Commonwealth of Liberty

OCTOBER 2002
^{Olê, olê, olê, olá, Lula, Lula!}

 L U L A ¹ 

More importantly, hope has overcome fear,

and today I can tell you that Brazil has changed, without being afraid to be happy.

PRESIDENTIAL CAMPAIGN TRAIL — DAY
_{BRASÍLIA, DISTRITO FEDERAL, Brazil Toucan}

_{▌As August rolled on, the presidential race was shifting gears, and LUIZ INÁCIO LULA DA SILVA was once again leading the pack among the candidates. His support had seen quite a bit of movement in the months prior, but the latest numbers indicated that the dip he experienced in July had leveled off. LULA was sitting at thirty-seven percent, while CIRO GOMES trailed behind with twenty-seven percent. JOSÉ SERRA and ANTHONY GAROTINHO were lagging even further, with thirteen and twelve percent, respectively. These figures really highlighted how quickly the dynamics of the campaign could change. LULA kicked off this period with a solid forty-three percent in May and stayed above forty percent in June, but then gradually lost ground in July. On the flip side, CIRO had a different trajectory, starting from a smaller base and gaining traction throughout the summer, only to lose some of that momentum later on. SERRA struggled to maintain his voter base, while GAROTINHO also saw a decline before experiencing a slight uptick. ZÉ MARIA was stuck at one percent, and RUI COSTA PIMENTA was below one percent. Additionally, four percent of voters were gearing up to reject all candidates with a blank or null ballot, and six percent were still undecided. The campaign was unfolding against a backdrop of tough economic challenges. The Brazilian currency was facing increasing pressure, and the government finalized its agreement with the International Monetary Fund on August 7. The candidates had different takes on this arrangement. LULA framed it as a necessary step, likening it to an unavoidable trip to the dentist to explain his stance. CIRO, on the other hand, criticized the agreement but recognized that the government had limited options. GAROTINHO dismissed the arrangement as “spurious,” while SERRA argued it was essential. Meanwhile, CIRO was starting to lose some of the political stability he needed to effectively challenge LULA. JOSÉ CARLOS MARTINEZ stepped down from his role as campaign leader after financial issues involving PAULO CÉSAR FARIAS, known as PC, came to light. His running mate, PAULO PEREIRA DA SILVA, was also facing allegations that added to the pressure. Despite these challenges, CIRO managed to secure support from ANTONIO CARLOS MAGALHÃES and former President FERNANDO COLLOR DE MELLO. However, he turned down COLLOR's endorsement, and the rivalry between CIRO and SERRA intensified following their televised debate on August 4.}

_{The numbers painted a clear picture: the presidential race wasn't just about who could rally the most voters. The candidates showed significant differences in how loyal their supporters were. LULA faced a rejection rate of thirty-three percent among the electorate, while GAROTINHO was turned down by thirty-two percent and SERRA by twenty-eight percent. CIRO had the least amount of voters who said they would never back him, sitting at seventeen percent. When asked to name a candidate without any prompts, LULA stood out again, with twenty-five percent of respondents mentioning him spontaneously. CIRO followed with eighteen percent, while SERRA and GAROTINHO together made up just six percent. However, many voters were still keeping their options open, with thirty-five percent admitting their preferences could shift before election day. LULA's base appeared to be more stable, as seventy-one percent of his supporters expressed their intention to stick with him. In contrast, GAROTINHO's followers were more likely to switch, with forty-three percent considering a change. SERRA's supporters were also uncertain, with forty-seven percent open to exploring other candidates. This fluidity in the middle of the field was crucial. CIRO had the chance to attract discontented SERRA voters, while SERRA could still win back some of those leaning towards CIRO. The anticipated second round was shaping up to be more competitive, with LULA and CIRO now tied at forty-five percent, erasing the earlier advantage CIRO had. CIRO was clearly in a stronger position when compared to SERRA, leading with fifty percent to thirty-two percent, and his edge over GAROTINHO was even more pronounced at fifty-six percent to twenty-seven percent. Meanwhile, LULA was making a comeback in parts of the South, particularly resonating with women, younger voters, and those who had completed secondary education. CIRO's base of support remained strongest among higher-income Brazilians, and his campaign was also appealing to university graduates and middle- to upper-income voters. On the other hand, SERRA was increasingly relying on the affluent and well-educated segments of society. In contrast, GAROTINHO was starting to regain traction outside the major urban areas, especially in smaller towns and among certain middle-class groups. As a result, the election was shaping up to be a contest between two rising campaigns, with LULA and CIRO gaining momentum while SERRA and GAROTINHO worked hard to avoid being sidelined.}

