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An increase in trade liberalisation coupled with the introduction of new competition can set new demands for certain domestic industries.In instances where domestic industries are struggling to survive, various trade remedies are available to protect them from foreign competitors. The retention of trade remedies in trade agreements serves the purpose of obtaining political support needed for the successful implementation of the agreement and assures import-competing sectors in member states that protection against unanticipated consequences of liberalisation is available. When there is a sudden surge in imports, countries can temporarily safeguard themselves in an effort to protect the affected domestic industry. Traditionally, these safeguard measures were only available for application under World Trade Organisation (WTO) rules; but with the proliferation of trade agreements in recent years, such measures have also been included on a regional and bilateral level. While global safeguards concern the application of safeguard measures on a multilateral level, regional or bilateral safeguards refer to measures addressing distortions which come about as a result of implementing regional of bilateral trade agreements.The rules of the WTO provide that safeguard measures must be applied without discrimination. Regional or bilateral safeguards, however, address only the adverse effect of the regional or bilateral liberalisation and are therefore only applicable between contracting parties. For this reason these measures are also known as ‘transitional measures’, as they may not be invoked after the termination of the transition period. Global and regional safeguards are different institutions dealing with problems arising from different free trade initiatives. The General Agreement on Tariffs and Trade (GATT) Article XIX, together with the WTO Agreement on Safeguards, remains the generally applicable safeguard regime at a multilateral level. Safeguards in regional and bilateral agreements vary greatly: from agreements containing no general safeguard measure to agreements with detailed and rigid provisions and conditions for implementation.All of the regional and bilateral agreements which contain safeguards do nevertheless share similar characteristics and are comparable to some extent with the WTO Agreement on Safeguards. For this reason the multilateral rules on safeguards were analysed to provide a basis on which the regional and bilateral agreements can be compared. The examination of the regional and bilateral safeguards is therefore patterned on the design of the WTO Agreements on Safeguards and provides for several topics which include conditions for invocation, investigation procedures, applying
the safeguard measure, duration of safeguard measures, provisional application, compensation for loss of trade, special treatment for developing countries and dispute settlement.Even though the rules and procedures for transitional safeguard measures are built into the agreements, they still need to be applied within the framework of GATT Article XXIV. The argument has been made that intra-regional safeguards are in conflict with this provision.This is due to the requirement that restrictions have to be eliminated on ‘substantially all trade’. The flexibility of the article does, however, allow for intra-regional safeguard application. Only if the measure is invoked on a significant percentage of the regional trade, will the question arise whether the remaining trade qualifies as ‘substantially all trade’. In addition to regional and bilateral safeguard,special safeguard mechanisms are applicable in certain situations where protection could usually not be obtained otherwise. These measures provide additional protection to traditionally sensitive sectors like agriculture and textiles and clothing. The provisions have different requirements and conditions for the invocation regarding notification, strength and length of implementation, compensation, option of retaliation and the determination of serious injury.These special measures were also examined to determine the difference between them and the normal safeguard measures.
Free trade is a type of trade policy that allows traders to act and transact without interference from government. Thus, the policy permits trading partners mutual gains from trade, with goods and services produced according to the theory of comparative advantage. Under a free trade policy, prices are a reflection of true supply and demand, and are the sole determinant of resource allocation. Free trade differs from other forms of trade policy where the allocation of goods and services amongst trading countries are determined by artificial prices that do not reflect the true nature of supply and demand. These artificial prices are the result of protectionist trade policies, whereby governments intervene in the market through price adjustments and supply restrictions. Such government interventions generally increase the cost of goods and services to both consumers and producers.
Interventions include subsidies, taxes and tariffs, non-tariff barriers, such as regulatory legislation and quotas, and even inter-government managed trade agreements such as the North American Free Trade Agreement (NAFTA) and Central America Free Trade Agreement (CAFTA) (contrary to their formal titles.)--any governmental market intervention resulting in artificial prices that do not reflect the principles of supply and demand. Most states conduct trade polices that are to a lesser or greater degree protectionist. One ubiquitous protectionist policy employed by states comes in the form agricultural subsidies whereby countries attempt to protect their agricultural industries from outside competition by creating artificial low prices for their agricultural goods.
