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ST. PETERSBURG, Russia (Kyodo) Prime Minister Junichiro Koizumi and his Indian counterpart, Manmohan Singh, adopted a report on a bilateral free-trade agreement during talks Monday after the end of the Group of Eight summit.

The two leaders welcomed the paper compiled by a bilateral joint study group to explore the possibility of signing an FTA, paving the way for the launch of official negotiations later this year, Japanese officials said.

The group, which consists of representatives from government, business and academia, had conducted studies on the feasibility of concluding an FTA since last July.

Koizumi and Singh also discussed recent incidents on the global scene, including the U.N. Security Council’s adoption Saturday of a resolution condemning North Korea’s missile launches on July 5, as well as India’s test-firing of a long-range missile four days later, the officials said.

Koizumi was quoted as saying he is pleased the resolution was adopted unanimously and that North Korea eventually cannot help but return to the six-party talks on curbing its nuclear programs.

The six-party talks involving the two Koreas, Japan, China, Russia and the United States have been stalled since November after North Korea refused to return to the negotiating table unless the U.S. lifts financial sanctions.

Touching on India’s missile launch July 9, Koizumi expressed regret. Singh simply said India, being surrounded by Pakistan and China, has its own reasons to take such action, according to the officials.

India fired a long-range Agni-3 missile, which has a range of about 3,500 km and can carry nuclear as well as conventional warheads weighing about 1 ton.

Koizumi and Singh also touched on the Bombay terror bomb blasts, with Koizumi saying terrorism cannot be tolerated and is a concern not just for India but the entire international community, the officials said.

Singh expressed gratitude for Koizumi’s sympathy and for the G8 decision to issue a statement on terrorism, they said.

Leaders of the G8 nations adopted a statement with invited leaders, including India and international organizations, that condemned terrorist attacks carried out in Bombay and other parts of India.

In the FTA report, the group concluded “there is a huge untapped potential to further develop and diversify the economic engagement” between the two countries and recommended that India and Japan launch intergovernmental negotiations on an FTA “within a reasonable period of time.”

The document said, however, that “sensitive sectors should be treated with flexibility and practicality” in consideration of current high tariffs of industrial items in India and agricultural products in Japan.

The group recommended that the FTA negotiations cover wide areas, including goods trade, services and investment.

It pointed out that the two economies can complement each other in the area of information technology with the strengths of Japan’s hardware and India’s software.

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