Asia-Pacific, Economy & Trade, Europe, Headlines

TRADE: EU Pushes to Prise Open India

David Cronin

BRUSSELS, Feb 10 2010 (IPS) - Secret discussions aimed at pressuring India into dropping all measures that shield its industry from foreign competition have been held between European Union officials and some of the world’s top corporations.

BusinessEurope, a group representing large companies, has been intimately involved in all stages of the EU’s preparations for talks aimed at securing a free trade agreement with India. Internal documents from the European Commission, the EU’s executive arm, show that it requested advice from the group when setting priorities for the talks as early as February 2007 – nine months before the talks were formally launched.

In response, BusinessEurope advocated that the key objective for these talks should be the complete abolition of trade taxes imposed by India; such tariffs are used by India to prevent its domestic firms from being undercut by cheaper imports of the goods they manufacture. “Anything less than this (abolition) would allow the exemption of highly protected sectors (from the agreement’s scope) and dramatically reduce the potential benefits to the European economy,” the group said.

The documents, seen by IPS, suggest that all of the core recommendations made by BusinessEurope were accepted by the Commission. Peter Mandelson, then the European commissioner for trade, said that the issues on which the group had advised him “coincide with my own priority concerns” in a letter he wrote to BusinessEurope in March 2008.

Anti-poverty campaigners are angry that BusinessEurope has been tasked with helping the EU draw up an aggressive plan to prise open India for foreign investors. The plan does not take account of the vast gap in wealth between Europe and India, which has the highest number of poor people in the world, the campaigners say. Some 42 percent of India’s billion-plus population lived on less than 1.25 dollars per day in 2005, according to the most recently available data from the World Bank.

“The Commission is a service provider for big business in these negotiations,” said Peter Fuchs from the German organisation World Economy, Ecology and Development (WEED). By contrast, organisations working on social justice or environmental issues are “kept at a distance” by the EU’s trade negotiators, he added.

A study on the EU-India talks published last year by the Centre for Trade and Development (CENTAD), which researches economic issues affecting south Asia, stated that there is a profound asymmetry between the EU and India. Although India’s total gross domestic product was only 6.5 percent that enjoyed by the EU in 2008, the Union has viewed India as an economic equal in the negotiations, the paper says.

It also found that the EU’s drive to remove almost all tariffs that India applies to food imports could leave its predominantly small farmers vulnerable to price changes and unable to compete with foreign produce. Some five million farmers who grow just one crop would be at risk. And the CENTAD paper warned that the EU’s demands that the services sector in India be more accommodating to foreign investors could endanger the future of 12 million small retail outlets once they are pitted against international chain-stores.

An Indian diplomat said there is an understanding between the EU and his government that tariffs should be removed from 90 percent of all goods traded by both sides. India has compiled a list of goods it deems “sensitive” and wants to have excluded from the scope of the agreement, at least temporarily. But the diplomat, who spoke on condition of anonymity, added that this list is “not cast in stone”.

After India first sought to have 643 goods exempted from the provisions of an eventual free trade agreement for a period of seven years, the European Commission sent the list of these goods to Business Europe in February 2008. Philippe de Buck, BusinessEurope’s president at the time, replied the following month, arguing that the Indian list was “far too extensive” as it included products considered to be of critical importance to the exporters he represents.

John Clancy, a European Commission spokesman, denied that BusinessEurope has been given “privileged treatment” over other organisations interested in trade policy. The Commission seeks advice from public interest groups, as well as the private sector, on how its trade negotiations should be handled, he said.

Yet while the Commission organises seminars on its trade policies several times a year, the nature of its dialogue with public interest advocates is of a “very different nature” to that with large firms, according to Olivier Hoedeman from Corporate Europe Observatory, which monitors the activities of lobbyists in Brussels.

Hoedeman said that whereas the Commission’s trade department has close contacts with private sector representatives when formulating strategies, it only invites comments from campaigners on social and ecological issues once those strategies have been drawn up.