FEATURES OF FREE TRADE
Free trade implies the following features
trade of goods without taxes (including tariffs) or other trade barriers (e.g., quotas on imports or subsidies for producers) trade in services without taxes or other trade barriers The absence of "trade-distorting" policies (such as taxes, subsidies, regulations or laws) that give some firms, households or factors of production an advantage over others
• • •
Free access to markets Free access to market information Inability of firms to distort markets through government-imposed monopoly or oligopoly power The free movement of labor between and within countries The free movement of capital between and within countries
FREE TRADE AGREEMENT (FTA)
Free trade agreements (FTAs) are generally made between two countries. Many governments, throughout the world have either signed FTA, or are negotiating, or
The agreements are like stepping stones towards international integration into a global free market economy. There are another way to ensure that governments implement the liberalisation, privatization and deregulation measures of the corporate globalisation agenda. It is assumed that free trade and the removal of regulations on investment will head to economic growth reducing poverty and increasing standards of living and generating employment opportunity.
Past evidences show that these kinds of agreements allow transnational corporations (TNCs) more freedom to exploit workers shaping the national and global economy to suit their interests. In simple terms it removes all restrictions on businesses.
FTAs severely constrain future governments in their policy options and help to lock in existing economic reforms which may have been imposed by the IMF, World Bank or Asean Development Bank, or pursued by national governments of their own volition. It work towards removing all restrictions on businesses as other free trade and investment agreements perform. FTAs are sometimes of narrow range in their dealing of traded goods. You can note the USCambodia bilateral textile trade agreement which was extended in January 2002 for a further 3years. India and Sri Lanka signed a free trade agreement in December 1998 with India agreeing to a phase out of tariffs on a wide range of Sri Lankan goods within 3 years, while Sri Lanka agreed to remove tariffs on Indian goods over eight years. One of its objectives which was stated was to contribute, by the removal of barriers to bilateral trade "to the harmonious development and expansion of world trade".
Other FTAs are much more comprehensive and cover other issues including services and investment. These agreements generally take existing WTO agreements as their benchmark. They often strive to even go further than what is set out in the WTO rules.
FREE TRADE AGREEMENT: IMPORTANCE
There are a number of things that make free trade agreements important. • • Obstacles such as taxes, quotas and tariffs are removed. The inability to distort trade policies gives every player an equal opportunity in the global market. The absence of government interference prevents the formation of monopolies and oligopolies. • • • Capital can move freely across territorial borders. Free access to markets and market information. Greater opportunities of employment, with the free movement of labor between countries.
HISTORY OF FREE TRADE AGREEMENTS
The theoretical questioning of protectionism began in England and other parts of Europe during the sixteenth century. Rationalizations were made to advocate the policy of free trade. Adam Smith, in the mid-eighteenth century, proposed the thought that free trade was the reason for the prosperity of most of the civilizations. The emergence of the Dutch as an economic power, after the dominance of Spain declined, brought the free trade versus mercantilism dispute into the limelight. Classical liberals promoted the concept of free trade on the basis of its favorable position in terms of world security.
FTA: LIST OF AGREEMENTS
Some of the important free trade agreements operating among the various nations of the world are listed below:
North American Free Trade Agreement (NAFTA): Mexico, Canada and the US. European Economic Area (EEA): EU and non-EU members of Europe
• • •
ASEAN Free Trade Area (AFTA): Southeast Asian nations Latin American Integration Association (ALADI): South American countries Commonwealth of Independent States Free Trade Agreement (CISFTA): CIS
Free trade agreements also strengthen the political relations between countries apart from benefiting them commercially.
TRADE AGREEMENTS AND TRADING BLOCS
These two concepts are close related. A trade agreement general leads to a trading bloc being formed. A trading bloc is generally defined as “two or more countries bound by a specific agreement which determines some or all of their international trade practices and which usually provides for common import tariffs on certain, if not all, imported products.” Some economists argue that although trading blocs are see as a means of reducing trade restrictions (between the countries involved), they themselves represent a form of trade barrier as they exclude non-members. Different types of trade agreements/trading blocs Trade agreements/trading blocs also come in different forms, involving increasing levels of co-operation. Examples include:
Free Trade Areas (FTA) – This is the simplest kind of trading bloc and incorporates a two or more countries that have agreed to eliminate tariffs and other barriers to trade amongst members, but individually each country retains its own tariffs on imports from other non-member countries. Perhaps the best example of a FTA is the North American Free trade Area (NAFTA).