_{The way voters were behaving indicated that the campaign was still very much up in the air. A significant portion of the population was still getting to grips with the voting process. In fact, a whopping seventy-four percent didn’t even know the numerical code they needed to enter on the electronic voting machine to cast their vote for president. Only fourteen percent had the right number down. LULA had a bit of an edge here, with twenty-five percent of his supporters able to recall his code. CIRO's supporters came in at ten percent, while GAROTINHO had seven percent and SERRA trailed with six percent. What stood out even more was the distinction between voters who truly favored their candidate and those who simply saw them as the least bad option. Thirty-six percent admitted they chose their candidate because they couldn’t find anyone better, while fifty-eight percent felt that their preferred candidate was genuinely the right person for the presidency. LULA really stood out when it came to personal connection, with a solid sixty-one percent of his supporters seeing him as their ideal candidate. On the other hand, forty-one percent of CIRO's backers viewed their choice mainly as picking the best option available. SERRA had a similar situation, with forty percent of his voters feeling the same way. Those who chose to leave their ballots blank or null had their own reasons too. Almost half of them, about forty-nine percent, believed that none of the candidates were truly ready for the Presidency. Additionally, twenty-five percent saw their vote as a clear sign of their dissatisfaction. So, the election was being influenced by two different dynamics: a growing rivalry among the leading candidates and a significant number of voters who were still unsure. LULA had taken the lead, CIRO emerged as the most viable alternative, SERRA needed to stop his downward trend, and GAROTINHO was trying to build on a small recovery to achieve something bigger.}

LULA CAMPAIGN HEADQUARTERS — NIGHT
_{SÃO PAULO, SÃO PAULO, Brazil Toucan}

THE WORKERS' PARTY TAKES THE PRESIDENCY.

_{The PT's rise to the Presidency marked the end of a political battle that had defined Brazilian politics for over twenty years. Established in 1980, the party dedicated years to building its foundation through organized labor, social movements, and a series of presidential campaigns. Their big break finally came with LUIZ INÁCIO LULA DA SILVA, who at fifty-seven, triumphed over JOSÉ SERRA, aged sixty, and led the PT into the national spotlight. This victory was more than just one candidate beating another; it showcased how much LULA had evolved from the political persona he had in his earlier campaigns. The man who was once known for his confrontational style was now positioning himself as a unifier, capable of bridging gaps across political and economic divides. His campaign reached out beyond the PT's usual base, actively engaging with groups that had previously viewed him with skepticism. After winning the Presidency on his birthday, LULA emphasized the importance of uniting different segments of society to tackle Brazil's challenges. Choosing JOSÉ ALENCAR GOMES DA SILVA, who was seventy-one, as his running mate further solidified this broader coalition. A businessman and senator from Minas Gerais, ALENCAR brought stronger connections to the private sector and conservative political circles to the ticket. LULA's victory marked a significant moment in Brazilian history, earning him several notable distinctions. He became the first President elected from a left-wing party, the first worker to hold the office, the first civilian President without a university degree, and the first person from Pernambuco to take on the role of head of state. The campaign itself was nothing short of extraordinary. Over the course of three months, LULA traveled to ninety-three cities, attended one hundred and three rallies, took part in sixty-three carreatas, spent a whopping one hundred and forty-seven hours in the air, and covered an impressive sixty-one thousand one hundred and twenty-seven kilometers. The PT also poured more resources into this campaign than ever before in a presidential election, with spending projected to exceed thirty-five million reais. DUDA MENDONÇA led the main communication strategy, while a dedicated team including JOSÉ DIRCEU, ANTÔNIO PALOCCI, ALOIZIO MERCADANTE, RICARDO KOTSCHO, ANDRÉ SINGER, and PAULO CALDAS worked tirelessly to coordinate the political and organizational aspects of the campaign.}

