EU-India FTA: Overview and Concerns

1. EU-India FTA: Overview and Concerns Shefali Sharma 22 November 2008

2. 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)

3. 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…?

4. 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 Content of the FTA

5. 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!

6. 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

7. 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

8. 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)

9. 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

10. 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)

11. No transparency in Negotiations!!! need to know what is being offered on both sides and WHY?

12. 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

13. 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

14. 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”

15. 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)

16. 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

17. 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)

18. 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)

19. 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…

20. 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)

21. 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

22. Manufacturing Growth and Livelihoods: Impact on Women 1999-2000: 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…

23. 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

24. 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)

25. 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

26. 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)

27. 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

28. 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 NEGOTIATIONS Build Awareness in EU and India about FTA; examine livelihood implications in detail; Demand answers from govts; FTA is wrong framework for trade. ORGANIZE!!

29. Thank You Shefali2005@gmail.com