Common Monetary Area (CMA) – A Common Monetary Area is when countries usually geographically closely located to each other agree to accept one dominant currency as legal tender. South Africa has had such an agreement in place with Swaziland and Lesotho. We discuss the SA Common Monetary Area in more detail below.
Customs Union – A Customs Union goes one step further than an FTA in that it abolishes all tariffs amongst member countries, while members agree to a single, external tariff on goods imported from outside the Customs Union. Revenue generated by the Customs Union is shared amongst members based on a specific formula. The South African Customs Union (SACU) is one of the oldest Customs Unions still in place. We discuss the SACU in more detail below.
Common Market – In a Common Market, like with a Customs Union, a common tariff is placed on imports from other non-member countries, while no tariffs are exist on goods produced by one member country and sold in the other member country’s. The main additional difference between a Customs Union and a Common Market is that with the latter, the free movement of labour and is capital is also permitted. In other words, any restrictions on immigration, emigration and cross-border investment (amongst member countries) are abolished. The current European Union developed from the European Economic Community, a form of Common Market. The Common Market for Eastern and Southern Africa (COMESA) and the Caribbean Community – formerly the Caribbean Community and Common Market (CARICOM) are perhaps the two best examples of Common Markets.
Monetary Union – In the case of a Monetary Union, member countries agree to use a single currency or to fix their rates of exchange for the respective currencies. Essentially, a Monetary Union includes a Common Market Area (discussed above), the difference being, that a Monetary Union involves far greater integration and cooperation amongst member countries. The best example of a monetary union is European Union in which member countries have agreed to use a new, single currency – the euro! There are many other Monetary Unions in place .
Economic Union – Beyond the free movement of labour and capital, an economic union incorporates the harmonization of economic policies amongst member states, including the integration of monetary policies, economic policies, taxation and other regulatory requirements. European Union is perhaps the only true Economic Union in place today
This is list of free trade areas between three or more countries, mainly notified to the General Agreement on Tariffs and Trade/World Trade Organization and in Force.
Every customs union, trade common market and economic and monetary union has also a free trade area. Smaller agreements, that are part of larger one are not listed. AANZFTA — ASEAN+3 African Free Trade Zone (AFTZ) Asia-Pacific Trade Agreement (APTA) Central European Free Trade Agreement (CEFTA) Commonwealth of Independent States Free Trade Agreement (CISFTA) Dominican Republic – Central America Free Trade Agreement (DR-CAFTA) Economic and Monetary Community of Central Africa (CEMAC) European Economic Area (EEA) -EC — Andorra -EC — CARICOM -EC — OCTs -EC — Switzerland and Liechtenstein -EC — Turkey Economic Community of West African States (ECOWAS) EFTA — SACU Greater Arab Free Trade Area (GAFTA) Latin American Integration Association (ALADI) North American Free Trade Agreement (NAFTA) South Asia Free Trade Agreement (SAFTA) South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) Trans-Pacific Strategic Economic Partnership .
INDIA AND WORLD TRADE ORGANISATION
The setting up of World Trade Organisation (WTO), as legacy of Bretton Wood institutions and as successor of GATT wef January 1, 1995 ushered in a new regime of international
trade – a regime which viewed the world as a global economy and where all the constituent countries irrespective of the status of development were to call the shots on an equal footing. Expanded scope of jurisdiction of this multi-lateral trading body with inclusion of agriculture, services, investment measures and patent issues gave rise to expectations of a new international economic order (NIEO) which was just and fair. In this respect it is important to note two basic principles of WTO: MFN treatment and national treatment.
The WTO agreements cover goods (GATT), services (GATS) and intellectual property (TRIPS). They spell out the principles of liberalization and the exceptions permitted. They include commitments of individual countries to lower customs tariffs and other trade barriers, and to open services markets and keep them open. They set procedures for settling disputes. They prescribe special treatment for developing countries. They require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted, and through regular reports by the WTO secretariat on their trade policies. These agreements are often called the trade rules of the WTO, and the WTO is often described as ‘rule-based’. But it is important to remember that the rules are actually agreements that governments have negotiated.
