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José Manuel Durão Barroso
President of the European Commission
EU-India: A strategic relationship in an evolving world
Mumbai, India, 13th February 2012
Ladies and gentlemen,
It is a real pleasure to be here today in this vibrant and dynamic city of Mumbai – a city that exudes enthusiasm and opportunity. And it is a pleasure to be invited to exchange views with you, members of Indian and European chambers of commerce.
I know you are all successful business people and have heard many speeches in your lives. I am a firm believer that politics is not about making speeches, but about making things work. But I also firmly believe that an idea that is not well explained is an idea that doesn't stand a chance of making a difference.
It is therefore a privilege to speak to you and to explain why I consider the EU-Indian partnership such a key pillar of Europe’s foreign policy and international economic strategy.
Despite our differences we have a lot of commonalities, some of them surprisingly similar. India has 28 States, the EU will have 28 States as from next year, after Croatia joins. You have 22 official languages, 23 if we consider the English and the EU also has 23 languages official languages. The EU has a 2020 Strategy for Growth and India is also part of a 2020... cricket league!
But I was referring to our similarities in terms of the strength of our democracies and in the diversity of our multicultural societies, as well as our determination to build sustainable economic growth.
This is why a positive and dynamic cooperation between India and the European Union is vital not only for our bilateral relations but also as a platform to address broader global challenges such as climate change, energy, or global security.
As you know, the main purpose of my visit to India - a country which I very much admire - was to attend the 12th summit between India and the European Union last Friday.
I was very pleased that our discussions with Prime Minister Singh were so fruitful and positive. Of particular importance, we made good progress with negotiations on the Free Trade Agreement, and the perimeter of a final agreement is emerging. I am confident that we can finalise the negotiations in the months to come. The prospect of concluding the single biggest free trade agreement in the world, between a total of 1.7 billion people, is a once in a lifetime opportunity that we have to seize with both hands.
I will come back to the benefits and opportunities of our trading relationship in a few moments. But first I want to make the wider point that for the European Union, opening up trade agreements represents much more than imports and exports. It represents embracing a spirit of openness with our key strategic partners in the world, and acknowledging that the ever-increasing levels of interdependence between us must be seen as opportunities and not risks.
Moreover, at a time when economic difficulties in much of the world are coupled with continuing uncertainties on the multilateral scene, this agreement also sends a positive signal about our determination to resist protectionism and embrace economic cooperation.
That is why trade is a crucial part of Europe's strategy to return to growth. But this would also be a major asset for India's economy and companies both in terms of immediate opportunities as well as future potential.
In today’s world, no country is an island, no country is self-sufficient and no country is immune to global impacts.
The fact that India has felt so keenly the impact of troubled times in the world economy over the last years, is testament to the level of interdependence between our economies, and proof that solutions reached jointly will benefit us both. This is why we all need to do our part to revive the world economy and guarantee financial stability. Much of the attention these days has been rightly concentrated on Europe. But Europe has been doing a lot to address its sovereign debt problems and our bold and comprehensive reforms have not always been accurately reported or understood. I have said several times that dealing with the current crisis in the euro area is less a sprint, more a marathon.
Last year the European Commission proposed a roadmap to stability and growth which outlines a fully comprehensive and credible response to the crisis by:
Firstly, giving a decisive and clear response to the problems of Greece;
Secondly, enhancing the euro area's backstops against the crisis;
Thirdly, making a coordinated effort to strengthen the banking system including through recapitalisation;
Fourthly frontloading stability and growth-enhancing policies and;
Finally, building a more robust and integrated economic governance.
We have been delivering on all these both at Member State level – for instance, the significant structural reforms recently implemented by Italy - and at the Union level; the fiscal compact approved by 25 Member States is a good example. In this I also include the determined action taken by the European Central Bank to lend unlimited amounts of money to the Euro area banks at low rates.
However, I have the feeling that sometimes commentators or the markets minimise both the far-reaching measures already taken and the complexity of moving forward 27 democracies, each with its own internal accountability system.
It is true that our difficulties are far from over and that we still need to finalise the negotiations on the second assistance programme to Greece. But in my view what Europe has been doing, in particular in the most recent period, constitutes a basis for investors to regain confidence in Europe.
While we continue with fiscal consolidation we need to focus all our attention on rapid and concrete actions to get our economy growing again. Our strategy for smart, sustainable and inclusive growth – what we call Europe 2020 – is the answer to the growth equation. It is based on a number of very strong fundamentals, notably the Single Market. Our Single Market is our most important driver for growth, it is Europe's "crown jewel". It is the cornerstone of more than 60 years of European integration. It is the biggest free trade area in the world, but it is also much more than a simple free trade area, as it allows half a billion citizens and 23 million small businesses to set up, operate and move around the 27 countries of our Union. And on this particular area I can say that the EU despite not being a federal state is more integrated than India.
