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COMMISSION OFTHEEUROPEAN COMMUNITIES
C0M(79 )176 final
Brussels ,5April 1979
THE COMMUNITY 'SRELATIONS WITH INDIA
(Communication from theCommission totheCouncil )
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C0M(79 )176 final

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2
COMMUNICATION FROM THE COMMISSION TOTHE COUNCIL
The Community 'srelations with India :
Proposals for anAgreement forCommercial andEconomic Cooperation
1 December 1973 theEuropean Economic Community concluded a
Commercial Cooperation Agreement (CCA)with theRepublic ofIndiad ).This
wasthefirst agreement with anynon-associated developing country embody­
ingtheconcepts ofcommercial cooperation andeconomic cooperation linked
with trade .Itestablished aframework fortheevolution oftrade relations
between theContracting Parties "onthebasis ofcomparative advantage and
mutual benef it"(2 ).Despite shortcomings which ,intherunning-in period
atleast were perhaps attributable tolack offamiliarity with the
limitations andpotential ofanewly-created mechanism ,theoperation of
the CCA,andoftheJoint Commission which itset up,gave both sides
reasonable grounds forsatisfaction .Having come into force on1April 1974
for aninitial term ofvalidity of5years ,the CCAisnow about tobe
tacitly extended byone year .
2. Among theprincipal objectives ofthe EEC/India Commercial
Cooperation Agreement were "the development anddiversification ofthe
Community 'simports from India andIndia 'simports from theCommunity"(3 ).
Thefollowing statistics show that theefforts oftheContracting Parties -
toattain thefirst ("development ")ofthese objectives have been moderately
successful ,despite theeffects ofthe sudden increase inoilprices in
1973/74onthetrade andbalance ofpayments ofpetroleum-deficit countries
and inparticular ofIndia :
mio EUA
Imports :
Extra-EEC total
From India1973 1977
84,306
655%
100
0.77171,230
1,641%
100
0.96
Exports :
Extra-EEC total
ToIndia80,673
678100
0.84164,140
1,388100
0.85
The import figures for 1977(thelast complete year for which trade statis­
tics areavailable )show that,despite thegreater share ofresources which
the Community has hadtodevote tothe purchase ofpetroleum since 1973,our
imports from India have increased substantially relative tototal imports .
Thelatest available statistics indicate that,in1978,thevalue of
Community imports from India was about the same asin1977,suggesting a
decline inIndia 'srelative share oftotal imports to0.93% .Ontheother
hand Community exports toIndia areestimated tohave risen in1978 by
about 30%,largely asaresult ofIndia 'simport liberalisation measures
referred toinparagraph 6below .This surge inexports means that forthefirst time India has become thedestination ofmore than 1%oftotal
Community exports .
1)0JL82of27.3.1974 ;
2)CCAPreamble andArticle 1;
3)CCAArticle 4

3
3. Statistics onIndia 'simports from all sources (A)indicate that
the Community 'sshare rose slightly between 1973 (27.1% )and 1977 (27.6% )
even though India also hadtocontend with atleast athreefold increase
inheroil-import bill .The buoyancy ofEEC exports toIndia in1978
undoubtedly means afurther increase inthe Community 'srelative importance
asasupplier tothat market .
4. The CCA'ssecond objective of"diversifying "trade clearly has
greater relevance toIndia 'sexports tothe Community than toour exports
tothat country ,and infact considerable diversification has been
achieved both inthe composition and inthegeographical distribution
within the Community ofimports from India :
A.Product Group bypercentage 1973 1977
Agriculture and Food Products 40 33.6
Primary and energy products 4.5 2.6
Manufactured goods 54.7 62.3
B.Destination bypercentage
"Six" 50.7 60.9
"Three " 49.3 39.1
The Joint Commission was active inencouraging both processes ofdiver­
sification .Specifically itmay berecalled that particular attention
was devoted toIndia 'sexports ofengineering products which ,with an
increase ofalmost 300% between 1973 and 1977,were among the most active
components ofthe swing towards manufactured goods' exports seen in
Table A. The improvement inIndia 'sexport structure hasclearly been
substantial and the Commission believes that further progress istobe
expected inthis regard because ofthe emphasis that country iscontinuing
toplace onnon-traditional exports .TheJoint Commission 'sactivities
also contributed tothe geographical diversification seen inTable B,
byhelping toincrease India 'scontacts with and knowledge ofthe
Community 'scontinental markets .
5. Though theUnited Kingdom dominated exports less thanitdid
imports in1973,some diversification has also takenplace since then in
Community exports toIndia :
1973 1977
C.Origin bypercentage
"Six" 61.2 68
"Three " 38.8 32
4)IMFstatistics onDirection ofTrade
■•■/•••

