People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 28

July 11, 2010

Germany: Left MPs Protest Indo-EU FTA


Below we are publishing the draft motion that is moved by the Left parliamentary group in the German Bundestag this week on the Free Trade Agreement (FTA) between European Union (EU) and India. The Left parliamentary group in the EU parliament that is opposed to this FTA, has exchanged its views with the CPI(M). The CPI (M) had provided them with the statements it had issued on this issue. The following draft motion is prepared by the Left parliamentary group based on this exchange and explicitly states its views on the subject.

The Motion was tabled by the following Bundestag members: Annette Annette Groth, Ulla Lötzer, Jan van Aken, Dr. Barbara Höll, Christine Buchholz, Sevim Dağdelen, Dr. Diether Dehm, Wolfgang Gehrcke, Heike Hänsel, Inge Höger, Andrej Hunko, Harald Koch, Stefan Liebich, Niema Movassat, Thomas Nord, Paul Schäfer, Alexander Ulrich, Katrin Werner, and the Left Party parliamentary group for halting the EU’s free-trade agreement with India and redefining the negotiating mandate in a democratic process


I. The Bundestag notes:

1. The aggressive market-access strategy of the European Union which was introduced in the autumn of 2006 in a communication from the European Commission entitled Global Europe: Competing in the World and which has served since then as the basis for the Union’s bilateral and interregional negotiations with developing and newly industrialised countries mirrors the neo-liberal economic model embraced by the EU. This economic model has been responsible for the worldwide financial and economic crisis and has proved ineffective as a means of generating socially and environmentally sustainable development. Accordingly, there must be no continuation of this policy in the new trade strategy announced by the EU as part of its Europe 2020 strategy.

2. In the global economic crisis, the more tightly regulated national economies of some newly industrialised countries such as that of India have proved to be less susceptible to the crisis than more liberalised and export-dependent economies and have benefited from the regulatory scope which the public authorities still possess. The liberalisation demands that the European Commission makes of developing and emerging economies on the basis of negotiating mandates derived from its Global Europe strategy are all the more irresponsible in the light of the foregoing observation.

3. The Global Europe market-access strategy and the negotiating mandates the European Commission derives from it cannot therefore be a basis for the European Union’s negotiations with developing and newly industrialised countries. The same applies to its current negotiation of a trade agreement with India, scheduled to be concluded in October 2010.

4. The mandate of the European Commission for the negotiations with India must be redefined in a democratic process involving the European Parliament and the national parliaments of the EU Member States. Equally, due consideration must be given to the legitimate participatory rights of Members of the Indian Parliament, who have not even been consulted in the course of the negotiations at those times when the debate has focused on Indian laws that may have to be revised as a result of the trade agreement.


II. The Bundestag calls on the Federal Government:

1. to disclose full details of the present state of negotiations and of the offers and demands on the table;

2. to press within the European Union for a moratorium on the negotiations with India and for a new pro-development negotiating mandate and to make specific efforts to ensure that:

(a) since the liberalisation of the Indian financial market has been relatively slow in international terms, the market has proved relatively stable during the global financial crisis and experts are therefore warning against any more liberalisation, the European Union’s demands that India remove barriers to trade in financial services are dropped and that a new mandate makes explicit provision for regulatory measures of the kind adopted by India in the context of the global financial crisis to protect the stability of the financial system,

(b) the European Union takes due account of the right to the highest attainable standard of health which is enshrined in the International Covenant on Economic, Social and Cultural Rights by abandoning its intention of prescribing more robust protection of patents in the free-trade agreement with India and by withdrawing its demands for longer terms of patents and data exclusivity,

(c) the provisions contained in the drafts of the free-trade agreement for the reduction of Indian import duties on agricultural products, which would expose India’s farmers to predatory competition with cheap imports from the EU, are scrapped and replaced by rules that accommodate India’s request for unequal treatment, allow the use of customs duties, quotas and other instruments for the protection of local agricultural production and, in particular, protect the interests of Indian dairy farmers,

(d) the provisions contained in the drafts of the free-trade agreement for the reduction of Indian duties on industrial products are scrapped and replaced by rules that authorise India to use customs duties, quotas and other instruments to protect its industrial development from predatory competition and hence guard against job losses,

(e) the demand made by the European Union for access to the public procurement market in India – which, if it were met, would considerably restrict the scope of public authorities at every tier of national and local government to pursue their development policies – is deleted from the agenda of the negotiations along with the Union’s demand that multinational enterprises be granted national treatment,

(f) supplying the EU with raw materials does not take precedence over the development interests of developing and newly industrialised countries and that, to this end, the demand made by the EU for enshrinement in the agreement with India of a ban on export restrictions is withdrawn;

3. to ensure that the Bundestag can take part in the redefining of the negotiating mandate;

4. to press for parliaments, trade unions, farmer’s associations and other organisations from civil society representing the interests of concerned groups to be involved in the negotiations on both the Indian and the EU side;

5. to ensure that the agreement between the EU and India is presented to the Bundestag for ratification.