We are now taking decisive steps to remove any last remaining barriers in the Single Market, in order to rapidly but sustainably boost growth, competitiveness and social progress and to make the lives of all market participants – companies, consumers and workers – easier. This will improve Europe's economy, but it will also critically improve conditions for foreign companies to operate in the European Union.
In short, Europe's approach to restoring economic growth is based on: measures to resolve the crisis in the short-term, deep reforms to prevent any future crisis, and a long-term growth strategy based on open markets.
To paraphrase Prime Minister Nehru's famous quote, “crises and deadlocks force us to think”. And this crisis has forced Europe to rethink our economic model. The Europe that emerges from this crisis will be a Europe more fit for this new interdependent world.
India's journey over the last few decades has been astounding. It is now a major world power, with impressive economic growth, a burgeoning middle class, and a significant influence on its surrounding region and far beyond. According to the World Bank the Indian economy should become the 5th largest in the world by 2025. Even with a conservative growth forecast of 7%, the Indian middle class would represent 130 million households in 2025, a tenfold increase in 20 years.
With a string of highly successful global companies and entrepreneurs, some of them represented here today, India shows the world it means business in a vast array of sectors - ranging from smart technology to services, and from movies and culture to manufacturing. There are some who claim that the success of the emerging economies represents an inevitable decline of the developed countries, and that we in Europe – or the so called west – should feel threatened by the rise of Asia. I refute this vision of world affairs as a 'zero sum game'. I am deeply convinced that India’s rise is a very positive contribution for global growth.
In fact, Europe can justly say that it has a stake in India’s success. We have been cooperating closely throughout these last years and Europe’s policies and open markets were greatly beneficial to India.
The European Union is India's first partner in terms of trade and investment – in 2010 the European Union imported over 40 billion Euros worth of goods and services from India. Overall bilateral trade amounted to 87.3 bn Euros. The first ten months of 2011 showed continued growth in EU trade with India. Exports and imports both grew by 20% between the first ten months of 2010 and the same period of 2011, with exports amounting to 33.4 bn and imports to 33.3 bn.
Europe is also one of India's major partners in the field of economic and development cooperation, particularly in the areas of education and social actions.
The recent evolution of the trade figures between us is impressive, but there is potential to have much larger flows of goods and investment. In times of global uncertainty, creating such economic anchors is of paramount importance.
Our economies complement each other in many ways and this overall complementarity is behind the positive trends in our bilateral trade and investment flows. Europe is India's largest source of foreign direct investment with a stock of 34.4 billion euros and India's investments in Europe are also fast reaching 7 billion euros. EU investment in India is bigger that of the US and Japan combined.
But as I was saying, there is scope to grow much more. European FDI in India for instance is half the amount of that in China, or a quarter of that in Russia, or a fifth of that in Brazil.
For these reasons we need to remain committed to unlocking all the potential of the relationship. This would also be entirely consistent with the Indian government's agenda of reform and opening up the economy. We need to move ahead with our trade negotiations in order to achieve a balanced and ambitious trade agreement, encompassing tariffs, services and procurement.
To agree on tariffs is to manage today's flows; to agree on services and procurement is to prepare the future.
I know that some of these decisions require India to approve additional internal legislation and that this is not always easy. But I am sure that political courage will prevail, and that the final hurdles can be overcome towards our common goal of shared growth.
And the benefits could be even greater if we truly exploit the synergies between our growth strategies in the areas of energy, research and innovation.
The field of science and technology for instance, is already a strong aspect of the EU-India partnership: the signature, in the margins of the Summit last Friday, of a joint declaration on Research and Innovation Cooperation, by which India and the European Union declare their resolve to moving up a gear in their research and innovation cooperation is a clear demonstration of this.
Take also energy: India has one of the highest potentials for the effective use of renewable energy and it is already the fifth largest producer of wind power; Europe has a large know-how in the green economy and we are developing a low-carbon economic strategy.
It is therefore clearly in our mutual interest to deepen our energy dialogue to pursue these joint goals of energy efficiency and renewable energies.
I hold the view that India and Europe are natural partners in a globalised and changing world, and that together, we can make a major contribution to finding and implementing solutions to common challenges, from demographic issues to climate change.
Our shared belief in the benefits of a rules-based multilateral system and our common deep commitment to supporting fair and balanced trade rules for all have allowed us to enhance our cooperation in several fields. This is prominently illustrated by our cooperation within the G20, where both India and Europe play a key role.
The time is therefore ripe for a political breakthrough that will propel our partnership forward into a new dynamic for the 21st century. A partnership that can bring remarkable benefits to our economies, our societies, and our 1.7 billion citizens. While, at the same time, providing a model for sustainable growth, for openness and for shared values to the rest of the world.
When we look at the challenges the world is facing today, I believe that the next few years will be really decisive in tackling them. Partnerships of the size and scale of that between India and Europe are an important demonstration that by acting together we can achieve more than we would alone.
I thank you for your attention.