6.Withapercapitaincomeofabout2150perannum,Indiaisofcourse
apoorcountry,anditseconomyismuchlessorientedtowardsforeigntrade
thanisthatoftheEuropeanEconomicCommunity.Significantimprovements
have,however,beenachievedinrecentyearsinIndia'sinternaleconomy
andtherearesignsthatthegovernment .intendstogivegreaterimportance
toforeigntradeinitsdevelopmentstrategyinthecomingyears.This
moreopenattitudereflectsahigherdegreeofconfidencebasedonrecent
achievements inthemodernisation ofagriculture,intheextensionof
industrialisation andinreversingthecountry'schronicbalanceofpayments
deficit.Thesteadyincreaseintheareaunderirrigation,combinedwith
theavailability ofbetterseedsandfertilisersandthegradualadoption
ofmodernagricultural methods,hascontributedtoasuccessionofrecord
harvestsandjustifiestheexpectationthatIndiawillfinditpossible
toimprovethenutritionofitspopulationoverthecomingdecade.The
countrynowpossessesanindustrialbaseofconsiderable diversity,whose
leveloftechnologyisalreadyquitehighincertainsectorsandwillno
doubtcontinuetorisebecauseoftheavailability ofawell-endowed and
quitesophisticated scientificresearchestablishment .Thoughthenon-
traditionalindustrieswhichhavegrownupinIndiabehindstrongprotective
barriershavenotyetreachedoptimumproductivityrtheyhavebecome
sufficientlyefficienttocompetesuccessfully withthoseofthedeveloped
countriesinmanyThirdWorldmarkets,ofteninconjunction withadaptable
andwell-qualified technicalpersonnelfromIndia.Itislargelythanksto
theremittances ofsuchemigrants,particularly intheMiddleEast,that
India'sbalanceofpaymentspositionimproveddramatically overthe
lastthreeyears.Thishasenabledthegovernmenttotackletheproblem
ofindustrialinefficiency byembarkingonasubstantialliberalisation
ofimportsofcapitalgoods,industrial rawmaterials,sparesand
components.(Itmayberemarkedthattheencouragement givenbythe
CommunityintheEEC/IndiaJointCommission mayhavehelpedtoinfluence
theGovernmentofIndiainadoptingthispolicy.)Theeffectsofimport
liberalisation canbeexpectedtobemoremarked,inexportterms,on
non-traditional industriesthanonthoseproducingless-sophisticated
consumerproducts(e.g.textiles),becausethegovernmentisendeavouring
todecentralise thelatterinordertoincreaseemployment andtoimprove
thesupplyofgoodsatthevillagelevel.Thisisparalleledbyapolicy
ofdiscouraging exportsofvariousmass-consumption itemssuchasedible
oils,sugar,vegetablesandrice.Thesemeasuresreflectconfidence
inthecountry'sabilitytopayitswayinternationally bytheexportof
increasinglysophisticated goodsproducedwithgreaterefficiencybyits
non-traditional industries .
7.•ItisagainstthisbackgroundthattheCommunitymustconsiderwhat
formandcontentitshouldgivetoitsfuturerelationswithIndia.India
itselfisonthethresholdofanewphaseofeconomicdevelopmentforwhich
itsstrategyislikelytobeinfluencedbyamoreoutward-lookingattitude
thanhitherto.Perhapsforthefirsttime,Indiahasboththeresources
andthewilltopursueself-reliance,notbyattempting,asinthepast,to
createself-sufficiency ineverysphereofproductionvirtuallyregardless
ofeconomiccost,butonthebasisofcomparativeadvantagerealistically
assessedandsubjectedtothetestofinternational competitiveness .The
CommissionisconvincedthatitwillbetotheCommunity'sadvantagetothrow
itsweightbehindthoseforces-whichareseekingtoguideIndiatowards
greaterparticipation intheworldtradingsystem,andthatitcanbestdo
sobycreatingtheframeworkforarelationship inwhicheverysectorof
EuropeaneconomiclifewillbeencouragedtocooperatewithitsIndian
counterpart .

