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India to soon ink trade agreements with Japan, European Union
Fresh from an exhilarating visit by US president Barack Obama that created much good-will on both sides, India seems keen to push its advantage as far as it will go. Talking to industry heads, India's commerce minister Anand Sharma pushed his American counterparts for starting negotiations for an India-US trade agreement, even as he announced his intention to shortly sign trade agreements with the European Union and Japan -- or a third of the world economy.
"Now, in the aftermath of President Obama's successful visit, we should consider engaging in a comprehensive economic partnership agreement (CEPA) which includes trade, investment and services," he told his American counterpart and US commerce secretary Gary Locke. Unlike the past, when the US would force free-trade agreements with developing countries like India, Locke seemed surprised by the suggestion. "I think we will take one thing at a time," he responded, when asked about Sharma's suggestion, and pointed out that US is already working with India on many multi-lateral fora.
Sharma, who inked a free trade agreement with the Association of South East Asian Nations (ASEAN), a CEPA with Korea and a preliminary agreement with Malaysia in the last twelve months, said his team has put the finishing touches on a similar agreement with Japan, the world's third largest economy. "We will sign it in a month or so. We are also at the concluding stage of a broad-based trade and investment agreement with the European Union," he added.
Sharma's aggression is in sharp contrast to the defensive approaches of earlier governments. Emboldened by India's ability to compete successfully on cost and ability with other countries -- especially in services -- the trade ministry is engaged in negotiations with dozens of countries and blocks for preferential trade agreements. One of the earliest, a free trade agreement (FTA) with Thailand, has already allowed many Indian firms to shift their manufacturing locations to the South East Asian nation. Under the FTA, a number of items -- like soaps and shampoos -- are made in Thailand and sold in India without paying import duties.
However, Sharma did not give details of the scope of the agreements he is to sign with the Japanese or EU blocks.
According to industry experts, the trade agreement with Japan is likely to improve India's access to Japanese goods including auto components, steel panels, DVD players, and agri products like Japanese yams, peaches, strawberries; with Japan improving market access to Indian generic drugs and certain agriculturaland industrial goods. On the other hand, the agreement with EU (which is India's largest trading partner), would improve access to EU banks and financial services firms, with India likely to get more openings in textiles and leather goods.
Industry body FICCI estimates trade between India and EU to touch $572 billion by 2015, if the FTA gets signed early. In comparison, India's overall foreign trade with rest of the world is only around $300 billion in goods and around $150 billion in services. Trade with Japan, currently around $10 billion, could jump double in just two years if a preferential trade agreement is signed. FTAs would mainly do away with tariffs on goods by upto 90% or even bring tariffs to zero levels on some goods and eliminate barriers on services, says Afsar Jafri, senior research associate, Focus on Global South, a policy research institute.
Japan, an ageing economic giant which was recently displaced as the second largest economy by China, looks upon India as its ticket to regaining lost economic momentum. While tensions between Japan and China have risen due to boundary disputes and historical baggage, Japanese companies have been actively scouting for an alternative to China as a cheap manufacturing destination. Japanese firms are developing scores of new cities from the scratch along the Delhi-Mumbai industrial corridor as a special project to diversify their manufacturing base away from China.
However, Jafri points out that the deals, which will boost sectors where India is competitively stronger, will also have negative effects on other sectors. Some of these agreements, he points out, come with strings attached in the form of obligations to implement intellectual property rights, such as patents, more strictly in India. India, which has had a relatively lax intellectual property regime, is home to one of the world's largest pharma industries that specializes in out-of-patent drugs. "The deal will impact key sectors including healthcare and agriculture. But there seems to be hardly any attempt by the government to let various stakeholders know about what the deal would like, says Jafri.
According to Bhaskar Goswami, from the Forum for Biotechnology and Food Security, the FTAs are pressing India to accede to IP provisions that can curb the rights of farmers like sharing, selling or exchanging seeds with other farmers and subject them to the economic interests of corporates. These concerns that we have have not been addressed by the government and hence they remain.
Moreover, according to Amit Sengupta, general secretary of All India Peoples Science Network, the IP provisions pertaining to healthcare could prolong patent terms for costly innovator medicines, while making registration of low cost generic medicines difficult. These IP provisions go beyond what India has already signed in the WTO Trips (trade related aspects of intellectual property rights )agreement. Developed countries try to get all that they couldn't get through Trips from the FTAs.
Furthermore, the reduction and removal of tariffs would imply easy access into India of 'non-new goods' as well as scrap pertaining to mining, metals etc say experts. According to Gopal Krishna, convener, environmental body Toxics Watch, FTAs will legitimise the already existing trade in waste. "Concerns are over inclusion of toxic technologies and other waste as goods or commodities like electronic goods, metal scrap for tariff reduction into FTAs."
India to soon ink trade agreements with Japan, European Union - Money - DNA
