Why India must not rush into international free trade agreements

India is in the middle of negotiating several significant agreements on trade, investment and related issues with some of its most important trading partners including the European Union, the UK and the USA.

This should be the time for very extensive consultations with all important stakeholders including organisations representing farmers and industrial workers, women’s organisations, health organisations and the state governments on protecting the interests of the country, its economy and all vulnerable groups.

Unfortunately, instead of this, some of the negotiations with far-reaching implications are taking place in conditions of non-transparency and without most people becoming aware of their implications and impact.

Talks with the European Union for a Free Trade Agreement (FTA) had broken down around 2013 and were revived last year. There are several aspects of the demands being made by European negotiators which can be potentially harmful for important sectors of the Indian economy.

In the case of farm and dairy products, significant reduction in tariffs is being sought from the Indian side, despite the fact that Indian farmers and dairy farmers, which are very small units compared to their European counterparts, are likely to be exposed to unfair competition. What is more, the European farmers have access to much bigger subsidies.

The EU negotiators have also taken positions that will strengthen their big seed multinational companies which are also known to link sales of their seeds with highly hazardous agro-chemicals. Livelihood issues, farming and dairy farming are critical areas in India, and the country cannot possibly risk a major disruption in these areas (on top of the problems that already exist).

In the case of medicines, EU negotiators are asking for patent provisions that go beyond the WTO-TRIPS provisions. These will create problems for production and availability of cheaper generic medicines while prolonging monopolistic patents resulting in more expensive medicines. Hence, not only patients with low resource base in India but patients in several other countries, who depend on generic and cheaper medicines from India, will be adversely affected.

Fuller liberalisation of government procurement policies is being sought in this FTA, which can have adverse implications for priority procurement by the government from indigenous providers, particularly from small and medium enterprises and women’s self-help groups.

Additionally, in the case of raw materials and energy, concessions are being sought which will adversely impact the ability of the government to protect the country’s resource base as well as the environment.

In return for making major concessions in crucial sectors, some of India’s exporters in certain sectors may well receive reciprocal concessions, but they will come at the cost of weaker sections and hence the overall structure of the trade agreement will be of increasing inequalities. At the WTO too, European Union has often taken up positions which are detrimental to India’s interests.

A senior researcher of the Third World Network Ranja Sengupta writes in a paper written for Heinrich Boll Stiftung, ‘While the EU and India are and will remain major trading partners and key allies on many global issues, the signing of an FTA between the two very unequal partners with different ambitions may be counterproductive.’ More consultation and more transparency, therefore, are required before entering into far-reaching trade agreements.

Several objections have also been raised to India’s participation in the Indo-Pacific Economic Framework for Prosperity (IPEF), a trade agreement led by the USA. Recently 31 organisations including the All India Kisan Sabha, All India Drug Action Network, All India People’s Science Network and Jan Swasthya Abhiyan asked for India’s withdrawal from the agreement.

In an open letter to the government, they stated that while the US has strategically pitched the IPEF as ‘not the usual’ trade agreement (as it does not include market access commitments such as import duty cuts), this should not mislead the Indian government into believing that the IPEF will only involve cooperation and no commitment to open up imports.

On the contrary, the letter added, ‘the IPEF is actually more intrusive than FTAs as it targets national policies and regulations across member countries and will therefore make deeper inroads into India’s regulatory policy space. Therefore, the IPEF is likely to push US interests not through direct market access channels, but through changing regulations and standards, which will then indirectly lead to market access in the second stage.’

The organisations suggested that the prevailing belief among some trade officials that the IPEF will not be enforceable and is a ‘soft’ agreement which can be negotiated and finalised quickly—as it does not pose any legally binding commitments—may not reflect the actual situation. ‘From our analysis, the IPEF will include “high standard commitments that will be enforceable” and India will have to comply with any commitment it makes.

The IPEF’s four pillars (trade, supply chains, clean economy and fair economy) will include provisions on multiple sectors including agriculture, fisheries, manufacturing and services, as well as on farmers, fishermen, workers and women. In particular, the IPEF will also impact policies related to the digital economy, environment and sustainability, taxation and finance among others, they added.

Agriculture is a key area. While India will not have to make direct tariff cuts, the IPEF will still extract commitments for facilitating agricultural trade through ‘science-based decision making’ and the adoption of ‘sound, transparent regulatory practices’.

Despite sounding innocuous, these provisions will allow the US to ensure a more favourable regulatory regime in IPEF countries for enhancing its exports of genetically modified (GM) seeds and GM food. Not only will this preempt India’s policy options to restrict import and sale of GM products, but also any surge in imports of products, such as GM corn and GM soybean, that are major exports of the US, will significantly hurt the livelihoods of Indian farmers.

Clauses in the IPEF impacting the digital economy are facing opposition even in the US as means to ensure that Big Tech remains unregulated. Big Tech is one of the biggest supporters of IPEF.

The letter says, ‘Countries like India, which for very good reasons have stayed out of digital trade related negotiations at the WTO and elsewhere, face the prospect of complete digital colonisation if it sacrifices its policy space in this key area. India needs its own rapid digital industrialisation, and signing the IPEF would in the circumstances be suicidal.’

The IPEF remains a non-transparent and undemocratic trade agreement that is unilaterally designed and promoted by the most powerful economy in the world, the letter claimed, being ‘nothing but a backdoor channel for the US to set global standards and regulations and secure the market interests of US-based multinational corporations (MNCs).’

We should, therefore, look at the combined impact of all the important trade treaties being negotiated so that the issues are better understood within the country and decisions arrived at which best protect the interests of the economy as well as the vulnerable sections.

(Bharat Dogra is an author and honorary convener, Campaign to Save Earth Now)