EU-India FTA: Overview and Concerns
Shefali Sharma
22 November 2008
Timeline of the FTA 2005: EU-India Summit, decision to
form High Level Trade Group (HLTG) to see if bilateral deal is possible
2006: HLTG defines areas to launch an FTA
Oct 2006: EC’s Global Europe Strategy June 2007: Launch of FTA negotiations
with goal WAS to end by December 2008 (now predicting Dec ’09)
Since then….
5 Rounds of talks taken place Last one: Sept, in Brussels Next one: around November 24
What is the Content of the FTA…?
Content of the FTA
Negotiations on Trade in Goods– Manufacturing, Non-
Ag: Fisheries etc– Agriculture
Services Investment Intellectual Property
Government Procurement
Competition Dispute Settlement Rules (anti-
dumping, CVD etc.) Trade Facilitation
Starting point on Goods….
Eliminate tariff and non-tariff barriers on “substantially all trade” in non-ag and agriculture over 7 years
India agreed to tariff cuts in 90% of tariff lines already; EU wants reciprocal cuts on 95%
Sees India as Equal Partner:
India’s entire GDP amounts to 3% of the EU’s!
What this means… India would have seven years to bring
90-95% of tariffs to zero (Ag and Manufacturing)
India would like to designate some of these as “sensitive” sectors and not reduce some to zero and not over seven years
List of offers in September; they were supposed to make requests for further cuts in October
But… EU Industry pushing for zero tariffs in
seven years, reciprocity, and extreme limitation of the number of “sensitive” sectors
EU wants market access to sectors that India wants to exclude completely
Ex. Fisheries, Textiles, Wines and Spirits, Automobiles
Some studies on EU-India show Indian “sensitive sectors” as: Processed food, fisheries, tobacco, paper,
furniture, bedding, plastics, chemicals, low-end machinery, textiles, electrical goods
“large expected negative changes in employment” in: paper production, publishing, transport equipment, processed food and beverages, tobacco
(EU commissioned “Trade Sustainability Impact Assessment”; CARIS)
Current State of Play
Negotiations far along Draft goods, investment and services, IPR,
competition, TBT chapters already Discussing each others’ regulatory regimes
for services liberalisation Ironing out conflicts on investment (India
wants to include investor protection; EU wants capital convertibility)
Discussing areas where India has to change legislation for intellectual property
Goods… Round not just about tariffs (17% of Indian tax
revenue)(75% of tariff lines of export interest to India are
in manufacturing and EU will liberalize most of these…EU will protect around 1% of Tariff lines of export interest to India)
FTA about non-tariff barriers on both sides (internal taxes on goods etc. …must be more or equally favorable to foreign providers)
India wants SPS and TBT requirements removed in EU (health, env., safety standards)
No transparency in Negotiations!!!
need to know what is being offered on both sides and WHY?
Financial Services: David and Goliath European Banking Federation:5,000 European banks, large and small, from
29 national banking associations, with assets of more than €20,000 billion;
India has 27 public sector banks and 29 private banks that represent 70% of market share in the Indian economy
Large majority of Indians already face “financial exclusion”.
