Trading doubts in India

Even with big trade barriers, South Korea already has a big thirst for Scotch whisky.

With the free trade agreement struck with the European Union coming into effect from today, it's likely to get much larger.

Export value was £153m last year, the sixth biggest market in the world. Estimates say that could double.

But what about the big prize for whisky distillers looking to develop markets in Asia?

Talks between the European Commission and Indian government drag on. They were supposed to be reaching a conclusion in spring of this year.

But in an interview I've done with Europe's trade commissioner, Karel de Gucht, he made clear that things remain very sticky.

Down payment

Delhi's desire to protect its Indian-distilled liquor is one of the remaining problems, as is the trade in car parts.

"Those discussions are not easy, not only about wine and spirits, but also about a lot of other topics," he told me. "We are facing considerable difficulties in the negotiation, for example in the automotive sector, for services which are important for you (in the UK).

"But we hope we can make considerable progress in the coming weeks and months. Ideally we can finish negotiations by the end of this year, but whether that is possible remains to be seen".

With the Doha Round of multi-lateral trade talks still struggling to avoid complete collapse, Commissioner de Gucht, says the best hope is for "the first down payment by the end of the year", especially centred on developing countries.

Fiercest competitors

He has an interesting take on what's gone so wrong. When the talks started ten years ago, China, India and Brazil were developing countries, where a trade agreement was seen in Europe and the USA as a means of helping them develop.

"The emerging economies have now emerged," says de Gucht.

"That makes the discussion very difficult because they still want to be treated as part of the developing world, but they are now the fiercest competitors in all of our markets".

Deserting a deal

India's access to open markets is even more in doubt after the long-awaited decision of its government ministers into the giant oil deal agreed between Edinburgh-based Cairn Energy and Vedanta, the metals company with Indian roots while listed on the London Stock Exchange.

It has approved the deal to sell a 40% stake in Cairn's Indian spin-off company - that share now reckoned to be worth around £3.4bn.

But it comes with a condition, which appears to reduce, very substantially, the value of Cairn's Indian asset.

The cabinet ministers are trying to force Cairn to accept much lower profits, and therefore less value to the sale, by only calculating profit after royalties have been paid.

The complex arrangements with Cairn's minority partner in the Rajasthani desert, state-controlled ONGC, are seen as unfair on the Indians.

Incentive to drill

But that's the deal they struck in 1995 when they wanted to entice European oil companies to drill.

The use of its regulatory power, arguably to break a contract and diminish the value of a foreign company's investment in India, is being closely watched by other foreign investors.

Cairn has yet to respond to media reports of the Indian government's decision.

But if the conditional approval is as it seems at first, this may turn out to be a very important moment in India's economic development - a turning point for the country, and one that points away from being serious about foreign investment.