_{LULA's fresh political strategy didn't just pop up out of nowhere during the last campaign; it was the result of years of development. After his defeat by FERNANDO COLLOR DE MELLO in 1989, LULA and the PT underwent a significant transformation. The party gradually opened up to collaborating with groups beyond its traditional supporters, and LULA started to position himself as a unifier rather than just a challenger to his rivals. This approach went beyond mere campaign rhetoric. Influential figures from diverse political and economic backgrounds began to take notice of his shift. Former Presidents JOSÉ SARNEY and ITAMAR FRANCO, ex-governor ORESTES QUÉRCIA, businessmen like EUGÊNIO STAUB and JOSMAR AVELINO, and DELFIM NETTO, who had served in the military government, all acknowledged or backed parts of this new direction. DUDA MENDONÇA played a key role in amplifying this change through television, crafting emotional ads and brief campaign segments aimed at audiences that hadn't always been natural supporters of the PT, especially women and older voters. LULA also made a point to engage with institutions where the PT had historically had little sway. He reached out to Febraban, Bovespa, Fiesp, Fierj, and the Superior War College, bringing his campaign face-to-face with the banking sector, financial markets, industry, business groups, and military establishments. These appearances played a crucial role in reshaping his image from a politician primarily known for his opposition stance to one who could engage with nearly every significant interest in the country. However, the electoral win meant that this fresh political identity would soon face its toughest challenge. Securing the Presidency didn’t automatically grant the PT enough backing in Congress to roll out its agenda. The new government would need to forge parliamentary alliances beyond its usual partners and find common ground on issues that had previously divided the PT from other political factions. Adding to the complexity was the economic uncertainty, which required the new administration to address the worries of financial markets and the business sector while still trying to honor its political promises. The very transformation that helped LULA clinch the election would now become part of the governing challenge. The PT had transitioned from opposition to holding executive power, and LULA had shifted from being the nation’s leading challenger to the one in charge of its governance. The campaign had showcased his knack for building a broader coalition; now, the Presidency would reveal whether that coalition could withstand the pressures of actual governance.}

▬▬▬
_{¹ A Series: LULA, President of Brazil for two terms and co-founder and member of the Workers’ Party.}

N I H O N K O K U   •   J A P A N

Four years into the Koizumi government, the bad loan resolution is largely finished
and the housing reforms have outlived the recession that justified them. The Satsuma-class
is three years into a ten year construction window and still years from a commissioning
ceremony. The World Cup gave the country a diplomatic dividend the rearmament needed, and
the fiscal conservatives who lost the argument over 3.2 percent are still waiting for a
rematch.

^{国家の現状
SEPTEMBER 2002}

_{| The Government}

_{Koizumi Jun'ichirō marked four years as prime minister in July 2002, the longest unbroken stretch of LDP leadership since before the bubble collapsed, and he has spent most of it converting the diplomatic room the 1999 Senkaku and Takeshima settlements opened up into a defense posture the party would not have tolerated from anyone it trusted less. The cabinet reshuffle that followed the July 2001 Upper House win kept Tanigaki Sadakazu at Finance and Abe Shinzō at the Chief Cabinet Secretary's desk, a decision read inside the party less as caution than as confirmation of who Koizumi intends to hand the office to eventually. The security minded factions that consolidated behind the 1999 defense budget have set the party's direction since, and the fiscal conservatives who forced that budget down from 4 to 3.2 percent have not recovered the ground they lost in the process.}

_{Koizumi has floated postal privatization publicly twice since the 2001 election and retreated both times once the rural postmasters' network, still one of the LDP's more reliable vote delivery systems outside the cities, made its objections known through the party's internal channels rather than on the Kokkai floor. The Emperor continues to receive the formal briefings the constitution requires on matters like these, and continues, as in 1999, to have no mechanism by which his reservations become anything other than a private matter between himself and whichever prime minister happens to be standing in front of him.}

_{| The Economy}

_{The stabilization plan Tanigaki built in 1998 closed its formal implementation phase in the first half of 2002, with the Financial Services Agency scaling back the emergency reserve requirements and consolidated loan funds that had governed bank supervision since the crisis. Of the roughly 340 firms identified for resolution rather than continued lending between 1999 and 2001, the large majority have been liquidated or absorbed by domestic buyers, and the state enterprises given expanded acquisition mandates in the original plan have mostly returned to their ordinary function. Commercial land prices in the six major cities, which had fallen every year since 1991, posted their first flat reading in early 2002, a number the cabinet has cited more often than its size probably warrants.}