This world trading body with assigned tasks of administering WTO trade agreements, to act as a forum for trade negotiations, handling trade disputes, monitoring technical assistance & training for developing countries and cooperating with other international organisation moved ahead through its six ministerial conferences so far. Ministerial Conference is the highest decision making authority of WTO on all matters under multilateral trade agreements. Since its inception in 1995, the WTO has held six Ministerial Conferences – in 1996 in Singapore, in 1998 at Geneva, in 1999 at Seattle, in 2001 at Doha, in 2003 at Cancun and in 2005 in Hong Kong. Today, the WTO has 149 members, together accounting for 90% of world trade. These members are mostly country governments, but can also be customs territories. There are nearly 30 applicants negotiating to become members including Russia. The main benefit of membership in the WTO is the right not to be discriminated against, in its trade with other members of the WTO. This principle of non-discrimination in trade is fundamental to the WTO and set down in the MFN and national treatment clauses.
In case a country is not a member of the WTO, it has to conduct international trade with other countries under bilateral agreements which may need to be renewed periodically and whose terms and conditions may also change. Membership of the WTO ensures that the country concerned undertakes international trade transactions with other WTO membercountries under a predictable and stable trade regime. Another important benefit of membership is that it gives a country the right to take part in WTO meetings and trade negotiations, and therefore the opportunity to shape future international trade to its advantage.
When the Uruguay Round of GATT talks was in progress during early 1990s, Indian economy was ailing and was totally on out of track. Under this compelling situation, India adopted new economic reforms (NERs) in 1991 based on Rao-Manmohan Model as a crisisdriven strategy. Macro Economic Stabilization (MES) which covered reforms in monetary policy, fiscal policy and external sector was brought to provide immediate relief to ailing economy. But, structural reforms, also called SAP (Structural Adjustment Programmes), was meant for long term reform process which covered components of industrial policy reform, PSU reform, financial sector reform and trade & capital flow reforms. Then crisis-driven reforms has now reached to consensus driven under second generation of our reform policies. These changes in Indian economy based on LPG (liberalization, privatization and globalisation) gave rise to a new market economy that brought growth and development in India. In this context, the emergence of WTO as multilateral world trade body to make tradefriendly environment at the global level and Indian attachment to this body could be understood.
India, one of the founder member of WTO, had its own expectations as well as reservations about the new economic order. While it unleashed great opportunities for agriculture and textiles sectors by improving their access to developed countries (as provided in AOA – Agreement on Agriculture and phasing out of MFA – Multi Fibre Agreement), it has some grey areas in the form of provisions for patent regime and services sector. As the events gradually unfolded, India, like other developing countries recognized that the rules of the game were not favourable to them and they must play an active role within the permissible limits to ‘minimise the damage.’ In the last decade, our economic agenda and the policies to be pursued have been largely shaped by the WTO commitments.
India adopted the process of globalisation and WTO rulings as a facet of structural reforms. It brought devaluation in currency in 1991 and also adopted convertibility system in Indian Rupees in different stages. Trade and current account have been made fully convertible and we are moving towards capital account convertibility regime, though cautious and as a long term objective. Various steps have been taken towards import liberlisation in India, for example, de-licensing, de-canalisation & expansion of OGL (open general license), removing quantitative restriction, lowering peak custom rate, etc. India has also adopted a very liberal policy towards foreign capital to attract direct foreign investment and portfolio investment. Insurance and print media have been opened for private competition. India has made following changes in the economy as mandated by WTO.
Quantitative Restrictions (QRs) have been completely phased out in 2000-01 and only the tariff structure remains which itself has been lowered considerably, with 67% of the tariff lines being bound.
Patent law has been reformed with amendment of Patent Act (2005). It provides for product patent in pharmaceutical and farm products.
Under the TRIMs (Trade Related Investment Measures) agreement, restrictions on entry of foreign investment and conditions upon various aspects have been removed and relaxed. Except a few sectors, FDI is being allowed upto 100% through automatic route and Indian companies are also free to invest abroad.
Under the GATS (General Agreement on Trade in Services), India has made commitment in 33 activities where foreign service providers are allowed to enter keeping in view national interests.
