The widespread optimism about the possible signing of the India-European Union (EU) Free Trade Agreement (FTA) sometime in 2010 fails to take into account the many thorny issues that remain to be resolved. Not the least of them are the tariff negotiations on goods and some agreement on the trade in services. Apart from these , an area of concern is sustainable development and climate change raised by members of the European Parliament. Lena Kolarska-Bobinska, Member of the European Parliament (MEP) and vice-chairwoman for the delegation for relations with India, points out that some 30 to 70 non-governmental organisations (NGOs) have raised several issues relating to environmental aspects, marginalisation of groups of people and global warming in their meetings with MEPs.
The FTA was stuck because of these issues as NGOs were opposing the trade agreement as it could contribute to bigger social disparities in India, she says. Ms Kolarska-Bobinska also referred to complaints that the Indian government was providing no real data on the impact of the FTA. Climate change and poverty alleviation were a concern for the MEPs and the European Parliament will put a lot of stress on these issues, apart from trade protectionism. A plenary session of the Parliament in Strasbourg this week will address some of these concerns.
Trade negotiations started between the India and the EU in 2006, roughly the same time as with Korea and while the FTA with Korea is almost finalised, the one with India after seven rounds of negotiations is nowhere near closure. The EU is thrusting itself as a single unified market with 27 countries. It is India’s largest trading partner accounting for approximately 77 billion euros in trade in goods and services in 2008, whereas India is ranked tenth in the list of EU’s main trading partners. The EU feels that India needs to further open up its market and accelerate market reform and address such matters as customs tariffs and the many non-tariff trade barriers, as well as considerably improve its infrastructure.
NGOs, however, pinpoint the social dimensions of the proposed FTA. Barbara Specht, advocacy officer, Women in Development Europe (WIDE), Brussels, feels there is a total lack of transparency, democratic process and public debate on the FTA. Until now, seven rounds of trade talks between the EU and India have been concluded without any negotiating texts or positions of either party being made public and without consulting key civil society constituents in Europe and in India.
Ms Specht says that so far it has been agreed that both parties would eliminate at least 90 per cent of tariff lines which for the Indian government means a substantial loss of customs revenue. In the past, revenue loss led to an increase in direct and indirect taxes as well as to cuts in public spending. It also includes a decline of investments in public services and cuts in subsidies of, for example, food grains, affecting women primarily.
Another area of impact is the liberalisation of government procurement which is an integral part of the mandate of the European Commission. Public procurement includes public utilities at state, provincial and local governance level in India and the EU has not stated that it would exclude essential services such as infrastructure for health, education and water from its demands.
In the arena of services, which is hotly debated as well, with the help of the FTA the EU would like to achieve significant liberalisation of the banking sector. A special report by Kavaljit Singh, titled “India-EU FTA: Should India open up the banking sector?” brought out by Madhyam, a policy research centre, questions the much-touted benefits of opening up this sector. The report asks whether big European banks are going to augment the reach of the banking system to millions of Indians citizens who have no access to basic banking services. What specialisation and experience do European banks have when it comes to providing basic banking services to landless rural workers and urban poor dwellers? Will the India-EU FTA reduce the domestic regulatory space? While there is some frustration in the trade negotiations, with the EU complaining of India’s lack of preparedness and inadequate human resources, the fact remains that the treaty is clouded in secrecy and its myriad issues are still contentious. The Indian government too has showed its usual lethargy in not creating a participatory process for the trade negotiations especially when the treaty could have an impact on livelihoods of already marginalised communities, apart from implications in the services sector and on Intellectual Property Rights.
Seven rounds of trade talks between the EU and India have been concluded without any negotiating texts or positions of either party being made public.