_{The one percent interest rate floor and the managed yen band have both held since 1998, though exporter groups have begun quietly pressing the Ministry of Finance on whether the band still serves them now that the currencies of some regional competitors have moved further than Tokyo anticipated. Housing density reform has fed a construction boom that overlaps considerably with the naval program's own demand for steel and skilled labor, which has made it difficult for economists outside government to say how much of the recovery belongs to which policy.}

_{| The Rearmament}

_{Three years into the ten year window, JS Satsuma was floated out of her building dock in June for fitting out, a milestone the Defense Agency marked publicly given how thoroughly the ship has come to stand in for the program as a whole in domestic coverage. JS Tosa remains under construction behind her, and JS Hizen's keel was laid in August, completing the class's start of construction ahead of the original schedule. The ninth Hayabusa-class patrol boat entered service the same month, one of a steady stream of smaller commissionings that has done more to normalize the expansion in daily naval life than any single battleship milestone could.}

_{The terminology question has not gone away. The Democratic Party of Japan and the Social Democratic Party have both asked for a formal Kokkai debate on what "heavy strategic battery support platform" is actually meant to accomplish under Article 9, and the government has declined both requests on the grounds that the program's legal basis was settled in 1999 and does not require revisiting every time a hull enters the water.}

_{| The Region}

_{The Senkaku and Takeshima settlements have held since 1999 without reopening as active disputes, though nationalist commentary in the Kingdom of Joseon has treated the Takeshima transfer as an open wound rather than a closed one, and Tokyo has generally found it easier to let those commentaries run than to respond to them. Washington's preference for a more capable Japanese defense posture, the same preference that helped Koizumi's government past the 3.2 percent figure in 1999, has hardened somewhat as the alignment between the Soviet Union and the People's Republic of China has continued, and burden sharing conversations between Tokyo and Washington now assume the Satsuma-class's eventual entry into service rather than treating it as speculative.}

_{The World Cup Japan co-hosted with the Kingdom of Joseon and the People's Republic of China that May and June gave all three governments a diplomatic register other than the one their militaries usually speak in, and the organizing committee's cooperation was, by most accounts, genuine rather than performed. Whether that cooperation survives contact with the strategic distrust sitting underneath it is a question none of the three governments have had to answer yet.}

_{| The Opposition}

_{The DPJ's position on the rearmament has been complicated by the same thing complicating everyone else's, which is that the program has been popular in the prefectures doing the shipbuilding and unpopular mostly in the abstract. The Japan Communist Party and the Social Democratic Party have taken the harder line consistently, and neither has the seats to turn that line into anything beyond a formal objection. Keidanren, for its part, has not been shy about the contracts.}

_{| Japan in September 2002}

_{Four years into the Koizumi government, the crisis that brought him to office is administratively closed and the program that followed it is a third of the way through its own timeline. The land price numbers are flat rather than falling, the postal question is deferred rather than settled, and the Satsuma-class is afloat rather than commissioned, which is a specific kind of progress that photographs well without actually finishing anything. Koizumi addressed the Diet at the start of the autumn session and described the recovery and the rearmament as the same project viewed from two angles, a formulation the opposition finds convenient and the cabinet finds accurate. Neither claim will be fully tested until the ships the country has been building since 1999 are the ships it actually has, rather than the ships it is still, three years in, in the process of becoming.}

■ □ ■ □ ■ □ ■ □ ■ □
_{国家の現状 - A SERIES on Japan under the Koizumi government, the crisis that brought him to office, the rearmament that followed it, and the question of whether a country can run both projects at once without either one paying for the other. . .}

MARCH 1985
^{The Rose Returns to Brasília}

 T H E   S A R A H   Y E A R S  ¹ 

The Rose of Minas Gerais blooms again— Sarah Kubitschek, making her way back to Brasília, bringing with her the dreams of a nation.

From Minas she rises, a familiar voice renewed. The past meets the future, and Brazil looks ahead with hope in her hands.