5
8. ByNote Verbale ofthe Indian Mission tothe European Communities
dated 9October 1978 (5)the Government ofIndia confirmed itswish,
previously expressed bythe Prime Minister ,H.E. Shri Morarji Desai ,during
avisit toBrussels inJune 1978,toenter into negotiations forreplacing
thepresent EEC-India Commercial Cooperation Agreement with one which would
enable "both sides toachieve amore dynamic relationship calling forcloser
cooperation over awider range ofcommercial and economic endeavour ". That
government 'swish for abroader basis onwhich todevelop itsrelations with
the Community isreadily understandable .Subjectively ,India hasgained new
self-confidence .Objectively ,itsagriculture isnolonger adead-weight
onthe economy ,itsdiversified industrial base inbecoming more efficient ,
anditsexternal resources position is,for thefirst time,relatively
unconstrained .Itistherefore inaposition topresent its economic size
ingeneral anditspotential asamarket forcapital goods inparticular as
inducements forcloser cooperation .Infact,asthediscussion paper
attached tothe Note Verbale makes clear ,India now feels that itwould be
appropriate foritsrelations with the Community toevolve along similar
lines tothose laid down inthe agreements concluded with Canada in1976C6 ).
9. InDecember 1978 and January 1979,the services ofthe Commission
conducted exploratory discussions with Indian representatives toclarify
theprecise scope oftheir proposals andtoexplain thelikely requirements
ofthe Community astothe form ofthe new arrangements inthe event that
the Community were willing toenter into negotiations tothat end.In
these discussions the Indian representatives confirmed that their Government ,
while generally satisfied with the progress achieved todate under the CCA,
now wishes tobroaden the area ofpotential cooperation tothe widest
extent consistent with theevolving competence ofthe European Economic
Communi ty„ Intheir view,this would imply continuing commercial cooperat­
ionalong existing lines ,extending thepresent concept ofeconomic
cooperation toareas notnecessarily linked totrade ,anditensifying
consultations andinformation exchanges onall aspects ofcommercial and
economic relations .They stated that India would wish tonegotiate an
agreement ofsimilar scope with the European Coal andSteel Community .In
this context they were informed that any such agreement would require that
the Governments ofthe Member States beContracting Parties thereto ,jointly
with the ECSC,andthat aProtocol totheproposed agreement with the
European Economic Community might bethe most appropriate form for such an
agreement with the ECSC .The Indian representatives made clear that their
country isnot seeking anagreement with the European Atomic Energy Community .
10. Inthecourse oftheexploratory discussions ,the Indian representa­
tives modified orexplained anumber ofthe ideas contained intheir
discussion paper .The more significant ofthese observations may be
summarised asfollows :
a)Theprovisions relating tocommercial cooperation inthe CCA should be
incorporated intheir entirety inany new agreement ,with some additions
(seepoint (e)below );
b)The concept ofeconomic cooperation would also cover science and
technology totheextent that there are Community activities inthis
area ;
c)Thereference to"fostering mutually beneficial investment "does not
imply arequest foraccess toCommunity funds forindustrial develoment ;
5)Attached asAnnex I
6)OJL260 of24.6.76

