Press statement issued by BJP Senior Leader,
Dr. Murli Manohar Joshi
Prime Minister Manmohan Singh, while announcing his road map for restoring the country's economic health in the coming year, had stressed that the UPA government would vigorously pursue the economic reforms which amounted to open several economic sectors to foreign capital and multinational financial agencies. It may be recalled that several financial experts and also political parties have questioned these measures which in the opinion of BJP need to be discussed through an informed debate in and outside the Parliament. The economy is already suffering from acute anaemia and it will not be prudent to allow it to bleed further.
What is even more surprising that the UPA government is now engaged in the final phase of the negotiations for the highly controversial Free Trade Agreement (FTA) with the European Union (EU) without taking in to account the opposition by several development experts and many stakeholders. Irrespective of ideological considerations, the conditions which, according to reports, the UPA government is willing to concede to EU will seriously jeopardize the interests of the Indian people with no obvious gains in trade or economic expansion. There are hundreds of FTAs between countries and whatever little gains, if at all, India is likely to gain will erode fast due to the same country's treaties with other countries. In the process India also looses the policy space which it will never get back. As UNCTAD notes, "the gains for developing countries from improved market access through FTAs are not guaranteed, and may be short lived, but the loss of policy space is certain." Through the current negotiations on FTA with EU India will certainly lose the policy space in several sectors of its economy.
According to reports in the First Post, India stands to gain very little from this FTA, because close to 69 percent of its agricultural exports and 65 percent of its non-agricultural export already enter the European markets without duties, whereas it allows only less than six percent of the former's products without duty. Under the proposed FTA, India has to remove 90 percent of the tariff, but there is no assurance that the EU will lift its subsidies that are disadvantageous to Indian agriculture. No, there is no provision to discuss subsidies in the FTA. So, in the short and long run, it will be bad for both farmers and agro-industries in India.
Once the FTA becomes active, the EU will flood the market with products in dairy, poultry, sugar, wheat, confectionary, oilseeds, plantation products and fisheries, some of which are strategic for India. This will directly compromise India's agricultural sovereignty and its food security. Obviously, an FTA which talks only about tariffs, and not about trade-distorting tricks such as subsidies and other incentives is detrimental to our agriculture.
Incidentally, access to food is a human right under the Universal Declaration of Human Rights and the International Covenant on Economic, Social and Cultural Rights (ICESCR) of the United Nations (UN).
Another area that will impact India is opening up of procurement in central and state government institutions. This is the lifeline of many of Indian industries and medium and small enterprises, including small businesses run by women and other disadvantaged communities. If this is opened to the EU, the SMEs will find it extremely hard to survive.
Imagine a situation when our small vendors have to compete with EU for contracts in Railways or other public sector undertakings. India hasn't so far given this facility to any other FTA-partner, and acceding to the EU will lead to demands by others. Small town India vendors competing with a high-tech vendor in Japan or Germany for government contracts doesn't sound like level-playing field. It's not about exclusive, technologically demanding area, but routine contracts.
India already has an increasing trade deficit since 2000-01 with the EU, which stood at 3309.3 million USD in 2008-09. Projections (CEPII-CIREM 2007) show that after the FTA even in the industrial sector India will make gains only in textiles & garments, and leather. The only significant variation in value for India is in textiles (3573 mln USD) and in industry and manufactures (807 mln USD). Even in the latter, India's market share in EU will remain unchanged. In addition, EU NTBs in the textile sector is a problem for India. However EU's bilateral trade will increase significantly in industry and manufactures, primary products, vehicles, textiles, leather and clothing, and in agro food. In fact EU's gain in industry and manufactures (7947 mln USD) alone is almost double the gain India will have from textile, garments, and leather.
MSMEs feel they are not given a 'level playing field' in competing with developed countries if the reported conditions are accepted. Since infrastructure in India including that of marketing, storage and transportation are weak, entrepreneurs feel their competitors in the developed countries have huge advantage in terms of basic facilities. In addition they get significant support from the government. The UK government just released a new document in support their SMEs. In India, while certain policies are supposed to encourage MSME exports and production, almost all the entrepreneurs feel that they are not able to avail these facilities in reality.
Another important concern is: investment provisions in FTA not only provide post investment protection but also pre-establishment rights including market access commitments. Such commitments in FTAs would lock in India and may take away the opportunity to review the foreign investment in certain sectors in certain circumstances. For instance, India is now facing challenges from pharmaceutical MNCs due to their aggressive acquisitions of Indian generic companies. This may compromise access to medicines to people of India at an affordable price. One of the most discussed policy response is to put a cap on FDI in pharmaceutical sector. Such response may not be possible if India locks in certain sectors for foreign investment without any safeguards.
The intellectual property rights chapters proposed in this FTA goes beyond the TRIPS Agreement, which will also give European companies considerable market power. Further, EU is also demanding liberalization of FDI through FTA and thus establishes linkage between trade and investment, which was successfully opposed by India during the WTO Cancun Ministerial Conference in 2003. These will also undermine the space of the government to enact policies to redress development inequalities.
Several media reports have suggested that EU is pressuring India to liberalize many sensitive areas which India cannot commit. The EU wants India's commitments in retail where millions of small businesses are dependent. The EU also wants India to open up sensitive areas such as banking, insurance, postal services, and energy which India can not afford.
BJP demands:
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A comprehensive debate in parliament during the second half of the Budget session on all FTAs entered and especially on EU-India FTA.
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Immediate release of negotiating text and impact assessment studies of FTAs particularly EU-India.
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Government should not go ahead on the Bilateral Trade and Investment Agreement (BTIA) with EU without a political consensus and a conference of all stake holders be immediately convened.
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FTA with EU should not be allowed to endanger the Indian retail in general and agriculture and dairy farming in particular.
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All Treaties which impinge upon the sovereignty of the country and the fundamental rights of the people including food security and health, and the federal structure of the country should be ratified after the scrutiny of the Parliament.
(O.P. KOHLI)
Headquarter Incharge
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