FTA: increased exclusion; greater financial risk, insolvency, consolidation, job losses, lack of accountability
Services
EU interested in Energy and Water Services (waste water treatment if not distribution)
India complaining about NTBs in Services: mutual recognition agreements, licensing requirements (have to negotiate with 27 diff. Countries anyway)
EU using Services talks as way to pressurize EU states in liberalising services internally
Investment
Deregulate conditions for EU firms to establish within India
Favorable terms of doing business as firms within India
Repatriation of profits and flow of money in and out of country, residence permits for personnel
EU not negotiating investor to state mechanism “investment protection”
Investment…
EU States will engage in Bilateral Investment treaties with India
France-India; Uk-India (already) EU carving out space for its own “deep
integration” treaties with EU accession countries; but wants India to commit to MFN (giving EU same rights as India gives to others)
Intellectual Property
Jeopardize biodiversity; access to medicine EU wants India to “implement” existing IPR
laws Rights of plant breeders over farmers Wants India to strengthen “Data exclusivity”
provisions…protection of data even before product registered or patented…up to 10 years at least
IP protection 20 plus 5 years..they claim that Indian processes take too many years and cut into years of monopoly ownership
Government Procurement
Right to bid for all state projects Typically used to boost economic activity in
underserved areas, fulfill development objectives; boost domestic spending (deal with recession)
EU GP: 99% to EU states, 1% to US, no DCs EU wants rights to India’s GP (11-13% of
India’s GDP) and right to prior comment and access to information (transparency in GP)
Impact on Labour and Livelihoods
Current Demographics… 92% of India’s Total Workforce of 457
million people in the Informal “unorganized” Economy (NCEUS)
In 2005, 836 million people or 77% of the country’s population earning less than 20 rupees/day (~30 euro cents/day)
Current Demographics…
42% of working age population “usually” employed (according to last survey 04-05)
Around 35 million people remain under or unemployed
Link with Liberalisation…
Jobless Growth and Joblessness...
b/w 1999-2005:
Females: 1% increase in both rural and urban unemployment
Males: No change in rural unemployment rate
Males: 1% decline in urban unemployment
(NSSO, GOI)
Manufacturing Growth and Livelihoods: Major proportion of organised labour;
diversified into several industries (which will be targeted in the FTA)
Past Experience: 92-96 (boom in manufacturing output and
investment) 95-2002: 1.3 million employees lost jobs (1.1
were workers; not supervisors) Out of 15 major industries, 11 industries
faced (80% of workforce) fall in jobs
Manufacturing Growth and Livelihoods: Impact on Women1999-2000: share of women in manufacturing
24% Faced massive decline since 1983 Shifted to services (domestic worker,
construction, wholesale, petty retail) Home-based contractual work (garments); no
protection and lower wages Women increasingly as “flexible” labour force
since liberalisation; informalisation…
Liberalisation and Impacts on labour Those who lost jobs shifted to informal sector Real wages remained stagnant Greater productivity per worker =
retrenchment Growth strong in recent years, but not
resulting in jobs Increased competition will create further
vulnerability
Impacts of FTA
FTA would eliminate close to 90% of tariffs in manufacturing and agriculture
More sensitive products will come from agriculture at cost of Non-ag goods
Small-scale Industries and both unorganised and organised workers at huge risk (experience of consumer goods sector in the 90s)
Agriculture and Livelihoods: 35 million people depend on production of a
single crop for 35 crops (huge crop constituencies)
Sharp Fall in “self employed” in agriculture (small and marginal farmers) between 1993-2000
Proportion of Ag Workers increased from 42.6% in 93-94 to 48% by 2000 (lowest paid out of any category of workers)
78% of women in rural areas working as Ag workers as of 2004-2005; 48.9% of Men
Faster rate of mobility for men out of Ag than women; Farmers suicides
Impacts of FTA
Increased vulnerability of farmers, agricultural workers will create more “job seekers” in urban areas (already see migration trends); no viable safeguards in the FTA for this sector
EU seeks Indian market in key industries such as chemicals, automotives and in sectors of major livelihood importance (fisheries)—will lead to further displacement
Services such as construction at risk (where bulk of informal sector currently makes its living)
On the Social Clause… Lessons from WTO (Strong resistance from
Developing Countries and does not address the core problems with free trade and loss of employment)
India will not sign an FTA with a social or environment clause
EU trade unions OK with env and social clause; but liberalisation of 90% of Goods sector will not prevent joblessness; Clause would only address existing jobs; NEED for mutual discussion with Indian trade unions
What Next?
Livelihood concerns most critical issue of FTA Must Monitor and address govts Currently, very little trade union or civil society
attention to the FTA(GoI and EC, working under the radar screen) NO TRANSPARENCY OR DEMOCRATIC
PRACTICE IN NEGOTIATIONSBuild Awareness in EU and India about FTA;
examine livelihood implications in detail; Demand answers from govts; FTA is wrong
framework for trade. ORGANIZE!!