A draft report prepared by Members of the European Parliament could potentially derail negotiations between India and the European Union, the country's largest trade partner, on a Comprehensive Economic Partnership Agreement involving duty-free trade of goods, services and investment.

The report has called for the inclusion of human rights and democracy issues in the CEPA talks and an international investigation into "extra judicial killings" in Jammu & Kashmir. The report also calls for legally binding and enforceable social and environmental standards in the CEPA talks.

The MEP's conditions, however, are likely to impact India more because the EU accounts for about 21 per cent of the country's merchandise exports bound for the 27-member economic bloc and is growing rapidly. The trade bloc, however, imports less than 2 per cent of its total requirement of goods from India. 

The report, submitted in December 2008, was prepared after a delegation of MEPs, who are part of the Committee on International Trade of the European Parliament, visited India late last year. Talks between India and EU on the CEPA have been on since mid-2007. The next round of talks was scheduled for March, but sources said it has been postponed for operational reasons.

Indian trade envoys maintain that talks are bound to stall if the EU introduces these clauses in the negotiations. "These are ploys to put pressure on India through non-trade issues at a time when the global slowdown is impacting them," said a government official familiar with trade negotiations.

India has opposed the inclusion of environment and social issues in the current Doha round of trade negotiations under the World Trade Organisation.

Among the many non-trade issues that the draft report raises are on religious minorities and Jammu & Kashmir. "(The committee) stresses that human rights and democracy clauses constitute an essential element of the FTA; is concerned by the continuing persecution of religious minorities and human rights defenders in India and extra-judicial killings and unmarked mass graves in the Indian Administrated Kashmir; calls on the Indian Government to grant access for the UN Special Rapporteurs to investigate these mass graves," it said.

Meanwhile, three proposed amendments on this paragraph have been filed, but no MEP has called for this clause to be deleted. 

The MEPs, through the draft report, has also asked the European Commission to raise the issue of illegal trade of tiger skins to Tibet.

The Committee on International Trade will shortly vote on adoption of the report.

A proposed addition to the draft report calls for allowing European Union authorities to monitor ships bound for the trade bloc in Indian ports.

Another proposed addition has called on the European Commission to refrain from committing to liberalise capital movements in the backdrop of the ongoing financial crisis.

The International Trade Committee has also asked the European Commission to address issues related to child labour in the negotiations.