Kerala will bleed if India negotiates trade deal in secrecy: Why can’t the Modi govt consult states?

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The News Minute | 3 August 2016

Kerala will bleed if India negotiates trade deal in secrecy: Why can’t the Modi govt consult states?

by Tushar Dhara

When it comes to free trade negotiations ‘secretive unitarism’ is the norm rather than ‘cooperative federalism’, Lutyens Delhi’s current buzzword.

A letter written by Kerala’s Agriculture Minister VS Sunil Kumar shows that when it comes to trade negotiations, New Delhi prefers non-transparency to consultations. The letter pleads with Union Commerce Minister Nirmala Sitharaman, to “protect the livelihood security” of Kerala’s farmers while negotiating the Regional Comprehensive Economic Partnership (RCEP) “at any cost”. It further adds that state governments must be consulted on matters regarding categorisation of agricultural commodities and fixing of import and export tariffs.

Finally, the letter states that Kerala is interested in consultations on the tariff structures of rubber, coconut, tea, coffee, spices, cashew, dairy and seafood. RCEP is a proposed free trade agreement (FTA) that will be one of the world’s largest. It is currently being negotiated between India, the 10 member-ASEAN, China, Japan, South Korea, Australia and New Zealand. It will have a combined population of 3 billion, a GDP of $17 trillion and 40 percent of global trade. It will bind the Asia-Pacific region into a close economic trading bloc.

History Repeats Itself, First as Tragedy

In 2009, a 600 km human chain stretched across the length of Kerala. It was the culmination of vehement opposition in the state to the India-ASEAN FTA. Then chief minister VS Achuthanandan wanted an assurance from the Centre that Kerala’s agricultural produce wouldn’t be harmed by cheaper imports. New Delhi went ahead and signed the deal anyway. As Sunil Kumar’s letter makes clear, tariff concessions on the import of palm oil, tea and pepper caused distress to Kerala’s small and marginal farmers. There are reports that rubber, spices, coconut oil prices also collapsed due to Southeast Asian imports. Kerala pepper had to compete with cheaper Vietnamese varieties. Prices for home grown rubber collapsed and coconut oil had to compete with cheaper palm oil from Malaysia.

Then as Farce…

Fast forward to the present! India is negotiating a trade deal that will bind it to Asia Pacific’s manufacturing and agricultural powerhouses. No one, least of all the states who bear the actual consequences, has a clue about what is being negotiated, the tariff lines being conceded, the products in the negative list, and what sectors and states will be affected.

“The southern governments haven’t been asked and neither has the Centre produced any papers regarding the costs and benefits,” KM Gopakumar of the Third World Network said on the side lines of a BRICS consultation organized in New Delhi by Oxfam India and others. Civil society has been demanding transparency and accountability in multilateral trade negotiations, including holding consultations with all the stakeholders.

Just to be clear, this is not only about Kerala. All states in India are equally affected. From the perspective of the other south Indian states, milk and cereals from Andhra Pradesh, Telangana and Tamil Nadu, coffee and rice from Karnataka and seafood products from all the coastal states could take a hit.

There is growing awareness about the potential negatives of RCEP among farmers in Kerala, since the state has a voluble tradition of debate and is home to the most argumentative Indians. This has to be viewed in the context of the opposition to the India-ASEAN FTA.

A more practical reason for the Centre to hold consultations with states is that agriculture is a state subject. They should know what is being bartered away and what is being gained by New Delhi. “When agriculture is being negotiated internationally the state should be in the loop,” Biswajit Dhar, a trade economist, who teaches at the Jawaharlal Nehru University said in an interview.

States also worry about upsetting agricultural lobbies, which have a disproportionate influence on political power. Although every state is different, there is some evidence that the reason the UDF lost in Kerala was due to the collapse of rubber prices, observes Sridhar Radhakrishnan, Director of Thanal, a Thiruvananthapuram-based organization that works on agricultural and environmental issues.

A lack of investment in Indian agriculture has rendered it uncompetitive internationally. Biswajit Dhar estimates that India faces stiff competition from Vietnam and Indonesia in coffee and Thailand and Myanmar in rice. Kerala, Thailand, Indonesia and Malaysia are among the world’s largest rubber producers. Cheap imports of coffee, rubber and fish have flooded Kerala’s markets.

A case in point is pepper. Vietnamese pepper has a huge price advantage and the nation is more efficient at growing the spice than Kerala. The tragedy is that the pepper seeds that travelled to Vietnam originally went from Kerala! The Southeast Asian nation has since become the largest producer of the spice in the world, accounting for 34% of the world’s production.

Other sources of potential competition are dairy products from New Zealand and Australian wheat and manufactured goods from China. A history of the India-ASEAN FTA is instructive to try and figure out how the RCEP will pan out.

The intention was to reduce tariffs on a majority of traded goods and increase market access to each other’s products. However, since the ASEAN nations are largely export-oriented economies, while India’s is largely consumption driven, the Southeast Asian nations enjoyed much greater access to Indian markets than the other way around.

Apart from the tedious minutiae of global trade negotiations, there are deeper questions involving democracy and popular legitimacy. Slavoj Zizek frames the issue as "the permanent plebiscite of global markets" to the "plebiscite of the ballot box", with sovereign states increasingly opting for the former at the expense of the latter.

Zizek argues in the essay that the key decisions concerning the economy are negotiated in secret so that finance capital is unencumbered. The same process shrinks the space for decision making by democratically elected politicians, who are reduced to writing letters to trade negotiators pleading for a voice in economic processes that affect their constituencies, but in which they have no say. This is the real meaning of the letter from Kerala.

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source: The News Minute