India’s legislation on Custom Valuation rules, 1998 has been amended to bring it in conformity with the provisions of WTO agreements on implementation of article VII of GATT 1994 and the Customs Valuation Agreement.
A survey of last 15 years since adoption of new economic reforms and specially after joining WTO, it is now clear that we have done well and still lot of scope remained for further development. The process of globalisation and the provision of WTO have had, no doubt, some important positive implications. Under this process, a platform has been created for different types of multilateral agreements. Multilateral regulation and discipline have been established & imposed and upto certain extent, trade-friendly environment has been created. Disputes are being solved & managed and trading activities are getting protection. India is also getting the benefits of this emerging trade-friendly environment.
Indian exports, specially exports of agricultural good, have been increased. The Doha Development Agenda, though passing through hard times, is built on the long term objective of the AOA to establish a fair and a market-oriented trading system. India could be highly advantaged with DDA. During the ongoing negotiations, India and other developing countries have sought a special safeguard mechanism (SSM) for addressing situations of import surges or swings in international prices of agricultural products.
The market access under Doha Work Programme has enormous potential for increased growth in agricultural exports. Also, the cost of imported goods has been reduced, in turn promoting the production of exported goods. The opening of economy has also brought increased competitiveness and prosperity in India. This has made possible for greater reach of foreign capital, foreign technology, foreign services and managerial skills in India and thus, promoting overall economic growth and development.
NAMA negotiations provide an opportunity for India to have an improved access to developed countries, especially in sectors that are employment-intensive. India welcomes negotiations over NAMA (Non-Agriculture Market Access) mandated by the Doha
Ministerial declaration (2001) aims to liberalise trade in industrial and consumer products, in particular in products of export interest to developing countries. The negotiations cover all products not covered under the AOA.
But, we have to be very careful because this process of globalization and WTO system has some drawbacks which could hamper Indian interest. First, under GATS, which provides a framework to regulate trade in services, seeks to commit member countries to provide improved market access and national treatment obligations in different modes of supply. In India, services accounted for 51 % of GDP in 2000-01. Still, India lacks a developed service sector and also latter has a social role to play. In this respect, opening service sector could invite negative implications.
TRIPS agreement sets the minimum level of protection to various forms of intellectual property. It also specifies enforcement procedures, remedies and dispute resolution procedures. Under the TRIPS agreement, India has brought product patent wef 01 January 2005 to replace process patent. One general concern is price hike. Under the new patent regime, drug multinationals could be indulged in monopoly practices. provisions if related with agriculture could have adverse implications. TRIPS In India, the
responsibility of plant and seeds development has been mainly with PSUs that have considered the broader interest of farmers. Now, opening this sector linked with patent rights could hamper farmer’s interest and self-reliance. Similar repercussions could be there if TRIPS provisions are linked with biotechnology.
The Agreement on trade-related Investment Measures (TRIMs) covers conditions on investment related to trade in goods. The agreements under TRIMS cover: all restriction on foreign capital, company and investment to go; all measures in the form of various conditions to be dismantled; no bar on extent of foreign investment; restrictions on repatriation of dividends and royalty to be eliminated, and national treatment with foreign investors. Under the agreements, there is no provision regarding banning of restrictive type of economic activities. Choice of selection in investment would be eroded and basic infrastructure may be
neglected. One argument is that it could have detrimental effects on indigenous development and MNCs/TNCs could eclipse Indian markets and the decision-making.
However, somewhat painful, but these measures were implemented more or less by consensus but the agreements which were expected to favour developing countries to a greater extent have not received an enthusiastic support from the developed countries as reflected in the failure to implement DDA (Doha Development Agenda) reached in 2001.
The negotiation round undertaken at the Ministerial Round at Doha ended by taking effect as the DDA. It was a landmark achievement and built on the long-term objective of the AOA (Agreement on Agriculture, comprises domestic support, market Access and Export Competition) to establish a fair and a market-oriented trading system through a programme of fundamental reforms, keeping in view the provisions for special and differential treatment for developing-country members to pursue agricultural policies that are supportive of development goals, poverty reduction strategies and food security and likelihood concerns. Since its launch in 2001, the Doha round has had a chequered record. Trade negotiations have tended to flounder and all deadlines have been missed because of the uncompromising positions adopted by some member countries. DDA also deals with liberalization of trade in industrial and consumer products which are of great export interest to developing countries under NAMA (non-agriculture market access). Developed country’s effort to include labour and environmental issues as a precondition to have better market access were partially thwarted by India and other developing countries who argued that labour issues were to be dealt with ILO (International Labour Organisation). Also, India succeeded in underlining the importance of non-trade concerns like food security, rural development, PDS for the developing countries.