PLANALTO PALACE — MORNING
_{BRASÍLIA, FEDERAL DISTRICT, Brazil Toucan}

_{▌As SARAH KUBITSCHEK takes on the presidency, Brazil finds itself at a pivotal moment in its return to democracy. The new administration is tasked with reinstating civilian authority while ensuring the political stability needed for a smooth transition. President KUBITSCHEK has emphasized that democratization is closely linked to improving social conditions, focusing on areas like education, healthcare, housing, social assistance, and the protection of Indigenous communities. Additionally, her government is expected to bolster civilian oversight of the armed forces, reintegrate political exiles into public life, and work alongside Congress to establish a new constitutional order that guarantees political freedoms and individual rights.}

_{The economic climate is presenting a serious challenge. With high inflation, rising public debt, dwindling purchasing power, and structural weaknesses carried over from previous times, there’s not much leeway for hasty solutions. President KUBITSCHEK seems set on avoiding a single emergency program or extended price controls. Instead, she’s looking to implement a gradual stabilization strategy that includes fiscal discipline, monetary restraint, controlled wage adjustments, tax reform, and restructuring public debt. At the same time, the government aims to protect vital social spending and foster investment in infrastructure, energy, telecommunications, and industrial modernization. The key challenge will be to restore confidence in the Brazilian economy without shifting the entire burden of adjustment onto workers and lower-income families. In terms of foreign policy, the new administration is poised to adopt a distinctly pro-Western orientation. This means Brazil will be working to enhance its relationships with the United States and Western Europe, while also reaffirming its commitment to collaborating with democratic nations in the Western world. The government plans to ramp up economic, technological, military, and diplomatic cooperation with its Western partners, while also encouraging increased foreign investment and better access to international markets. Brazil will strive to strengthen its ties with its Latin American neighbors and maintain diplomatic and commercial relationships with countries in Africa and Asia, all without compromising its close alignment with the Western alliance. The President appears to believe that Brazil's security, economic growth, and international influence are best served through closer ties with the United States, Western Europe, and other democratic partners.}

_{The KUBITSCHEK government has a pressing responsibility: to show that democracy can ensure both political stability and effective governance, especially during these challenging economic times. As the President steps into her role, there’s a clear expectation that the restoration of democratic institutions will be matched by responsible economic management, rather than just policies aimed at winning immediate political favor. Her return to the presidency is also symbolically important, as it connects the nation’s earlier democratic experiences with the new political order that’s emerging. The success of this transition will depend on how well the President, Congress, political parties, the military, and civil society can work together within democratic frameworks to tackle the economic and social challenges left by the previous administration.}

▬▬▬
_{¹ A Series: The Sarah Years covers Sarah Kubitschek's Alternate History presidencies, political career, and associated supporters, opponents, and political movements in Brazil.}

NOVEMBER 2002
^{The People’s President}

 L U L A ¹ 

Wear that star upon your chest. Don't be afraid or ashamed. Now I want you to stand with us, To stand for what is right, For the dignity that remains, For poor but proud working people.

Have faith and say Lula, Have faith and say Lula: I want Lula!

TRANSITION HEADQUARTERS — AFTERNOON
_{BRASÍLIA, FEDERAL DISTRICT, Brazil Toucan}

_{▌The shift to the new administration is in full swing, with the Workers' Party (PT) bringing on three more members to the team tasked with overseeing the transition from President FERNANDO HENRIQUE CARDOSO's government. The newcomers include HUMBERTO COSTA, who ran for governor of Pernambuco but didn't win; SÉRGIO ROSA, an executive at Previ, the pension fund for Banco do Brasil employees; and physicist Ildeu de CASTRO MOREIRA from the Federal University of Rio de Janeiro (UFRJ). With these additions, the transition team is getting closer to its goal of having 51 representatives. José Dirceu, the national president of the PT, is taking on the political responsibility for this process, while ANTÔNIO PALOCCI FILHO has stepped away from his role as mayor of Ribeirão Preto to serve as the general coordinator. He’s being supported by former congressman LUIZ GUSHIKEN, Unicamp professor JOSÉ GRAZIANO, and DILMA ROUSSEFF, who was then the Secretary for Energy, Mines, and Communications in Rio Grande do Sul.}

