INDIA-EU FREE TRADE AGREEMENT

--Pratyush

 

Since 2007 India and the European Union have been engaged in negotiations on Free Trade Agreement (FTA). The agreement is being termed as one that would improve market access for goods and services, substantially increasing the bilateral trade between the two entities. As per the statement of the European parliament the bilateral trade is expected to exceed €70.7 billion by 2010 and €160.6 billion by 2015. The FTA would increase EU exports to India by $17-18 billion while India’s export would increase by around $5 billion.

The FTA after it comes into effect would be substantially different from the other FTAs that have been signed till date. The agreement being termed as a new generation FTA that will cover many more areas other than commodity trade like trade in services, investment, intellectual property rights, competition policy, government procurement to name a few.
The proposed FTA is going to have a far reaching consequence for both the Indian state as well as for the lives and livelihood of Indian masses. In this context it becomes imperative to understand the various provisions being negotiated in the agreement that are going to directly impact an extremely large segment of the population.

What is intriguing in this case is the almost total secrecy being maintained by both the parties’ vis-à-vis the agreement and the negotiations. The scant information that have been made available all point to an agreement that would be detrimental to the interest of the vast majority of the poor in India fuelling poverty, inequality and environmental destruction.
The People’s movements and groups both in EU and India have criticised the FTA as one having detrimental impact on the livelihood of vast majority of Indians, according to a report jointly prepared by Corporate Europe Observatory and India FDI Watch...

“devastating impacts on the livelihoods of farmers, workers and other marginalised groups; increase India‘s vulnerability to financial crises; increase the pressure on the countries‘ natural resources; reduce public spending on education, health or food security as a result of revenue losses; hamper access to seeds and affordable medicines; and lead to the loss of policy space when, for example, government procurement policies can no longer be used to help small and local firms and marginalised constituencies. (Trade Invaders, How big business is driving the EU-India free trade negotiations)

The report further noted that:  


“Powerful corporate sectors, including banking, retail and manufacturing, are demanding access to the Indian market – exposing rural farmers, small traders and businesses to crushing competition. Big Pharma‘s proposals to strengthen intellectual property rights could endanger the availability of affordable generic medicines for the treatment of AIDS, cancer and malaria, not just in India but across the developing world. In Europe, corporate India‘s market access agenda is likely to lead to job losses in the automobile and textiles sector, increased pressure on health, quality and labour standards.”


With the recession hitting the European union hardest and the markets being stagnant the corporate Europe along with the parties that protect their interest have all converged to expedite the FTA with India, so as to have an unlimited access and provide ‘effective opportunity for competition’ in the vast Indian market.

According to the free trade agreement both the EU and India are supposed to completely eliminate duties on 90% of tariff lines with the remaining 10% to be negotiated or completely excluded. Given the unevenness of the industrial development and wealth between the EU and India, such a high level of trade liberalisation would flood the Indian market with cheap and subsidised European goods; adversely affecting certain industries leading to large scale job loss and potential closure of several units in the small and medium-scale industries.

The tariff reduction would lead to significant reducing in the revenue of the Government of India thus impacting Governments spending on the social sectors as well as increase in taxes to compensate for this loss of revenue
The precarious impact on the livelihood of significant section of Indian population was analysed by the European Union itself as one that would lead to “significant production decrease” and job losses in India‘s automobile and auto components sector due to increased imports from the EU. It has also predicted layoffs in the paper and electronics industries and a long term decline in agricultural employment.

The sector that is going to be hardest hit by the FTA is the informal sector comprising ninety-two percent of India’s 457 million strong workforce with no job security and little income. The competition from subsidised EU imports will make them virtually out of their profession leading to their pauperisation and loss of livelihood.

Pharmaceutical: Depriving the poor of affordable life saving drugs

The most significant aspect of the FTA is in the way pharmaceutical sector of India – which is hitherto known for providing cheap life saving drugs to many countries of the third world, is being targeted by the multinational drug conglomerates. According to the reports that have come out suggest that EU is pressurising the Indian government to extend the period of patents beyond 20 years; data exclusivity(Data exclusivity guarantees additional market protection for originator pharmaceuticals by preventing health authorities from accepting applications for generic medicines during the period of exclusivity.) which delays the entry of a generic medicine in a market by 10-15 years even after the expiry of a patent; and the patent-registration linkage, which prevents the registration of a generic manufacturer before the expiry of patent.

