Originally Published 2013-08-23 13:30:33 Published on Aug 23, 2013
With one seventh of the world's population and one of the fastest growing economies India has the potential to be a major player in global trade negotiations. It should bear this position in mind while moving ahead with the EU-India FTA.
EU-India FTA: Is India undermining its position as a defender of the developing world?
"India was once considered the champion of the developing world, but its recent participation in bilateral trade agreements provokes a questionable outlook on this stance. Over the past decade India has taken a lead role in defending developing countries’ industries in the multilateral negotiations at the World Trade Organization (WTO), where responsibility for global trade governance has rested since its creation in 1995. The Doha Development Round at the WTO has more recently come to a standstill, putting the credibility of multilateralism in jeopardy and encouraging developed and developing countries alike to enter into alternative agreements such as Free Trade Agreements (FTAs) or Preferential Trade Agreements (PTAs). India is no exception to this trend and has entered into trade negotiations with the European Union (EU), as well as South Korea, Japan, Chile, ASEAN, and many others. The EU-India FTA, whose negotiations began in 2007, is a groundbreaking potential deal and the largest FTA that India has ever negotiated. The key point of interest with this agreement is that for the first time ever as part of a bilateral trade deal India is negotiating issues that go beyond the WTO protective measures in areas such as agriculture, intellectual property, and foreign direct investment. India is facing negotiations on areas that it has staunchly protected at the multilateral level. This provokes the question of whether India is undermining its position as a defender of the developing world’s rights at the WTO. India has a long history of fighting to protect developing countries’ rights at the multilateral level. A number of India’s past Ministers for Commerce have gained loud reputations in the media for their tenacious negotiating styles. Murasoli Maran, Minister for Commerce from 1999 to 2002, is known for his successful consolidation of developing nations at the Fourth Session of the WTO Ministerial Conference at Doha in 2001. And Kamal Nath, Minister for Commerce from 2004 to 2009, has often been cited as the major cause of the breakdown of the 2008 Doha Round in Geneva i and was nicknamed "Dr. No" by one business lobbyist for his obstinacy at the negotiating table.ii Nath considered special provisions for developing nations under the WTO, such as the Special Safeguard Mechanisms (SSMs) or Special Products (SPs), as "not negotiable" and followed Prime Minister Manmohan Singh’s view that "unless India’s interests are protected New Delhi should not move forward"iii with negotiations. India has in particular defended its standpoint on agriculture, environmental goods, intellectual property rights, public procurement, trade facilitation, investment and IT. But many of these issues are now on the negotiating table for the EU-India FTA, signalling potential compromises for India. Agriculture has been a major point of contention in the Doha Round and has always been strongly defended by India. The Indian agricultural sector is one of the most protected of its kind in the world and 70% of India’s population depend on it as their primary source of livelihood.iv Current trade barriers exist in India to stop cheaper subsidised products from abroad flooding the market, increasing India’s agricultural trade deficit, and putting India’s farmers out of business. Maran was party to the inclusion of agricultural negotiations in the Round in 2001 that would allow India to address its food security concerns through export tariffs and safeguard mechanisms. However these negotiations have been consistently stalled and were considered the sticking point at the Geneva talks in 2008, partly due to India’s persistence in protecting the sector. At these talks there was irresolvable disagreement between India; China and the US over agricultural subsidies in developed countries and SSMs, the latter allowing for developing countries to impose a temporary special tariff barrier on products in the case of a sudden price drop or import surge. Nath would not compromise on these issues and stated that "any deal which does not result in substantially and effectively reducing all types of trade-distorting subsidies provided by the developed countries will not do justice to the more than 2 billion poor and vulnerable farmers across the world."v He stood strongly against what he saw as the developed world’s commercial exploitation of the livelihoods of millions of farmers in developing countries. Under the current FTA negotiations, the very export tariffs and safeguard mechanisms that Maran and Nath have fought for at WTO are being challenged by the EU. The FTA provisions include bringing down tariff barriers to nearly zero on 90% of product lines, including agriculture, within the next seven years. There is provision for protecting certain sensitive products, but given the closed nature of the talks, we cannot know which these will apply to. If India accepts tariff reductions it is likely the "free trade" aspect of the agricultural market will nevertheless continue to be distorted by non-tariff barriers such as highly subsidised EU products. Agricultural subsidies in the EU under the Common Agricultural Policy comprise the largest proportion out of all spending areas of the Multi-Annual Financial Framework budget set at 38% for the period 2014-2020. The EU has not yet agreed to negotiate these subsidies as part of the FTA,vi and therefore it is likely that low-priced EU products would push many Indian products out of the Indian domestic agricultural market, leaving many Indian farmers out of business. If India were to accept major tariff reductions in the agricultural sector in the EU-India FTA it would undermine the work that India has carried out multilaterally. Another area that has been strongly defended by India at WTO, but challenged by the EU at the bilateral level, is intellectual property, particularly with regards to access to essential medicines in the developing world. At the 2001 WTO Ministerial Meeting, Maran was, with Brazil, at the forefront of negotiations ending in the Doha declaration on Trade-Related Aspects of Intellectual Property Rights (TRIPS), vii which confirms a country’s right to implement safeguard mechanisms such as compulsory licensing or parallel importation to overcome patent barriers. These provisions have allowed India to continue to support its generic medicines industry, which is the global leader in producing