EU should lead to an increase in bilateral trade but would not necessarily lead to an automatic increase in economic welfare. The increase in bilateral trade could occur as a result of more efficiently produced imported goods replacing less efficiently produced domestically produced goods. Trade creation as well as allocative and productive efficiency gains follow. In turn, incentives for Indian, EU and UK producers to invest in product and process innovations would increase, thereby improving the dynamic efficiency of the trading partners and subsequently resulting in greater competition amongst firms located within the agreement's partners. The resulting increased competitive pressures may encourage firms to modifY their strategies in order to restore their profit margins by either reducing 149 150 Bilateral Trade Agreements in the Era a/Globalization production costs, which can be achieved by concentrating...
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