6
d)Cooperation inthefield ofeconomic relations withthird countri es"
includes both EEC-India collaboration inthird countries andEFC-third
country collaboration inIndia .Under the CCA,only theformer iscovered ;
e>"[heideaof"friend lyconsultations "oncommercial andeconomic problems ,
both onthebilateral level ,through theJoint Commission ,andinthemultilateral context ,forexample ontheoccasion ofinternational
conferences ,isonetowhich India attaches great importance ;
f)Themain lines ofAnnex Iofthe CCAmight form thebasis ofthe
provisions intheproposed newagreement relating totheestablishment
andoperation oftheJoint Commission .Itisnot intended that that
body should begiven newcompetence inthefinancial field ,butthatit
should beempowered todiscuss and make appropriate recommendations on
allmatters arising inregard tocommercial andeconomic cooperation .
* * *
11, India smotives inseeking toformalise itsrelations with the
European Economic Community andtheEuropean Coal andSteel Community ona
broader basis areindicated intheforegoing paragraphs ,asarethe
principal changes tothepresent CCAwhich itwould consider desirable
towards this end.However ,thetwoCommunities would also,inthe
Commission 'sopinion ,derive several advantages from agreeing toIndia 's
request fornegotiations leading tobroader ties with that country :
-itwould not bepolitically wise toreject India 'srequest for an
agreement ofatype already concluded with other countries ,inview of
herinfluential role intheThird World ,her economic attainments in
certain sectors ofindustry ,science andtechnology ,andalso her
traditional friendship with the Community which inspired theJoint
Declaration ofIntent ;
~atatime when the EECistilting thebalance ofitspolicies onnon-
associated developing countries increasingly infavour oftheleast-
developed (e.g. inGSP),itwould tend todisarm criticism ifagesture
were made towards India taking account ofitsprogress onthe road
towards industrialisation ;
-the formal isation ofbroader links between India and the two Communities
should ,both byitstiming anditscontent ,have theeffect ofencourag­
ingthetrend towards amore open economy inthat country ;
-inthe event that this trend ismaintained ,theexistence ofaformal
relationship additional tothebilateral ties between individual
Member States andIndia should facilitate participation inIndia 's
,economic development bysingle industries which transcend national
boundaries within the Community ,orbyconsortia ofindustries from
several Member States .
 **
•••/•••

7
12.TheCommissionisoftheopinionthattherightofMemberStates
tomaintainexistingagreementsforeconomiccooperation and,where
appropriate,toconcludenewones,shouldnotbereferredtointhetext
ofanyagreementconcludedwithIndia.This,beingaquestioninvolving
therepartition ofcompetenceasbetweenCommunityandMemberStates,
isaninternalmatter,andtheCommissionconsidersthatthemostappropriate
waytodealwithitwouldbetoinscribethefollowingstatementin
theminutesoftheCouncilofMinisters :
"Inthefieldofeconomiccooperation MemberStatesretainthe
powertoundertakebilateralactivities andtoconclude,where
appropriate,newcooperation agreementswithIndia,without
prejudicehowevertotherelevantprovisionsoftheTreaties
establishing theCommunities orprovisionsadoptedonthebasis
oftheseTreaties,andsubject,furthermore,totheconditionthat
anybilateralactionundertaken byMemberStatesmustnotaffect
theproperfunctioning anddevelopment oftherelationsestablished
underthepresentagreement."
13.TheCommission recommendsthattheCounciladopttheattacheddraft
decision(AnnexII)authorising theCommissiontoopennegotiations with
Indiaforanagreementforcommercial andeconomiccooperation .The
CommissionalsorecommendsthattheCouncilconsiderissuingdirectives
forthesenegotiations inthetermsofthedraftattachedasAnnexIII.
14.TheCommissionfurtherrecommendsthataprotocolbeagreed
betweentheMemberStatesoftheEuropeanCoalandSteelCommunityand
thatCommunityontheonehandandIndiaontheother,andthatthe
Commissionbeauthorised bytherepresentatives oftheGovernmentsof
theMemberStatesmeetingwithintheCounciltonegotiatesuchaprotocol,
inthetermsofthedraftattachedasAnnexIV.

