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A deal still on the drawing board, India

A deal still on the drawing board

The India-EU free trade agreement is yet to see daylight. Labour and environmental issues may derail it

By Biswajit Dhar

4 July 2011

The proposed free trade agreement (FTA) between the 27- member European Union (EU) and India has evoked considerable interest since the negotiations commenced in 2007. This agreement was projected as “one of the new generation of EU FTAs launched as part of the global Europe strategy”, the focus of which was market opening and stronger rules in new trade areas of economic importance to the EU, including intellectual property rights (IPR), services, investment, public procurement and competition.

Importantly, the strategy emphasized that the “FTAs must be comprehensive in scope, provide for liberalization of substantially all trade and go beyond World Trade Organization (WTO) disciplines”. While the EU had clearly stated its intent, India saw the FTA as the key to unlock the services markets in Europe.

In many ways, the EU-India FTA was seen as a complement to the trade liberalization agenda pursued by WTO as a part of the Doha Round of multilateral trade negotiations. However, as the Doha Round started sinking, this bilateral deal became even more important for the two partners. Reflecting this sense of priority, in the EU-India Summit in December 2010 both EU and India pledged political support for concluding the deal at the earliest.

The expectation at the beginning of the year was that the summer of 2011 would witness the endgame, but clearly things have not worked as per the plan.

However, in the past few weeks, the European Parliament has been witness to a series of debates on the EU-India FTA negotiations, which provides a ringside view of the state of play. It is fairly evident that the agreement is in the works. This is the least that can be read from the broad brush statement of EU trade commissioner Karel De Gucht to the European Parliament that “there are also still some thorny issues on the table which require difficult negotiation”.

While speaking of the “thorny issues”, the trade commissioner was not referring to the area of intellectual property rights, or more specifically the contentious issues of access to medicines, which has hogged much of the limelight in the public debates. De Grucht informed his peers that this FTA “will not undermine the capacity of India to promote, produce or export generic medicines, including through compulsory licences”. This seems to be the strongest statement yet that the European negotiators are making attempts to understand the sensitivities of their counterparts.

A European Parliament resolution on the FTA tabled a few weeks back by three of the top four political groups, the European People’s Party (Christian Democrats), Alliance of Liberals and Democrats for Europe (ALDE) and the European Conservatives and Reformists (ECR) has, however, put the negotiating dynamics in a very different light. The resolution, which was adopted by Parliament, recommended that “an evaluation be carried out of the existing sector specificities in order to identify potential disadvantages of the FTA for sensitive EU sectors”. As always, negotiations on temporary movement of labour, the so-called Mode 4 in trade in services, have raised the hackles of the members of European Parliament (MEP). The MEPs have instructed the commission that a thorough analysis be carried out in relation to the individual member states in order to avoid negative consequences for the EU labour market, while permitting temporary stays of necessary skilled professionals.

Members of these groups have also spelt out the areas in which the EU negotiators can use extra leverage and bring added advantages to their industries. The MEPs appear to be redrawing the negotiating contours by stating that the objectives for “industrial goods should be reciprocal full [import] duty elimination, with asymmetry in timing, and that any possible exception to this objective should be limited and subject to review and should not involve the exclusion of sectors that are of importance to both sides, such as passenger cars”. Again, in the services sector, the MEPs have asked the negotiators to explore the opportunities and scope for liberalization of several services sectors such as legal services and accounting services, banking, insurance and retail.

The resolution is positive for India as it could result in a radical shift in the EU’s negotiating position on IPRs. Echoing India’s concerns regarding access to medicines, the MEPs have asked the negotiators “not to request data exclusivity in the context of IPR negotiations, and to recognise that data exclusivity would have far-reaching consequences for the production of generic medicines” in India. As the MEPs have alluded to, data exclusivity, when introduced, results in blocking entry of generic firms, which could result in higher prices of medicines in the country.

Notwithstanding the positive element introduced in the negotiations, India should be concerned for the resolution has proposed inclusion of “legally binding clauses on human rights, social and environmental standards and their enforcement, with measures in the event of infringement”.

The set issues that the MEPs would like to see in this chapter include two of the most problematic ones: (i) compliance with the eight core conventions of the International Labour Organization (ILO) and four priority conventions and (ii) adherence to internationally agreed environmental standards. These are areas that are potentially deal breakers as far as India is concerned.

Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi