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India-EU deal hits political rocks

Inter Press Service

India-EU Deal Hits Political Rocks

David Cronin

14 March 2007

BRUSSELS, Mar 14 (IPS) — A planned free trade deal between the EU and India has run into serious difficulties over whether or not it should include clauses relating to human rights and weapons of mass destruction. But anti-poverty campaigners have also argued that an agreement is undesirable as it could potentially reduce India’s control over its own economy.

The idea of launching free trade talks was agreed at an EU-India summit in Helsinki last October. Over the past few weeks, though, two vexed issues have threatened to stall the process.

The EU is bound by a 1995 decision by its government leaders that any trade or political agreement with the wider world contain a commitment to human rights and democracy. But the Union’s executive, the European Commission, has been arguing that an exception should be made for India, which does not want this clause inserted.

Commission officials say that human rights are already covered by a 1994 cooperation agreement between the European Union and India and that a free trade accord should be limited to economic issues.

Similarly, India is opposed to having a clause relating to weapons of mass destruction (WMD). Although the clause would commit India to supporting international conventions against chemical and biological weapons, it would not deal with the nuclear Non- Proliferation Treaty, which India has declined to accept.

Annalisa Giannella, adviser on WMD to the Union’s foreign policy chief Javier Solana, confirmed earlier this month that some EU states are willing to omit such a clause. She argued that if the EU fails to apply to India the WMD clause it systematically includes in agreements with other countries, this would "establish a terrible double standard."

Although India’s Commerce Minister Kamal Nath last year predicted that the EU agreement should be "one of the easiest" in a series of international accords it hopes to reach, he has recently stated that the human rights clause would be a "deal-breaker".

Non-governmental organisations, meanwhile, suspect the EU has a hidden agenda. One reason why it is pursuing a bilateral trade deal could be to ensure that India no longer sides with other developing countries at the World Trade Organisation (WTO) level.

"The EU may be using a strategy to divide developing countries in the WTO negotiations," Astab Alam, head of ActionAid’s trade campaign told IPS. "The EU and the United States want to capture the markets of developing countries through bilateral agreements, when they are not able to succeed in the WTO."

The EU has cited India and Brazil’s reluctance to prise their markets open to western firms as one of the reasons why the Doha round of world trade talks has so far been unsuccessful.

Peter Mandelson, the European trade commissioner, is seeking to have investment issues included in a bilateral deal with India. This is despite investment being taken off the agenda of the Doha round, following protests from developing countries. Anti-poverty advocates are concerned that a deal designed to placate Western multinationals would reduce India’s ability to restrict the activities of such firms within its borders.

"Recent research on free trade agreements by Oxford University has shown that they generally work in favour of the stronger party," Alam told IPS. "Since the EU is stronger than India in terms of economic and political muscle, I fear that the EU would benefit more. The EU wants to push its agricultural and industrial products on India, given that it’s such a big market. This would not be useful for poor farmers and industrial workers in India.

"The EU is only interested in its own mercantilist interests, rather than the multilateral trading system," he added. "It wants to get market access at any cost."

Mandelson’s policy of pursuing bilateral deals has driven a wedge between EU trade officials and their counterparts handling development aid. "The EU used to complain that the U.S. was bypassing the multilateral system by going after bilateral deals," said a senior development official, speaking on condition of anonymity. "But now the EU is doing exactly the same."

A procession of senior European politicians has visited India this year.

Mariann Fischer Boel, European commissioner for agriculture, told an audience in Mumbai last week that India needs to address its high import tariffs and duties on food and agricultural products, particularly those affecting Europe’s wine and spirits sector.

"If we get things right, our bilateral agri-food trade has potential to grow from its current level," she said. "This is true for your exports, which were worth about 1.2 billion euro (1.6 billion dollars) in 2005; and I feel it is particularly true of ours, which are currently very modest, at 200 million euro (264 million dollars) in 2005."

While the EU accounts for almost 20 percent of India’s total external trade, India is only the EU’s tenth largest trading destination, at 1.8 percent. India also receives less than one percent of the EU’s foreign direct investment.

"Bilateral trade agreements could be negotiated more rapidly than a WTO agreement," said Carlos Gonzalez, an India specialist with the employers’ federation Business Europe. "One does not exclude the other, however. We believe that in parallel to the Doha round, the EU can negotiate with countries of interest.

"We also believe that there will be a reduction of poverty after a free trade agreement. The aim should be to have a further opening for European companies in India. This will create jobs there that are sometimes better paid than what local firms can offer."

As well as mulling over the whether the impasse over human rights will scupper a bilateral deal with the EU, the Indian government was this week considering the future of the Doha trade talks.

When Pascal Lamy, the director-general of the World Trade Organisation, visited Delhi for discussions with government figures Monday (Mar. 12), he was met by protests from trade unionists, farmers and migrant workers.

The protesters pointed out that more than 600 million people depend on agriculture in India, and insisted that trade liberalisation must not be allowed damage their livelihoods.