antiretrovirals and other medicines to the developing world cheaply.viii At WTO in 2001 Maran asserted that "availability and affordability of essential medicines is a universal human right. WTO should not deny that right." ix However, the EU is seeking to implement what is known as "TRIPS plus" provisions in the EU-India FTA, which go beyond the WTO’s protective measures. "TRIPS plus" typically includes patent-term extension, limiting the use of compulsory licensing, blocking the import, export and transit of generic drugs, and introducing data exclusivity clauses. The EU issued a statement in April 2013 stating that "the FTA will in no way affect access to medicines in India, nor in other developing countries" and that it "will not require India to introduce any kind of data exclusivity provisions," however as regards intercepting drugs transiting through Europe the EU says that "adequate vigilance from EU customs is necessary to prevent fake drugs from entering the market." x Since the negotiations are taking place behind closed doors it is not possible to know which clauses the EU really are proposing. The Indian pharmaceutical sector is highly prized in the developing world, and there is no reason to assume that India would agree to any new intellectual property provisions. However, pressure from the West is mounting on India to change their patent laws in light of the recent patent dismissals for the pharmaceutical companies Novartis and Pfizer in India have sparked resentment in the EU and US. If India makes any compromises on their position on intellectual property rights at the bilateral level, it will have to consider the consequences this set precedent will have for future TRIPS negotiations at WTO. A final two aspects that India has resisted in WTO negotiations, but faces in EU-India FTA negotiations, are foreign direct investment (FDI) and opening up the services sector. At the Doha Round in 2001, Maran asserted that India was strongly opposed to including such issues in multilateral negotiations because they would restrict the government’s ability to develop economic and industrial policies for national development.xi Maran’s interventions achieved a push back of the consideration of foreign investment at WTO by two years, from 2005 to 2007.xii Opening up FDI and the services sector in India have been a key part of the EU’s requests in this FTA, and this in an area where concrete action has already been taken by India. The much-protected areas have seen major changes recently in order to accommodate these requests and further facilitate the completion of the FTA negotiations. Raising FDI caps in areas such as multi-brand retailing and insurance was seen as crucial to the FTA by the EU, and particularly by Germany. xiii Finally in August 2013 India raised the FDI cap up to 49% in several sectors including single-brand retail, multi-brand retail, state-run oil refineries, commodity bourses, power exchanges, stock exchanges and clearing corporations, xiv while a bill to raise FDI to 49% in insurance is pending at the Rajya Sabha.xv These actions taken by India on FDI show the country’s willingness to compromise on certain issues for the FTA negotiations, but it remains to be seen whether it is willing to compromise on other areas such as agricultural trade and intellectual property rights. There is a tight time schedule to complete the negotiations that have been continuing for six years due to several changes taking place in the next two years that would stall negotiations, including the change of headship of WTO in September 2013, German federal elections in September 2013, Lok Sabha elections in May 2014, and European Parliament Presidential elections in 2014. According to an official EU source, if the negotiations are not completed before the end of the monsoon session this year, it is likely that they will be stalled indefinitely. xvi With time pressure mounting on both the EU and India, both sides should be advised not to make hasty compromises. It cannot be assumed that India will make compromises for the EU-India FTA in any of the areas that it has staunchly defended at the multilateral level, but if it does, it must be wary that any action taken may undermine its traditional role as a champion of the developing world. If India compromises on agriculture or intellectual property, it may contradict its past actions. If India agrees to provisions at the bilateral level that go beyond WTO protective measures it will set the precedent for future North-South FTAs and weaken India and the developing world’s negotiating position at the multilateral level. With one seventh of the world’s population and one of the fastest growing economies India has the potential to be a major player in global trade negotiations. It should bear this position in mind while moving ahead with the EU-India FTA. (The author is a Researcher at the Observer Research Foundation)  i    http://southasiainvestor.blogspot.in/2008/07/india-blamed-for-dohas-death.html ii    http://www.ft.com/cms/s/0/392e46b6-574c-11dd-916c-000077b07658.html#axzz2cUPSqflt iii    http://news.oneindia.in/2008/07/16/livelihood-concerns-primary-doha-kamal-nath-1216220700.html iv    Asher, M., S. Bhutani, C. Chemnitz, R. Hoffman, A. Paasch, S. Ramdas, and R. Sengupta. 2011. ’Right to Food Impact Assessment of the EU-India Free Trade Agreement,’ in Ecofair Trade Dialogue. Published by Misereor (Aachen), Heinrich Böll Stiftung (Berlin), Third World Network (Penang), Anthra (Secunderabad), Glopolis (Prague). v    http://commerce.nic.in/pressrelease/pressrelease_detail.asp?id=1780 vi    Asher, M., S. Bhutani, C. Chemnitz, R. Hoffman, A. Paasch, S. Ramdas, and R. Sengupta. 2011. ’Right to Food Impact Assessment of the EU-India Free Trade Agreement,’ in Ecofair Trade Dialogue. Published by Misereor (Aachen), Heinrich Böll Stiftung (Berlin), Third World Network (Penang), Anthra (Secunderabad), Glopolis (Prague). P.26. vii    http://www.financialexpress.com/old/wto/inter3.html viii    http://www.doctorswithoutborders.org/publications/article.cfm?id=6837&cat=speech ix    http://bookstore.teriin.org/docs/journals/doha.pdf, p.211 x    http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_150989.pdf xi     http://bookstore.teriin.org/docs/journals/doha.pdf, p.213. xii    http://www.wright.edu/~tdung/Doha_result_WSJ.htm xiii    http://www.thehindu.com/business/Economy/indiaeu-fta-talks-likely-to-hit-roadblock/article4695909.ece xiv    http://articles.economictimes.indiatimes.com/2013-08-02/news/40964021_1_fdi-policy-fdi-caps-stake-sale xv    http://timesofindia.indiatimes.com/business/india-business/Govt-allows-100-FDI-in-telecom-hikes-insurance-cap-to-49/articleshow/21106372.cms xvi    Personal communication. "
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