FTA? Nothing free about it
The Times of India | 14 May 2010
FTA? Nothing Free about it
Biraj Patnaik
There is a growing chorus of voices against the slew of Free Trade Agreements (FTAs) that India is lining up. In recent months, for instance, organizations of farmers, fish-workers, groups working on patent issues and trade and development NGOs have been protesting against the proposed FTA between the European Union and India.
FTAs are bilateral agreements signed between two countries or between an individual country and a trading bloc like the European Union or ASEAN. Countries agree to reduce or eliminate tariff and non-tariff barriers, over a period of time to facilitate trade in goods and services. World trade, in recent decades, has been driven through multilateral trade instruments, facilitated by the World Trade Organization. Developing countries collectively bargain in multilateral forums vis-à-vis developed countries and these negotiations are often long-drawn since each group tries to extract as much as it can while protecting domestic interests.
However, the last round of multilateral talks – the Doha round – was not able to achieve the desired consensus and multilateral trade negotiations have been held up for the past few years.
Depending on the bargaining power of the countries involved, FTAs go much further in liberalizing and prying open domestic trade and services than multilateral agreements facilitated through multilateral forums.
Therefore, developed countries and the major trading blocs, especially US, Japan, ASEAN and European Union, are signing FTAs with developing countries that will allow them to access markets for their goods and services while protecting their own domestic interests. Since FTAs typically go much further than multilateral agreements, they make future rounds of trade negotiations redundant and even further strengthen the bargaining capacity of the developed countries since a nation that has already agreed to a higher set of bilateral concessions through FTAs has little to lose by extending these to a subsequent multilateral
negotiation.
In India, what compounds matters further is that the government does not need legislative approval for signing trade agreements. Much of the discussion, therefore, on FTAs is non-transparent and done behind closed doors, even though the content of the agreements may impact millions of people. The Centre does not even consult state governments. Thus, even as the Norway-India FTA may impact the livelihoods of millions of small fish-workers in coastal states like Kerala, West Bengal and Orissa, their concerns are unlikely to be heard when the FTA is being negotiated.
The EU-India FTA could force India to open up its financial services sector to banks and other financial institutions in the EU, leading precisely to the kind of risky capital inflows into India and the attendant dangers that led to the global financial meltdown. With the EU insisting that all government procurement, which accounts for 13% of GDP in India, be opened up to EU companies as part of the FTA, it is likely to have far-reaching consequences on a wide range of sectors.
Further, over the past few years, India has developed a patent regime that gives precedence to patient rights over the interests of pharma companies, emerging as one of the major sources for cheap generics being used worldwide. Almost 80% of HIV/AIDS patients in developing countries have access to generics manufactured in India. Indian patent laws also allow patient groups to oppose pharma company patents through pre- and post-grant opposition mechanisms. All of this is done under the provisions of the current multi-lateral agreement on Trade Related Intellectual Property Rights. With the EU insisting on TRIPS-plus conditions, the supply of life-saving medicines will be denied to millions of people in India and the developing world.
Current provisions of the draft EU-India FTA are likely to place the interests of plant breeders over farmers, leaving the Indian farmer more vulnerable. Since the EU is insisting on elimination of duties on 90% of tariff lines, it is likely to lead to a surge of exports from EU which would lead to large-scale unemployment in many key sectors.
The only thing to be said with certainty about free trade and free markets is that they have never existed. That Indian policy makers are willing to compromise the interests of the poor while chasing the elusive chimera of free trade does not portend well for the average Indian.
Biraj Patnaik is principal adviser to the Commissioners of Supreme Court in the Right to Food Case. The views expressed in this article are his own.