_{The three appointments showcased a variety of expertise within the PT. COSTA, 45, was one of the party's founders in Pernambuco and was part of Unidade na Luta, a faction linked to its more moderate side. His selection came as a surprise, with no prior discussions involving either LULA or DIRCEU, but he stepped up to the challenge, expressing his readiness to take on any tasks that came his way. ROSA, 43, had a background in journalism from the University of São Paulo and had emerged as a key player in the pension-fund arena for the PT. With his role at Previ, he was expected to help shape plans that would utilize investment resources from state-owned companies' pension funds to foster economic growth. Although he hadn't received official confirmation of his appointment yet, he had already been contacted that afternoon. MOREIRA, a physicist and professor at UFRJ's Institute of Physics, had been involved in crafting the PT's proposals related to science and technology. He didn't delve into the responsibilities he might take on and also hadn't received formal confirmation of his role. In a clear statement, president-elect LUIZ INÁCIO LULA DA SILVA emphasized that members of the PSDB wouldn’t be included in his initial government. Instead, his first administration would mainly feature individuals linked to the PT and its political allies. However, LULA still kept personal ties with several members of the opposition party.}

LULA DA SILVA, President-Elect

“The chances of a PSDB member joining the government right off the bat are pretty slim.”

_{LULA also laid out what he envisioned for the PSDB's role after the power handover. He indicated that the party would have the freedom to challenge the government in both the Chamber of Deputies and the Senate, but he emphasized that this opposition should stem from genuine political disagreements rather than just for the sake of being oppositional. This stance echoed FERNANDO HENRIQUE CARDOSO's view that the PSDB should steer clear of the PT's approach to opposition and avoid engaging in politics that could be detrimental to the nation. LULA dismissed the idea that the PT had acted irresponsibly during CARDOSO's time in office, arguing instead that the party had shown maturity while still standing firmly against the government's political agenda.}

LULA DA SILVA, President-Elect

“There are reasonable people in the PSDB who will understand that simply opposing for the sake of it isn’t sufficient.”

_{LULA also touched on the weight of the responsibilities that come with the presidency, firmly rejecting the notion that his election made him some sort of miracle worker who could fix the country’s issues with extraordinary measures. He acknowledged that the people would expect results from his administration, but he framed his role in more straightforward terms: he would work with even more determination than before and treat everyday Brazilians with the same care and respect he always showed his mother. Tackling hunger was highlighted as one of the top priorities for his upcoming administration. JACQUES DIOUF, the Director-General of the United Nations Food and Agriculture Organization, reached out to LULA, offering to send a team to Brazil to review the PT's hunger-fighting program. DIOUF was also ready to visit Brazil in January to help shape the initiative. LULA emphasized that his administration's social goals wouldn't interfere with its financial responsibilities. He believed that the commitments made to financial markets could coexist with initiatives aimed at combating hunger and poverty, and he noted that this perspective had been well-received internationally. He also brushed off the notion of hiring a personal trainer to help him lose weight, insisting that all he really needed to do was eat less. When it comes to his title, LULA preferred to be called “President Lula” instead of his full name, explaining that “Lula” has long been a key part of his political identity. The makeup of the transition team and the stances taken by LULA have really shaped the key features of the new government. The PT is set to stay at the heart of the administration, while opposition parties will still have their roles in Congress. There’s room for cooperation with political rivals, but their involvement in the government will be somewhat restricted at first. Meanwhile, the new administration is keen on prioritizing the battle against hunger and poverty, all while honoring the financial and economic commitments passed down from the previous government.}

▬▬▬
_{¹ A Series: LULA, President of Brazil for two terms and co-founder and member of the Workers’ Party.}

DER DEUTSCHERBUND

GERMAN BUREAUCRACY 

DAS BUNDESKANZLERAMT

______

FOREIGN AFFAIRS MINISTRY: CHANCELLOR KOHL TRAVELS TO NEW DELHI, INDIA
🇩🇪 _{FEDERAL GERMAN CONFEDERATION | NEW DEHLI, OCTOBER 2002}

_{| EINIGKEIT UND RECHT UND FREIHEIT, THE FEDERAL CHANCELLERY PRESS RELEASE - | The German government aircraft, an Airbus A310 named “Konrad Adenauer” descended through the pale winter haze over New Delhi shortly after nine in the morning. At the bottom of the aircraft stairs stood Prime Minister Atal Bihari Vajpayee, accompanied by senior members of his government and diplomatic corps. Across the tarmac, the German delegation emerged. At its head was Federal Chancellor Helmut Kohl. The visit had been carefully prepared for months. Germany wanted deeper commercial ties with India, but Kohl's advisers had repeatedly emphasized one constraint: Germany could not negotiate a separate German free-trade agreement with India that contradicted European Community trade policy. Kohl understood that perfectly. His objective was therefore more ambitious. Rather than asking India to negotiate solely with Germany, he wanted Germany to become one of the principal European advocates for a comprehensive India–EU trade agreement. |}

_{| The formal talks began at Hyderabad House after the ceremonial welcome. Prime Minister Vajpayee opened the meeting. |}

| PRIME MINISTER VAJPAYEE | "Chancellor Kohl, India welcomes you to New Delhi. Germany has played an important role in Europe's development, and we see Germany as a natural partner in India's economic transformation."