Over the years India has come to be known as the pharmacy of the developing world, owing to the cheap life saving drugs that are manufactured and exported from here to other poor countries. "In recent free trade agreements signed with the EU or the US, developing countries agreed to introduce very strict intellectual property rules that drastically restrict [the] ability to produce or trade in affordable generic medicines. If India also gives in, access to treatment for people living with HIV/AIDS and other patients will have been sacrificed in the negotiation process," noted Medecins Sans Frontiere, it further mentioned that "As the source of 92% of the AIDS medicines used in developing countries today, India is the pharmacy of the developing world. So, the impact of this also stretches far beyond India,"

In their frenzied pursuit of profit health of the masses is the least priority, as mentioned in an article printed in Guardian newspaper:

In the corporate headquarters of major drug companies, the public relations posters display the image they like to present: of caring companies that bring benefit to humanity, relieving the suffering of the sick. What they don’t say, is that, so far, their humanity has not extended beyond the limits of the pockets of the sick.

(Isabel Hilton, A Bitter Pill For The World’s Poor,
the Guardian, January 5, 2000)

Another area of concern is EU’s new planned law on generic medicines:

The other most pernicious clause in the EU draft refers to what are now being called as Border Measures [Article 36]. The EU is concurrently changing its laws to effectively bar all generic medicines that do not conform to their patent law from being transported through EU countries. The IBSA summit recently took note of such measures and called them as violations of WTO provisions and international law. A number of seizures of Indian medical consignments to third countries passing through Europe have been confiscated as “counterfeit” by EU customs though they have no legal jurisdiction on the consignments. It is indeed strange that such border measures are sought to be introduced in the FTA and Indian side should even be sitting and discussing such issues.

(Prabir Purkayastha and Indranil Mukhopadhyay, Newsclick 21/05/2010)

The impact of Indian government agreeing to the demands of European pharmaceutical cartels would be devastating not only for the people of this country but would have a catastrophic effect on large majority of the world’s poor. Yet all pointers indicate towards the Indian government acceding to the demands of these companies may be with some cosmetic change to the provisions being negotiated behind closed doors.

Asphyxiating Indian Agriculture

 The European farm lobbyists, large agribusiness multinationals and the heavily subsidised farmers are clamouring for opening up of the agricultural sector and the retail sector for it. The EU is pressurising the Indian government to open up its market to European dairy and meat products. It should be noted that the EU exports these products at prices much below the cost of production.

European subsidy

According to Brussels based organisation farmsubsidy.org; “The European Union spends around €55 billion a year on farm subsidies.” Unconfirmed reports on Internet say that as part of Europe's Common Agricultural Policy the EU doled out a massive $70 billion in agricultural subsidies last year.

Who are the prime recipients of these jaw-dropping subsidies, not the small and needy peasants (that Europe hardly has any) but the multi-million agro industries, here is what was reported by Times:


The list of recipients, published May 4 [2010], contains some eye-popping revelations. One of the biggest subsidies was $223 million, given to the French sugar conglomerate Tereos, one of whose subsidiaries produces rum on France's Indian Ocean territory of Réunion. France's Saint Louis Sucre also received multimillion-dollar subsidies and the British sugar giant Tate & Lyle received hundreds of thousands of dollars.

... Those bumper payouts are part of an E.U. plan to overhaul its sugar industry, after the World Trade Organization accused Europe in 2004 of violating global trade rules with its huge export subsidies. But while aid to the sugar industry is due to be phased out eventually, there is no end point for the help most of the E.U.'s other recipients are getting. Last year, more than 1,200 of the recipients received more than $1 million each — a sharp increase from the approximately 900 such recipients in 2008.

(Vivienne Walt, Even in Hard Times, E.U. Farm Subsidies Roll On; May. 14, 2010,)

Compare with this the Indian agro scenario;

“Around 90 million people are working in the dairy sector in India, most of them small scale farmers or herders and 70 per cent of them women.

(FTA will hurt livelihoods in India, Europe: civil society,The Hindu )

The subsidies provided to the Indian farm sector are miniscule as compared to that of Europeans farmers, that too the subsidies provided by the government are appropriated by the middlemen and the fertiliser companies.

The European commission is pressurising India to open its market by reducing the agricultural tariffs to almost zero, today the major European agricultural produce -- beverages including wines and spirits, cereal products, fruits and vegetables, dairy and meat products – face tariffs of between 20 and 70% in India. The CIAA, the Confederation of EU Food and Drink industries which lobbies for companies like Unilever, Coca Cola, Danone, Kraft Foods Nestlé etc is clamouring for reducing the tariff to zero and unrestricted market access for the European products. The Indian farmers and the agricultural sector per se is in no position to compete against the heavily subsidised European products.

