Governments should safeguard public interests while negotiating Free Trade Agreements, says a CUTS study
India has a social responsibility to make generic drugs and protect its citizens from high cost patented drugs of European companies. Moreover, it needs to assert that it cannot go beyond the parameters of the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement governing patent system in the negotiations with the European Union on signing a Free Trade Agreement (FTA), a latest study by CUTS International has observed.
The study by CUTS Centre for International Trade, Economics & Environment (CUTS CITEE) states that India has signed a number of FTAs with other Asian countries, such as Japan, South Korea, and South Asian Free Trade Area (SAFTA) in South Asia and with ASEAN which is yet to provide long-term sustainable benefits to the country. However, whether a FTA outside of Asian boundaries will benefit India has not been studied widely as these have not been concluded before. Most of previous FTAs were signed between the developing countries but this time it is between a group of developed countries, on one side, and a developing country, on the other.
Studies conducted by CUTS International show that for the EU, the social impacts of this FTA would be minimum, with no impact on wages, and only minor labour displacement, while for India there would be an increase in wages of skilled and unskilled workers of 1.7 percent in the short run and 1.6 percent in the long run, as well as some labour displacement in the direction of better-paying jobs.
From the Indian point of view, the investment provisions should be relaxed and not include investor-to-state arbitration mechanism. Indirect expropriation and fair and equitable treatment should be precisely and narrowly defined to protect legitimate government regulations in support of public health, access to medicines and other public interests from challenge by foreign investors.
Public interests at large must be safeguarded in negotiating FTAs by both the partners. To include transparency in negotiations, all existing negotiation documents and government commissioned studies must be made public. Current proposals from both sides must be debated and discussed in Parliament, with State governments and with civil society organisations. The study felt it is also important to take into account the impact of the FTA, in particular on labour standards, consumer protection, informal economy, agriculture, and generic medicines.
The study is of the view that India and the EU should start careful but speedy dialogue that must go beyond norms setting and lead to concrete action. It will require balanced economic bargaining and broad political alignment. In this context, the India-EU security dialogue which is happening since 2006 can be taken as an example. An FTA is favourable for both partners but it has to be finalised soon despite the economic and political challenges. Continuous deadlock on negotiations poses a challenge for political class from both the sides in their efforts to justify the status of India-EU strategic partnership.