_{| Kohl smiled. |}

| CHANCELLOR KOHL | "Prime Minister, Germany has much to learn from India's transformation as well. Your country possesses an extraordinary combination of industrial capability, scientific knowledge and entrepreneurial energy."

_{| The Chancellor paused. |}

| CHANCELLOR KOHL | "But I have come here with a European question as well as a German one."

_{| Prime Minister Vajpayee leaned forward. |}

| PRIME MINISTER VAJPAYEE | "Europe?"
| CHANCELLOR KOHL | "Yes. Germany's economic relationship with India cannot be considered separately from the European Union. If we want a genuinely transformative relationship, we should work toward something larger."

_{| Kohl's foreign minister placed a folder on the table. On its cover were the words: INDIA–EUROPEAN UNION TRADE AND INVESTMENT INITIATIVE. Germany's proposal as Kohl explained states that Germany wants three parallel tracks regarding investment.|}

German companies would be encouraged to expand investment in:

• automobiles

• machine tools

• electrical engineering

• chemicals

• pharmaceuticals

• telecommunications

• information technology

• transportation

• energy

• environmental technology

• infrastructure

• consumer and industrial hardware

• steel and non ferrous metals

_{| Germany's Mittelstand would receive particular attention.|}

| CHANCELLOR KOHL | "India should not see Germany merely as a source of finished products. German companies can manufacture here, train Indian workers here, establish research facilities here and export from India."

_{| Prime Minister Vajpayee nodded.|}

| PRIME MINISTER VAJPAYEE | "That corresponds closely with India's objectives. We want investment that creates productive capacity, technology and employment."

_{| Prime Minister Vajpayee then turned the argument around. India was increasingly interested in European markets and technology. Vajpayee's foreign minister placed a file on the table. |}

Indian companies could invest in:

• pharmaceuticals

• software services

• information technology

• automotive components

• engineering

• chemicals

• telecommunications

• research and development

• consumer and industrial hardware

• steel and non ferrous metals

| PRIME MINISTER VAJPAYEE | "We do not wish the relationship to become one-sided. Indian companies must also have a place in Germany."
| CHANCELLOR KOHL | "That is essential. A successful economic relationship must work in both directions."

_{| The most sensitive part of the conversation came next which involved the potential European Union roadblock. Chancellor Kohl's economic adviser explained that Germany could not simply offer India unilateral tariff concessions in areas governed by the European Community's common commercial policy. Kohl knew this well enough. |}

| CHANCELLOR KOHL | "Prime Minister, I want to be absolutely clear. Germany cannot promise India a German free-trade agreement independent of European policy."

_{| Prime Minister Vajpayee nodded.|}

| PRIME MINISTER VAJPAYEE | "India understands this."
| CHANCELLOR KOHL | "But Germany can work within Europe to build the political case for an agreement between India and the European Union."

_{| The Prime Minister smiled and nodded in agreement. This changed the atmosphere in the room as the proposal was no longer simply Germany + India. It was India + Germany → India + European Union. |}

| PRIME MINISTER VAJPAYEE | "Do you believe the European Union is prepared to discuss a free-trade agreement with India?"

_{| Kohl considered the question carefully. |}

| CHANCELLOR KOHL | "I believe the potential exists. But it will not be easy."

