CUTS Institute for Regulation & Competition

1. CUTS Institute for Regulation & Competition Training Programme on Commercial and Economic Diplomacy 22-26 October 2007, Royal Orchid, Jaipur Trade – OFFS in Negotiations A Presentation By B. K. Zutshi October 25, 2007

2. 2 CUTS Institute for Regulation & Competition Training Programme on Commercial and Economic Diplomacy OUTLINE • Introduction • Negotiations between sovereign countries • In Multilateral Context • In Bilateral Context B. K. Zutshi

3. 3 Introduction • The Premise and the Hypothesis – Negotiations are to resolve conflicts • Negotiation is a part of living in any Society • Humankind begin this process early in the family itself. Negotiations take place between children and parents and between spouses • An act of Sale and Purchase of a Good or a Service involves Negotiations • Negotiations between Sovereign Countries -- bilateral, plurilateral or multilateral – is also another kind of conflict resolution process, though more complex B. K. Zutshi

4. 4 Negotiations between sovereign countries • Sovereignty: Evolution of the Concept Historically: Divine Right to Peoples Right • Its Practical Manifestation: Freedom of policy and action to a duly constituted government, subject to domestic laws and regulations • Interaction between sovereign states inevitably gives rise to conflicts which can be resolved either by consultations and negotiations or by resort to force • All successful negotiations between sovereign states leads to some abridgement of the sovereign right of freedom of action • This essentially means a trade off between the nature and extent of the loss of freedom of action on the one hand, and, a possible gain resulting from a negotiated settlement, on the other. • Another way to assess the bargain or trade off is to look at the deal as a cost benefit equation. B. K. Zutshi

5. 5 In Multilateral Context • Two main reasons for multilateral negotiations between sovereign countries is the need to cooperate • In order to manage services like cross border communications, air traffic control, maritime navigation • In order to address an issue or a problem having cross border implications like in case of environment – cross border spillovers of pollution, global warming etc. • In cases where status quo is unacceptable to some countries. Or some countries are seeking improvements in the status quo, like in Market Access. A good example of the former is the incorporation of IPRs in the MTS under the UR negotiations B. K. Zutshi

6. 6 In Multilateral Context …Contd • The set of issues in the first example above is the least contentious as services cannot be provided without cooperation and understanding on a host of technical parameters. Cooperation on devising common parameters is a win win situation for the participants. The trade off is between giving up individual country technical parameters and receiving the concerned service. It is a good bargain whichever way it may be assessed – whether as a cost benefit equation or otherwise. The outcome is particularly satisfactory if all parties have had a say in developing the technical parameters. B. K. Zutshi

7. 7 In Multilateral Context …Contd • The set of issues in the second example regarding cross-border environmental spillovers is more contentious as there are conflicts of interests between short term economic costs and the long term benefits of a pollution-free environment. Also, polluters and recipients of pollution may be different, or pollution contribution may vary. The issue of trade offs therefore is a bit complicated and will need an assessment of the short term costs and their mitigation to identifying the nature and extent of any trade off; the costs of remedial measures (by way of obligations) have to be proportional to the extent of pollution contribution. Looking at this in terms of a cost benefit equation is a good way to identify trade offs. B. K. Zutshi

8. 8 In Multilateral Context …Contd • The set of issues in the third example, namely that of the TRIPs agreement are the most complex and proved the most contentious in the UR negotiations and continue to be so in some respects in the ongoing Doha Round negotiations. The challenge of identifying trade offs is difficult and complex. • For instance for India there was limited scope for trade offs within the TRIPs agreement itself, largely because of our being importers of new technologies and innovations rather that of exporters in this area. India therefore had to look for a trade off outside this agreement. We settled for the complete abrogation of the MFA agreement in the shortest possible period, but when the ten-year phase out period was proposed for the MFA, India linked it to the phase in period for product patents on pharmaceuticals and agrochemicals. • There are scores of examples of trade offs between and within various agreements in the UR. B. K. Zutshi

9. 9 In Bilateral Context • In case of bilateral negotiations, there is no complication of interest and concerns of many parties having to be taken on board, but otherwise bilateral negotiations can be quite complicated depending on the issue under negotiations. • A good example is the controversial Indo-US civil nuclear cooperation deal which is threatening the very survival of the present central government. It will be instructive to look at the trade offs in this deal as reflected in the 123 agreement. • Let us look at India’s negotiating objectives and then see how far the same have been realized so far, because the full negotiating process for operationalization of the agreement is contingent on the outcome of negotiations with IAEA and NSG. • And then what is the price we have paid for realizing our negotiating objectives. In other words what is the trade off? B. K. Zutshi

10. 10 In Bilateral Context …Contd • Our main objective in these negotiations has been to gain access to fissile material and technology and know how (including dual use technology) for civil nuclear energy production, but at the same time retain complete freedom in the matter of development of our strategic nuclear weapon programme, without outside interference. • India should have the freedom to test nuclear devices in future, even though we have declared a voluntary moratorium on further testing. • In case of any future testing, guarantees that we will have access to fissile material and spare parts for the civil nuclear plants we may have built with imported fuel and materials following the entry into force of the agreement, for the lifetime of any such nuclear plants. • The issue is whether these objectives have been realized fully? B. K. Zutshi

11. 11 In Bilateral Context …Contd • What is it that we have given in return i.e. what has been the trade off? • We have agreed to separate our strategic and civil nuclear programmes and to place the civil nuclear programme under surveillance and monitoring by the international community through IAEA • The agreement will end India’s isolation and pariah status as a nuclear power and allow India access to fissile material and dual- use equipment and technology for overall development, but specifically help us in realizing the objective of energy security. • The essential trade off here is between access to nuclear technology, know how, equipment and fissile material for building civil nuclear plants for development and energy security purposes in return for placing our civil nuclear programme under international scrutiny and surveillance. B. K. Zutshi

12. 12 In Bilateral Context …Contd • Is it a fair bargain and how does one assess the balance of advantage in the deal? • Are the critics right in suggesting that India has failed to safeguard its strategic and security interests and that in case of future testing, India will attract sanctions, denial of access to nuclear fuels and technology and return of fuel and materials supplied under the agreement. • Are the safeguards in this regard in the 123 agreement credible and legally binding on the US in view of the provisions of the Hyde Act, the enabling legislation for the 123 agreement? • In the absence of access to civil nuclear materials and technology is it possible for India to ensure its energy security? • Is there an expectation that India be treated as a full fledged nuclear power at par with the five declared nuclear power countries? Is that expectation realistic? B. K. Zutshi

13. 13 In Bilateral Context …Contd • subjecting ourselves to international scrutiny and surveillance so as to assure the international community that the equipment and material is not diverted for our strategic nuclear weapons programme. • Is it a fair trade off? What does it look like in terms of a cost benefit equation, given that • India’s strategic programme is outside the purview of the agreement and India is free to develop this programme in the light of its own perception of its security needs • the agreement is silent on India’s sovereign right to undertake further tests in future. • India has secured a commitment on building reserves of fissionable material for the life time of the nuclear power plants in order to avoid possible disruption of supplies in the event of India testing in future and NSG imposing ban on further supplies. • What are the larger foreign-policy related geo-political and strategic implications of the agreement. B. K. Zutshi