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!!

Thank You

Shefali2005@gmail.com