In 2005, WTO Conference in Hong Kong resolved to complete Doha Work Programme and conclude negotiations in 2006. It also called for elimination of all export subsidies by 2013 and also adopted ‘Swiss formula’ to lower tariffs proposed under NAMA.
But in the case of services, India has been unable to get any binding commitments from developed countries.
This trend of crisis of indecisiveness reached its climax in June 2006 WTO miniministerial meet (participation by six important trading blocs – India, the United States, the European Union, Brazil, Japan, and Australia) in Geneva with no agreement reached on cuts in subsidies and tariffs in agriculture, NAMA issue and ‘flexibilities’ to be provided to developing countries. The immediate cause of the meeting collapse was US intransigence. The developing countries refused to give up in to the unreasonable demands of the US (and EU) in what was supposed to be a “development round” of trade negotiations. However, World Trade Organization chief Pascal Lamy has endorsed India’s stand in global trade talks but asked New Delhi to look at the “bigger picture” and help break the impasse in the negotiations. He said even if India pursued bilateral trading pacts with the US and EU, it would still have to open up its markets for their products and services.
This increased inability of this international organization to deliver effectively and the rising frustration from belied expectations that developing countries like India have been nurturing since long has led to some ‘rethinking.’ Moreover, India, along with Brazil, as representative of developing countries has to consider various policy options about the agenda and the strategy to be followed in the future. One body of opinion holds that India should join the FTA bandwagon, give the importance of US market in the economy. But experience of other countries who have joined such agreements with US vis-à-vis experience of India (and China) shows that we have been doing well without such FTA.
Another choice to be made is with respect to the strategy of negotiating – whether bloc style negotiations where all the developing countries act as a block or issue-based coalitions of a mix of developed and developing countries. As the recent outcome of Geneva talks prove the fact that India, along with Brazil can not influence the major powers and are intended to be merely used as instruments to win over developing countries for an unequal deal. It would be in its best interest that it shifts focus from serving as facilitator or catalyst
for an agreement to asserting its solidarity with the developing countries as this is the only hope for garnering a positive outcome from the Doha round. A setback to multilateral trade as visualized in the Doha round means that the disputes settlement mechanism of the WTO may be overburdened as individual countries engage in “tit for tat” policies rather than abide by the rules of fair trade that should have been in place. India always stands for rule-based multi-lateral trading system to ensure that structural flaws in trading are effectively eliminated.
INDIA FREE TRADE AGREEMENT EU–INDIA FREE TRADE AGREEMENT
In June 2007, the European Union (EU)’s European Commission and the Government of India started negotiating a Free Trade Agreement (FTA). This new generation FTA covers many areas other than trade in goods viz. trade in services, investment, intellectual property rights, competition policy, government procurement etc. Hence, these negotiations are going to have far reaching consequences both for the policy space of the Indian state and on the lives and livelihoods of Indian citizens. So far, five rounds of the negotiations have been completed and a proposed sixth round which was meant to take place in New Delhi in the last week of November has just been postponed. In addition to the EU, India is currently negotiating with 20 other countries and regions including Japan and the European Free Trade Association (EFTA). FTAs negotiations with more developed economies are likely to have similar agenda with minor variations in the design and architecture of the agreement.
Studies1, including those based on rigorous computable general equilibrium reveal that FTAs between developing and developed economies do not extend much advantage to developing countries such as India. The reasons behind poor gains to developing countries from FTAs are many. Firstly, they undermine the right of ‘special and differential treatment’ specifically recognized under the World Trade Organisation (WTO) framework. Under this right, developing countries are not required to equally reciprocate. In contravention to this special treatment, the above FTAs demand full reciprocity. Secondly, many FTAs with developed countries contain provisions related to investment, intellectual property, competition policy, government procurement, services etc. and require crucial changes in national law and policy in developing countries. Such changes reduce the policy space available for developing countries especially in these critical areas. Thirdly, preferences obtained through FTAs with developed countries do not last long as these countries are also negotiating with a range of other developing countries including competitors in the same product range. Lastly, developed countries are using FTAs to bring into place an international trade regime on terms not conducive to
developing or least developed countries. FTAs are a preferred route for this as multilateral negotiations afford developing countries collective bargaining space while FTAs do not. Once sufficient FTAs are in place, the new regime can then be pushed more easily through multilateral forums like the WTO at a convenient time.
