BMS Letter to PM

Author: BMS      Date: 23 Sep 2013 13:46:54









TELEPHONE: (011) 23222654 FAX: 91-11-23212648 EMAIL:  

Ref :      Date :  6-3-2013  

Sub: Concerns related to EU–India FTA  

Dear Prime Minister Shri Manmohan Singhji,  

On behalf of The Bharatiya Mazdoor Sangh, the largest trade union in the country, I write this letter to express our deep concerns about the ongoing Free Trade Agreement (FTA) negotiations with European Union (EU). We understand from the reports that India’s Commerce and Industry Minister is meeting his EU counterpart, the Trade commissioner of the EU, on 14-15 of April 2013. News reports also show that Government of India would like to conclude the trade negations during the said meeting. We urge you not to make any political or legal commitments regarding the conclusion of the FTA with EU because EU-India FTA, if concluded, would seriously undermine India’s industrial development and employment opportunities. Please recall our demand at the last Indian Labour Conference (ILC) held in New Delhi on 14-15 February 2012, to halt discussions on Indo EU-FTA and make public disclosure of the contents. However, it is unfortunate that we did not receive any response from you or Commerce Ministry or even from the Labour Ministry. Further, there was no attempt to have structured dialogue with the trade unions on the implications of FTA on jobs and future growth of manufacturing sector.  This year’s Economic survey stated that “The widening of the trade deficit to more than 10 per cent of GDP and the CAD crossing 4 per cent of GDP in 2011-12 and the first half of 2012-13 have been matters of concern”. Further it also stated that “The room to increase exports in the short run is limited, as they are dependent upon the recovery and growth of partner countries, especially in industrial economies. This may take time”. Hence an FTA, especially with a developed countries’ bloc like the EU, will further increase the trade and current account deficit. India is having already a trade deficit of 35 billion USD with the EU in 2011-12. Conclusion of the FTA would further deteriorate the situation.  As you know, EU is the major trading power, which controls one-third of global trade. Various independent studies categorically state that the FTA is beneficial to EU and is detrimental for India in the long run. Currently, India has trade deficit with EU. FTA is supposed to cover 95 per cent of trade in goods between these countries. EU would benefit more as EU is at present stronger than India in terms of economic and political muscle. The European Commission calculates that by the EU-India FTA, EU exports to India will increase by 57% and Indian exports to the EU by only 19%. It shows that the trade surplus will be grossly in favor of EU. Apart from trade in goods this FTA also covers trade in services, which may force India to open up its financial services and be vulnerable to systemic risks.  Further, this FTA goes beyond these areas to include investment, competition policy and government procurement. We would like to highlight that India opposed the inclusion of these issues in the ongoing Doha Round of trade negotiations.   FTAs go against protection of labour and social rights. Large scale retrenchments and closures which FTAs will bring, are a major concern for Trade Unions. India has the least separation benefit i.e. 15 days per year. FTAs will force further labor liberalization which would result in  decreased wages,  worsened working conditions to increase profit, using cheap labour for ‘competitiveness’, competition with imported workforce brought by foreign companies, do not allow permanency or regularization and restrict rather than encourage new entrants into the migrant labor pool. It is a major threat to workers' welfare and sustainable livelihoods of people who are depending on natural resources like fisheries and forestry. Communities directly impacted include fish workers and plantation workers etc. In the absence of adequate social security, expenses on medicine are extremely important for the people of India especially for the poorer population. We understand that EU is asking India to undertake obligations, which goes beyond the TRIPS Agreement. EU’s demand to introduce patent extension, data exclusivity would compromise India’s self-sufficiency in ensuring access to medicines at affordable prices. Further, it would result in job loss to lakhs of people working in the generic pharmaceutical sector.  Since the EU continues farm subsidies, they do not agree to include agri-subsidies on the negotiation agenda. This would amount to legitimizing EU subsidies at WTO and ruining the farmers of developing countries including India. Reduction of tariff in EU does not offer the market access to Indian products because there are many other barriers for accessing EU markets viz. standards, health restrictions, qualifications etc. Projections show that EU will gain 321million, 133 million, 150 million and 80 million USD respectively out of trade in agro food, cereals, products from animal origin and in other crops with India by 2020. In comparison, India will gain only 83, 7, 1 and 2 million USD respectively in trade with EU. This shows that this FTA will benefit EU’s agriculture and will take away markets from our small holders. The proposed FTA is going to make adverse impact on the rural or urban poor who constitute 80% of India's population. It will result in large-scale job losses in the unorganized sector. Flood of industrial imports from the EU into India will have a devastating effect on the small and medium sector which is the second largest employment sector. Massive cuts in import duties on industrial goods would greatly impact the country's manufacturing sector that is already facing a serious crisis. EU wants India to lower duties to zero on 90% of goods within the first day of FTA. Our industries like automobiles, plastic items, equipment & machinery were most concerned about tariff cuts. Projections show that the vehicles industry in EU will gain 1802 million USD whereas Indian car industry will gain only 87 million USD by 2020. EU will also gain a massive 7947 million USD in industry and manufacturing sector, while India will gain only 807 million USD. Further, there will be heavy revenue loss or fiscal loss due to tariff reduction; which would adversely affect the social sector spending.  Further we would like to point out that a robust manufacturing sector is absolutely essential for providing jobs to millions of population. During the last 20 years, India’s growth story remained one of jobless growth and the share of manufacturing in GDP remained only around 15% of GDP. We are afraid that FTAs, especially with developed country groupings like EU, would deteriorate the situation and compromise efforts to create jobs in the manufacturing sector. It would also retard the industrialization of the country.  However, The Economic Survey 2012-13 notes that “India is one of the top manufacturing countries though its share in total  manufacturing value addition (MVA) is only about 1.8 percent”. It also states that India’s performance in fast growing manufacturing segments is dismal except in basic metal.  There is almost no official public disclosure on the contents of the FTA till date. There is littlie information with regard to the various aspects of the FTA and its likely impact on development and people. Government has not done any comprehensive cost-benefit assessment or studies on comparative advantages. In comparison, SIAs (Sustainability Impact Assessments) are undertaken by EU for every trade negotiation. Further, EU needs the parliament ratification of EU parliament for the approval of FTA unlike in India where FTAs can go through without any parliamentary scrutiny. The government is completely non transparent in its FTA engagements. Government has not discussed the implications of the FTA in parliament. It has not consulted with affected parties like farmers or labour unions. Government has not initiated any consultation process even with state governments.  We would like to remind you about the Ashok Mitra report (1996), which recommended the necessity of transparency of Commerce Ministry negotiations.  Hence we demand that:  1. Indian Govt. should forthwith stop the negotiations on FTA with EU. 
2. Government of India should not make any political or legal commitments during the EU–India Summit.   
3. Government should publish the details of negotiations, negotiating text and the commitments it is going to make.  
4. Government should publish all studies conducted or commissioned by the government of India including the impact assessment studies should be made public. 
5. Ashok Mitra recommendations should be implemented in all international negotiations. 
6. Government should immediately issue a white paper on the impact of FTA on various sections of the society. 
7. Government should constitute an independent commission to review FTA with BMS participation in it. 
8. Government should convene a meeting with BMS on the impact of FTA on labour and other sectors. 
9. Decent work should be made a National goal to create Quality Jobs related to all commercial transactions.  

                                                                                                  Sincerely  C.K. Saji Narayanan,  National President, Bharatiya Mazdoor Sangh. Cc: Hon’ble Minister of Labour Hon’ble Minister of Commerce and Industry Hon’ble Minister of Finance    

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