EMBASSY OFINDIA
BRUXELLES8
ANNEX I
No.BRU/M/204/1L/78 October 9,1978
TheMission ofIndia tothe EECpresents itscompliments tothe
Commission ofthe European Communities and has the honour torefer to
thediscussions which took place during thevisit ofthePrime Minister
ofIndia toBrussels onJune 5,1978,concerning negotiations forthe
modification ofthe Indo-EEC Commercial Cooperation Agreement of
December 17,1973 .Itmay berecalled that during thediscussions which
the Prime Minister ofIndia had onthat occasion with thePresident of
theCommission andtheVice-President incharge ofExternal Relations it
wasexpressed ontheside ofthe Commission that the Community was
committed tonegotiate with India theincreased implementation ofthe
present Commercial Cooperation Agreement andthat thepossibility of
supplementing trade relations byincreased industrial cooperation would
also belooked into .Further itwassuggested ontheside ofthe
Commission that theCommercial Cooperation Agreement should gowell beyond
trade andprovide forwider cooperation specially inthefield of
technology .
2. Itwas also suggested bythe Commission side that official and
technical level talks should take place between the two sides after the
Commission 'ssummer recess .The Prime Minister ofIndia expressed his
agreement with these suggestions .
3. Inthelight ofthedecisions taken during thevisit ofthe Prime
Minister ofIndia ,theMission ofIndia wishes toconfirm that the Indian
side isready toparticipate indiscussions with the Community onthe
review andmodification ofthe Agreement .
4. Abroad outline ofthe modifications that could beconsidered for
incorporation inthe Agreement are indicated inthe attached statement .
Itishoped that this would provide some guidance fortheinitiation of
thediscussions .The Government ofIndia trust that theproposals will
receive theurgent consideration oftheappropriate authorities inthe
Community andthat thediscussions can beheld atanearly date and
concluded expeditiously ,preferably bythe endofFebruary 1979 .
5. The Mission ofIndia avails itself oftheopportunity torenew
tothe Commission ofthe European Commission the assurances ofits
highest consideration .
The Commission ofthe
European Communities
Brussels

ANNEX Icontinued
Broad outline ofthemodifications andnew concepts sought tobeincluded
intheAgreement between India and theCommunity
1.Title
a)Inview ofthewider scope proposed fortheAgreement ,thetitle
oftheAgreement may bechanged from Commercial Cooperation Agreement
to"Commercial andEconomic Cooperation Agreement ".
b)TheEuropean Coal andSteel Community may bementioned asaco­
signatory oftheAgreement inorder toclear the legal confusion
regarding thecompetence oftheAgreement tocover the coal and steel
sectors .
2.Preamble
a)Thepreamble may bestrengthened toreflect thedesire onboth sides
toachieve amore dynamic relationship calling forcloser cooperation
over awider range ofcommercial andeconomic endeavour .
b)Theexpansion ofinternational trade may beadded asone ofthe
important principles subscribed tobyboth sides .
c)Areference may bemade tothe role played bytheCCAof1973 in
developing economic and commercial relations between the two sides .
d)Theevolutive nature ofthecooperation between India and the EEC
may beemphasised .
3.Commercial Cooperation
With aview tostrengthen theexisting provisions forcommercial
cooperation ,the two sides may reiterate theneed tocomply diligently
with theprovisions ofGATT ,strengthen consultation procedures andstream
line information exchanges' onvarious aspects ofcommercial cooperation ,
identify products fordeveloping exports andassist intheir production
andmarketing ,provide forcomprehensive trade promotion programmes ,
andsponsor studies that would help inthefulfilment oftheobjectives
ofcommercial cooperation .
J
4.Economic Cooperation
TheAgreement should reflect thedecisions ofthetwosides toadvance
beyond the limited concept oftrade-oriented cooperation toeconomic
cooperation inallfields ofmutual interest inorder tocontribute to
thedevelopment oftheir respective economies andtheir standards of
living .TheAgreement should cover thecreation offavourable conditions
forindustrial cooperation ,fostering mutually beneficial investment
including that inthird countries ,cooperation inthefield ofscience
andtechnology ,e.g. inthefield ofenergy andimprovement ofenvironment
undertaking programmes inthefield ofagricultural andfisheries
development andallied activities ,streamlining information exchanges and
promoting cooperation inthefield ofeconomic relations with third
countries .

10
ANNEXIcontinued
5.Friendlyconsultations
Aprovisionforfriendlyconsultations onproblemsthatmayariseinmutual
relationswillremoveagapintheexistingCCA.
6.TheJointCommission
TheJointCommissionisdesignedtobetheprincipaloperational
institutionoftheAgreement.
Thefollowingprovisionswillcontributetostrengthening itsposition
andmakingitamoreeffectiveinstrumentofcooperation :
a)Incorporation oftheclausesinAnnexureIofthepresentAgreement
inthemainbodyoftheAgreement
b)EmpoweringtheJointCommissiontorecommendallocationoffundsfor
theimplementation oftheobjectivesoftheAgreement.