Context of EU-India FTA negotiations The EUs interest in pushing these ‘expanded’ FTAs is part of a broader agenda to maintain Europe’s competitive edge in the world economy. This has been clearly spelt out in 2006 document released by the European Commission entitled ‘Global Europe: Competing in a Globalized World.’ This document outlines EU’s new international trade policy stressing an aggressive push for market expansion for European goods in, and imports of raw materials from, the Global South through a series of FTAs. It notes, “Measures taken by some of our biggest trading partners to restrict access to their supplies of these inputs are causing some EU industries major problems. Unless justified for security or environmental reasons, restrictions on access to resources should be removed.”
More specifically, on FTAs, the document states, "In terms of content new competitiveness-driven FTAs would need to be comprehensive and ambitious in coverage, aiming at the highest possible degree of trade liberalization including far-reaching liberalization of services and investment”.
According to the Global Europe document, the criteria for the selection of partners for FTA negotiations are market potential (indicated by size and growth of the economy) and the level of protection against EU export interests. Based on the above criteria, the Commission prioritized India as a key strategic target because of its large market, the numerous trade and non-trade barriers against EU interests and in order to beat its main competitors by completing a far-reaching trade and investment treaty. Currently, the EU is India’s biggest trading partner while India ranks ninth in terms of size in the list of trading partners for the EU.
The roadmap for the EU-India FTA is also revealed in the ‘Report of the EU-India High Level Trade Group (HTLG) to the EU-India Summit’ dated 13th October 2006. This Report makes detailed observations and recommendations on the issues to be negotiated between India and the EU including massive reductions in tariff.
EU-India FTA: Issues of Concern The FTA proposed by the EU raises a series of concerns with regard to peoples’ livelihoods and policy space for developing an inclusive development strategy. The text of previous FTAs concluded by the EU shows that these agreements undermine development and pursue a corporate agenda that favors multinational corporations based in the EU.
In the present backdrop of a global financial, food and fuel crisis, future policy space for governments becomes an essential lens with which to assess the merits of negotiating an FTA with the EU. Based on news reports, the current proposals on trade in goods would significantly increase food insecurity and livelihood risks for both the agriculture and manufacturing sectors.
Some of the major issues of concern for India in an FTA with the EU include:
1. Massive reductions in tariff 2. Import surge.
3. Impact on livelihoods.
4. Unequal impact of tariff reductions
5. Automatic extension of MFN clause to EU.
6. Imposition of full reciprocity; undermining India’s special and differential treatment
7. Inclusion of Singapore Issues 8. Expansive liberalization in services and investment 9. TRIPS-plus intellectual property protection
10. Creating advantages for MNCs through ‘effective competition’
11. Liberalising government procurement 12. Extreme and unwarranted secrecy in negotiations Food security, livelihoods and access to healthcare threatened by EU-India FTA In conclusion, in addition to creating serious short and long-term economic vulnerability, the EU-India FTA could have major food security, healthcare and livelihood implications that must be assessed in detail. The current global crisis signals a critical need to democratize trade policy processes so that elected bodies and civil society can have a voice in the choices governments make. This democratic process is a central pillar to ensure that governments are accountable to their citizens. Current “free” trade and investment policies are proving to be highly costly to citizens even as their governments negotiate away their right to regulate. These policies also severely constrain policy space for domestic policies that favour just, equitable and environmentally sustainable development. It is of grave concern that the EU-India FTA negotiations till date have been marked by a gross absence of transparency and public debate. The Indian Government’s consultations have been limited to large corporate and commercial interests and have completely by-passed those most likely to be adversely affected by the FTA. There is an urgent need for an informed public debate on the feasibility and efficacy of the FTA with the EU.
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