European supermarkets eyes Indian retail sector

It is a well known fact that the retail market of Europe is saturated hence the supermarket chains like Tesco (of UK), Metro (Germany) etc are desperately trying to expand their operations beyond the current areas.

Though official estimates state that there are over 12 million small retail outlets in India, this number is grossly underestimated as large informal networks exist around retail, often composed of the poorest of the poor. In India 96% of the retail trade is comprised of small firms run by local people, and the sector employs about 33 million workers. But now the European retail giants, such as Tesco, Metro and Carrefour, are moving in, where, says Kumar, “they have been lobbying like mad”. A total number of 40 million people are engaged in retail trade in India.
Though FDI in retail trade is not permitted, but in the FTA it has been a major component to allow 100 per cent entry for the multinationals to do business in this segment. As noted by the journal Aspect of Indian Economy,

...Foreign retailers have already started operations in India through various routes: (i) joint ventures where the Indian firm is an export house; (ii) franchising (eg. Kentucky Fried Chicken, Nike); (iii) sourcing of supplies from small-scale sector; (iv) ‘cash and carry’ operations (Giant in Hyderabad, Metro in Bangalore)3; (v) non-store formats – direct marketing (Amway). Large international retailers of home furnishing and apparels such as Pottery Barn, The Gap and Ralph Lauren have made India one of their major sourcing hubs. Up to 100 per cent FDI is allowed in ‘cash and carry’ operations. The Great Wholesaling Club Ltd is one such example. In February 2002, the world’s largest retailer, Wal-Mart, opened a global sourcing office in Bangalore. In November 2006, it announced its entry under a joint venture with the Indian corporation Bharti. For the time being, Bharti is to own the chain of front-end retail stores, while the two firms will have an equal share in a firm that will engage in wholesale, logistics, supply chain and sourcing activities.”

(Dipankar Dey, FDI in India’s Retail Trade: Some Additional Issues, Aspect Of Indian Economy)


The big retail companies have made their business agenda the EU position with the trade associations Foreign Trade Association (FTA) and EuroCommerce as their lobbyist. How much pressure these retail giants can exert on government of India can be seen from the way they dealt with the street vendors protest that took place in the Left ruled West Bengal against the German retail giant Metro Cash and Carry. The city‘s marketing board did not allow the company to purchase and sell agricultural produce, the German Consul-General in Kolkata Gunter Wehrmann threatened “If Metro Cash & Carry does not get the required licence, this will be the death knell for any future German investment here in the eastern region. Metro is a household name in Germany and if they are unable to set up a store here, then other companies will also follow suit and prefer going elsewhere”, the Marxist Chief Minister of the state buckled and granted the necessary license bypassing the marketing board.

 Conclusion

The FTA as mentioned above is being pushed down the throat of the citizen of the country without letting them know what really is being discussed, in this entire process the business interest is being given the paramount importance and the people’s interest is being compromised at every level. Both the officials of EU and India, as well as, the business lobbies seem to be agreeing on the common scheme of maximising their profits.

The FTA being negotiated is in direct contravention to the Doha declaration, and they prioritise the interests of global capital and profit maximisation over people’s right and livelihoods.

 

THE PROLIFERATION OF FTAs

 

9 Ongoing FTA Negotiations:

    • EU (27 European countries)
    • Japan
    • EFTA (Iceland, Norway, Liechtenstein, Switzerland)
    • New Zealand
    • Malaysia
    • Gulf Cooperation Council
    • BIMSTEC (Bangladesh, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal)
    • Mauritius
    • SACU (South Africa, Botswana, Lesotho, Namibia)
 

4 FTAs signed, but under negotiation for expansion:

    • Sri Lanka (1998)
    • Thailand (2003)
    • SAFTA (2004)
    • ASEAN (2009)
 
11 FTAs under consideration and/or at various stages of development:
    • Australia
    • Canada
    • Chile
    • China
    • Colombia
    • Egypt
    • Hong Kong
    • Israel
    • Russia
    • Uruguay
    • Venezuela
 

India has also launched the process for a potential FTA with the United States through the “Framework for Cooperation on Trade and Investment”

 

The first Indian FTAs that include trade in services and investment: Singapore (2005) Korea (2009)

Other Signed FTAs: Nepal (07 ), Bhutan (06)

Total FTAs signed: 8

Total FTAs (signed, negotiating or at various stages of development/consideration): 29

 

 

 

31-12-2010