11
ANNEX II
Recommendation
Council Décision
/
authorising the opening ofnegotiations with India
THE COUNCIL OF THE EUROPEAN COMMUNITIES
Having regard totheTreaty establishing the European Economic Community ;
Having regard tothe Recommendation from the Commission that negotiations
beauthorised for anagreement ofbroader scope with India ;
Whereas the aimofthese negotiations should betoconclude anagreement
for commercial and economic cooperation ;
HAS DECIDED AS FOLLOWS :
Article 1
The Commission ishereby authorised toopen negotiations with India
for the conclusion ofanagreement for commercial and economic
cooperation between the European Economic Community andIndia .
Article 2
The Commission shall conduct these negotiations inaccordance with
thedirectives annexed hereto^n consultation with therepresentatives ofthe
Member States ,
Done at
For the Council
o

ANNEX III
DRAFT
NEGOTIATING DIRECTIVES
A.Nature ofthe agrecment
1.Scope
Theaimofthenegotiations should betoconclude anagreement for
commercial andeconomic cooperation between theEuropean Economic
Community andIndiaO ).
2.Evolutionary nature
Theagreement should beofanessentially evolutionary nature ;nosphere
foreconomic cooperation should beruled outinadvance ,both parties
totheagreement proposing tousetheJoint Commission astheinstrument
forexploring practical cooperation possibilities .
3.Duration
Theagreement should beoffive years' duration ,tacitly renewable
thereafter from year toyear unless denounced byeither Party .
B.Content ofthe agreement
1.Preamble
p.m.
2.Commercial Cooperation
Thenegotiators should secure provisions similar tothose ofthecurrent
EEC/India Commercial Cooperation Agreement ,with theaddition ofa
commitment bytheContracting Parties tomutual consultations onbilateral
andmultilateral commercial problems and issues .
3.Economic Cooperation
a)Objecti ves
Inthe light ofthepotential complementarity oftheContracting Parties
andthelong-term aims oftheir respective economies ,theenvisaged
economic cooperation should help toachieve thefollowing objectives ofthe
agreement ,namely to:
-promote thedevelopment ofEuropean andIndian industries ;
-contribute toscientific andtechnological progress ;
-open newsources ofsupply andnewmarkets ;
~generally contribute tothedevelopment oftheir respective economies
andtoraising their standards ofliving .
1)Seealso draft Protocol concerning theECSC setoutmAnnex IV

13
ANNEX III continued
b)Fields
Inview ofitsessentially evolutionary nature ,theagreement should not
seek tolist the fields tobecovered byeconomic cooperation .Therefore
nofield suitable foreconomic cooperation should beruled out inadvance
c)Means
TheContracting Parties could encourage andfacilitate inter alia :
-broader inter-corporate links between their respective industries ,
especially inthe form ofjoint ventures ;
-greater participation bytheir respective economic operators inthe
industrial development oftheContracting Parties onmutually
advantageous terms ;
-increased andmutually beneficial investment ;
-technological andscientific cooperation ,including thedevelopment of
new sources ofenergy ;
-cooperation with and inthird countries ;
-exchange ofinformation inallareas relevant toeconomic cooperation .
4.Joint Cooperation Commission
This Commission should beset uptosupervise andpromote
economic andcommercial cooperation activities envisaged ,
theproper functioning ofany sectoral agreements between
Parties .Itshould beempowered tocreate Subcommissions
intheperformance ofitstasks .
5.Consultations
Theagreements should provide forconsultations ,atanappropriate level
andwithin the Joint Cooperation ,onquestions arising from orrelevant
totheimplementation oftheagreement .Each Contracting Party should
undertake togive favourable consideration toanyrepresentations on
commercial andeconomic problems made bytheother insuch consultations .
6.Other Agreements
p.m .
7.Territorial application
p.m.
8.Authentic languagesthe various
and toensure
theContracting
toassist it

14
ANNEX IV
DRAFT
Protocol tobeagreed between theMember States oftheEuropean
Coal andSteel Community andtheEuropean Coal andSteel Community
onone hand and India onthe other
"Theprovisions oftheagreement forcommercial andeconomic cooperation
between theEuropean Economic Community andIndia shall also apply in
matters covered bytheTreaty establishing theEuropean Coal andSteel
Community ".