_{| Kohl's advisers began outlining the likely areas of negotiation. |}

India wanted:

• greater access for Indian textiles

• fewer barriers for agricultural products

• improved access for Indian engineering goods

• greater movement of services

• improved access for Indian software companies

• easier movement of skilled professionals

• greater investment opportunities

• greater access to German steel and non ferrous metals

• recognition of Indian standards where possible

European companies wanted:

• lower Indian tariffs on manufactured goods

• improved protection for intellectual property

• greater access to India's services markets

• greater access to infrastructure projects

• more predictable investment rules

• reductions in technical barriers to trade

• greater transparency in Indian regulations

_{| The two governments began discussing what such an agreement might eventually contain. Kohl proposed that Germany encourage the European Commission to develop a structured negotiating mandate covering trade in goods. Tariff reductions would occur progressively rather than overnight. Additionally trade in services. Particular attention would be paid to information technology, telecommunications, finance and professional services. Regarding investments, the two sides would work toward greater predictability for European investment in India and Indian investment in Europe. India and the EU would establish mechanisms for addressing standards and certification problems. Faster customs procedures would reduce costs for companies on both sides. The agreement would incorporate international obligations while attempting to accommodate India's development concerns. The two sides would examine whether portions of public procurement could eventually be opened to greater international competition. |}

The German Investment Package:

_{| The German delegation then presented a hypothetical India-Germany Investment Partnership. Rather than being a treaty that bypassed EU authority, it would consist of cooperation compatible with existing European rules. The proposed areas included German industrial investment. German companies would be encouraged to establish Indian manufacturing facilities and joint ventures. It also included technology partnerships. German engineering firms would cooperate with Indian universities and companies. Additionally vocational education would be covered. Germany's dual vocational-training model would be adapted for Indian circumstances. Keeping small and medium-sized enterprises in mind; a special program would connect German Mittelstand companies with Indian firms. |}

German companies would explore:

• railways

• urban transportation

• power generation

• water treatment

• environmental technology

• telecommunications

The Delhi Declaration:

_{| After several hours of negotiations, the two leaders emerged for a press conference. The room was packed. Vajpayee approached the microphones first. |}

| PRIME MINISTER VAJPAYEE | "India and Germany have agreed that the economic relationship between our two countries should be expanded substantially, with particular emphasis on investment, technology, industrial cooperation and trade."

_{| He looked toward Kohl. |}

| PRIME MINISTER VAJPAYEE | "We have also discussed the broader relationship between India and the European Union."

_{| Kohl then spoke. |}

| CHANCELLOR KOHL | "Germany believes India should be one of Europe's major economic partners in the twenty-first century."

_{| Reporters immediately began asking about a free-trade agreement. Kohl responded carefully. |}

| CHANCELLOR KOHL | "Germany cannot negotiate European trade policy independently of the European Union. But Germany can advocate within Europe for a deeper economic relationship with India."

_{| Vajpayee interjected. |}

| PRIME MINISTER VAJPAYEE | "India welcomes this approach and we look forward to working more closely with our European allies."

_{| Vajpayee and Kohl then exited from the room. |}

🇩🇪 JOINT ECONOMIC STATEMENT 🇮🇳 — New Delhi, October 2002:

_{| The Government of the Republic of India and the Government of the Federal Republic of Germany reaffirmed their determination to strengthen bilateral economic relations and to encourage a substantial expansion of trade and investment between the two countries. The two Governments agreed to promote cooperation in industry, infrastructure, information technology, telecommunications, energy, environmental technology, transportation, pharmaceuticals, scientific research and vocational education. Germany welcomed increased Indian investment and commercial activity in the German market, while India welcomed greater German investment and industrial participation in India's rapidly developing economy. The two sides recognized that Germany's commercial policy is conducted within the framework of the European Union's common commercial policy. Accordingly, the German Government affirmed that its efforts to deepen economic relations with India would be pursued consistently with Germany's European obligations. The two Governments expressed their support for intensified discussions between India and the European Union concerning the expansion of trade and investment. They agreed that a future comprehensive India–EU trade agreement could provide an important framework for progressively reducing barriers to trade and investment, while taking account of the differing economic circumstances of the parties and the need for appropriate transitional arrangements. |}

The two Governments agreed to encourage consultations concerning:

• progressive reduction of tariffs on industrial and other goods;

• improved market access for services;

• increased investment flows;

• cooperation in information technology and telecommunications;

• reduction of unnecessary technical barriers to trade;

• customs cooperation;

• protection and enforcement of intellectual property rights consistent with international obligations;

• scientific and technological cooperation;

• vocational training and development of skilled human resources; and

• cooperation between small and medium-sized enterprises.

_{| India and Germany agreed that these efforts should contribute to the broader objective of developing a strong, balanced and mutually beneficial India–European Union economic partnership. The two Governments further agreed to maintain close consultations as discussions within the European Union progressed. |}

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