14th May, 2013
Ref: Appeal to Critically Evaluate India’s Gain in the EU-India FTA on the Eve of 15th May Negotiations
Dear Shri Sharma,
This is an urgent appeal to you from various sections of the society; civil society organisations, farmers’ organisations, trade unions, academics, industry associations, students, and others; to relook at the EU-India FTA from both a development as well as an economic perspective.
From available news reports, it seems that the negotiations on the 15th May between the two sides will lay the seal on the final ministerial and possible signing of the FTA in June. Unfortunately negotiations have been shrouded in secrecy without even the knowledge of the parliament. However, based on available information, we want to bring to your attention a critical perspective shared by all of us.
Current analyses show that India cannot make gains in the agriculture sector and can make very limited gain in the industrial sector whereas the EU will gain massively in terms of gaining access to the Indian market. On the other hand, 68.9% of India’s agricultural exports and 64.3% of its non-agricultural exports to the EU already enter duty free. Given EU’s massive agricultural subsidies, and high standards and technical barriers, additional real market access in the EU will continue to remain difficult for Indian producers. Industries like dairy (Amul), and automobiles (SIAM) have already raised concerns as to adverse impacts of duty cuts and intellectual property demands (such as related to GIs) of the EU in these sectors. Moreover, available information shows that gains will be limited only to sunset industries such as textiles which have limited future growth potential.
The large majority of India’s people work and earn in the agriculture and industrial sector. Any adverse impact on growth and employment prospects in these two sectors will critically impact the lives of Indian people. Moreover ensuring access; to food and the means to produce and sell it, and, to a wide variety of industrial products, is also in the long term interest of Indian society.
On the other hand, from current reports, the gains in the service sector do not seem clear either. The EU continues to refuse to grant data secure status to India, and significant additional entry for Indian professionals is hardly likely to materialise especially under EU’s current conditions of crisis. In any case, it is not justified either on economic or development grounds, to trade away the jobs of millions in agriculture and industry for a few professional visas in the IT sector. This is especially important as India has not yet reached a stage of human development where displaced workers from agriculture, industry or informal services can directly move to the IT sector for jobs.
In addition, EU’s insistence on locking in current FDI liberalisation in retail, banking and other service sectors can critically affect future policy space to roll back such measures if these were seen to create negative impacts on jobs, access to critical services, or even exacerbate economic crisis (through financial liberalisation). Moreover EU’s guidance on domestic legislation, for example, in the insurance sector, is a gross violation of the independence of Indian democracy.
India’s trade deficit currently stands at nearly 200 billion USD and at a massive 10.92% of the GDP, and is coupled with a current account deficit (CAD) of 78.155 billion USD at a high 4.5% of the GDP. India has not done so well from its past FTAs and as we anticipate huge imports from the EU after this FTA, the trade deficit and CAD are likely to go up further. Given India’s current macroeconomic situation, signing this FTA is not a prudent economic option for India.
Further, EU’s demands to liberalise government procurement will also grossly undermine the growth opportunities for the domestic industry and destroy the domestic linkages that this huge market provides to MSMEs and ancillary suppliers. It will also limit the use of this market as a development policy tool for promotion of marginalised groups.
On the other hand, EU’s demands in the field of IPRs, specifically its enforcement measures, and investment protection will significantly hamper the growth of the generic medicine industry and threaten access to medicine for the majority of India’s patients. Investment protection, sought by EU for all its 27 members, will make it impossible for the government to promote policies to protect public interest, public health, natural resources and the environment, the poor, women, children and the elderly.
We therefore appeal to you to immediately;
- · inform the Indian people, with substantiating evidence, exactly in which sectors and by how much is India gaining;
- · inform the Indian people as to who is benefitting from this FTA and whether broad based interests of a large number of people, such as in agriculture and industry, are being safeguarded;
- · place impact assessment studies on all sectors and negotiating texts for public scrutiny;
- · consult with state governments and gain their consensus especially on areas under state and concurrent lists (such as agriculture, health);
- · take on board the critical concerns expressed by political parties and in particular, the Parliamentary Standing Committees on Commerce and Agriculture.
We appeal to you to halt the EU-India FTA negotiations until the government can guarantee an FTA that is inclusive in its design, process and impacts, and one that will uphold the traditions of Indian democracy.