feeds from sacw.net
print versionFebruary 20, 2012
Rolls Royce, Mercedes-Benz and BMW cars to get cheaper for Indian millionaires? Premium Scotch whisky brands set to become more “affordable†, with import duty reduction from 150 percent to just 60 percent? More European cheese to enter India as tariffs are lowered while huge dairying subsidies continue at home? Higher profits for European pharmaceuticals manufacturers at India’s expense?
Nothing could have had India’s rich salivating at the mouth more copiously than the prospect of luxury products becoming cheaper. And nothing would have pleased the crisis-bound industrial and services sectors of the 27-nation European Union more than greater access to India’s fast-growing market for exotic processed foods, industrial goods and financial services.
However, despite strenuous attempts during the recent summit meeting in New Delhi, Indian and EU leaders failed to clinch the proposed EU-India Free Trade Agreement (FTA). The 15th round of negotiations, in progress since 2007, didn’t produce the “political framework†widely expected to conclude the talks.
In many ways, this is welcome. An FTA between the two vastly dissimilar entities, which falsely treats them as equal, would have further skewed the imbalance in their economic relations, and hurt some of India’s most vulnerable people.
One’s only regret is that the proposed FTA’s sole progressive part, clauses pertaining to labour rights and environmental protection, has also fallen by the wayside – because of India’s stiff opposition.
With sweeping reductions in tariffs for 92 percent of all products to zero, an FTA would have greatly shrunk the Indian government’s capacity to protect its people, including their access to food and the country’s agriculture, industries and services, including retail trade. It would have further widened India’s trade deficit with the EU.
Worse, low-tariff imports of industrial products would defeat the objective of the National Manufacturing Policy to raise manufactures’ share of the GDP from the current 16 percent to 25 percent in the coming decade. By 2020, projections show, the EU would gain $1.8 billion in vehicle sales and $7.9 billion in manufacturing exports. India would gain a pittance.
The talks failed for many reasons: pressure from Indian industry sectors like automobiles; differences on issues such as market access in services, public procurement, temporary work permits/visas for Indians, and intellectual property protection; and to an extent, public opposition from Indian and the EU-based non-governmental organisations representing farmers, agricultural workers and small traders, or working in public health, right to food, sustainable development, and Dalit rights.
A turning point came when the Society of Indian Automobile Manufacturers (SIAM), representing a powerful, fast-growing industry, found that its many pleas to the government were ignored. It issued an uncharacteristically angry statement saying: “This FTA is being done with minimum consultation with industry and [without public] debate... It is also believed that the pressure to sign an agreement is politically motivated and not driven by economic logic.â€
During the week preceding the summit, Ratan Tata moved from supporting the FTA to opposing it. That more or less sealed the talks’ fate on industrial tariffs.
Similarly, on public procurement, or government purchases of goods, the EU wanted that its businesses could bid for contracts in the railways, health schemes, energy, and public sector units. India wanted this limited to purchases by government departments alone. Opening them up further would affect the government’s ability to use purchases as development tools to support enterprises of Dalits/Adivasis/minorities and women, and small businesses.
On agriculture, the proposed deal was totally loaded in the EU’s favour. The EU would not have to reduce its huge agricultural subsidies or lower its food standards which are major barriers to Indian exports. But EU wanted India to reduce import duties on wines, alcoholic beverages, cereals, dairy, poultry, fisheries and agro-processed goods. This imbalance would threaten the livelihoods of India’s small farmers and their food consumption.
The EU will increase trade by $470 million in agrofood and animal-origin products by 2020. But India will gain only $84 million. In cereals, the EU will gain $133 million while India will gain $1 million. As the UN Special Rapporteur on the Right to Food said last December: “This FTA represents a clear risk to India’s obligation to respect, protect and fulfil the right to food if sensitive agricultural sectors were opened up....†and foreign investment allowed in land and retail trade.
Medicine prices will also rise sharply under harsh patent enforcement in India which goes even beyond the stringent rules of the World Trade Organisation.
The FTA proposal for services trade liberalisation sought to secure unfettered EU access to retail, banking, insurance, energy, telecom, postal services etc. This would compromise the livelihoods of informal retailers and vendors and jeopardise India’s 12 million small unorganised businesses.
That’s why the government had to abandon, under strong public opposition, its move to open up multi-brand retail to foreign investment. Even if French retailer Carrefour creates 1.8 million jobs, as claimed, it will still mean a frightening loss of 2.9-to-6.7 million informal sector jobs.
More FDI in banking may have an adverse impact on people’s access to financial services and also increase systemic risk. Opening up the financial sector amidst the current global crisis will severely affect the government’s ability to implement capital controls and regulate risky financial activities.
The FTA, then, is an unequal bargain. India should not succumb to the EU pressure on the issue. There is nothing worthy about free trade, certainly not with a bloc of nations that has a per capita income more than 10 times higher than India’s.
By contrast, India must enthusiastically pursue trade talks with its neighbours, particularly with Pakistan, to which commerce minister Anand Sharma led a large delegation with 100 CEOs. (How one wishes he had also included farmers’ and workers’ representatives and peace-oriented NGOs!) This visit, the first by an Indian commerce minister in 35 years, was an excellent initiative, which came amidst positive signals of a turnaround in economic relations.
Pakistan’s cabinet has in principle granted India the Most Favoured Nation (MFN) status – against hardliner resistance. A structured dialogue on trade has been under way since April to address sector-specific issues and non-tariff barriers, and on improving cargo movement. A big “India Show†has been mounted in Lahore with some 400 Indian exhibitors displaying products.
The two countries have long under-performed as trading partners despite their economic complementarity. In 2010-11, bilateral trade was only $2.7 billion. India is Pakistan’s eighth top supplier, but Pakistan doesn’t even figure among India’s top 50 partners. India and Pakistan have announced that trade will be boosted to $6 billion by 2014. There is potential, say industry sources, to raise the volume to $10 billion by 2015.
This means that India must not only level the trade field; it must make unilateral concessions to Pakistan. This will generate tremendous goodwill and help political-diplomatic reconciliation. This is also a precondition for India’s progress.
The writer, a former newspaper editor, is a researcher and peace and human-rights activist based in Delhi.