Berlin, 22 June 2010


Explanatory Memorandum

During the global economic crisis of these past few years, the more tightly regulated emerging economies have proved comparatively resilient. For example, India’s gross national income was still growing at a rate of 5.8 per cent at the peak of the crisis in the second half of the 2008/2009 financial year (October 2008 to March 2009), and by the first quarter of 2010 it was already back up to 8.6 per cent. India’s emerging economy makes it an attractive market and a potential investment target for European conglomerates and therefore a priority target of the EU market-access strategy outlined in the communication Global Europe: Competing in the World.

By means of this strategy, the European Union seeks to achieve in bilateral agreements with individual states and regional groups of states what it has failed to do multilaterally through the World Trade Organization (WTO) because of resistance from the developing and newly industrialised countries, namely to establish, along with the liberalisation of trade in goods and services, access to public procurement markets for tenderers from the EU, agreements on the protection of investments, more robust protection of patents, national treatment for multinational companies in India and a ban on export restrictions. The general aim of the demands made by the EU is to render government interference with investment activity in partner countries virtually impossible. In pursuing this aim, it is endangering the vulnerable sectors of the Indian economy, particularly small and medium-sized businesses.

The European Commission is conducting its negotiations with India on the basis of a negotiating mandate derived from the Global Europe strategy. In its liberalisation demands, the Commission is therefore disregarding the development interests of broad sections of the population in India as well as the creditable results achieved by relatively tight regulation, which still exists in some sectors of the Indian economy in spite of the liberalisation measures that began in the 1990s.

The privatisations, liberalisation and export orientation of Indian industry that were pushed through in the years from 1995 to 2002 cost more than a million jobs. Wages fell, and working conditions deteriorated. At the same time, it was precisely the export-focused sectors of Indian industry that felt the impact of the global economic crisis most keenly. A total of 700,000 workers in manufacturing industry – in companies producing textiles, leather and vehicle parts – lost their jobs in 2008. Against this backdrop, many experts believe that the benefits of easier access to EU markets for Indian industrial products under a free-trade agreement are outweighed by the dangers posed by easier access to the Indian market for EU conglomerates.

India’s financial system is more tightly regulated than those of other countries and its degree of intertwinement with other financial systems is relatively low. The Indian stock market is not fully open, and investment in foreign derivatives is strictly controlled. The Indian financial market has therefore been largely safeguarded from toxic securities. In the light of this experience, experts are all the more emphatic in their warnings against the liberalisation of the Indian market in financial services which the European Union is demanding in its negotiations with India. The activities of foreign banks in India remain subject to restrictions and rules which the EU would like to overturn through the freetrade agreement. This would have seriously adverse effects on the access of the poorest people to financial services and on credit facilities for small and medium-sized businesses, as recent history has shown, for the liberalisation measures in the Indian financial system in the 1990s have already severely restricted the access of poorer people, especially in rural communities, to financial services. The market share of cooperative banks has fallen from 62 per cent to 33 per cent. The effectiveness of the regionalrural banks has been severely curtailed. Foreign commercial banks have focused largely on profitable business with wealthy urban clients and have done next to nothing to improve facilities for the poor and rural populations. Instead of further liberalisation, it would therefore be more appropriate to tighten the restrictions on foreign banks to at least the same level that applies to domestic banks in India.

Public procurement markets in newly industrialised countries are strategic regulatory instruments of economic and social policy. At the same time, European conglomerates see them as an extremely appealing proposition, though these markets remain closed to them in many cases. The liberalisation of the public procurement market in India that the EU is demanding would result in a requirement that all orders placed by India’s national, state and local administrations be put out to tender throughout the area of application of the agreement, in other words in India and the EU, and that all tenderers be given equal access to the bidding procedure. It would no longer be possible then to place orders in accordance with policy objectives, such as targeted support for local small and medium-sized businesses.

The demand of the European Union for a ban on export restrictions is in line with the new EU rawmaterials strategy. Such a ban would severely restrict the freedom of the Indian Government to channel raw materials into particular domestic production processes with the additional effect of influencing global price trends.

The WTO Agreement on Trade-Related Aspects of International Property Rights (TRIPS) already restricts the access of people in the South to cheap medicines. Now the European Union wants to stiffen the protection of patents still further in its bilateral agreements with countries and other regions. The EU expects India, the world’s leading manufacturer and exporter of generic drugs, to amend its patent law so as to prolong the terms of patents and enshrine the principle of data exclusivity. Should the EU succeed with its demands, the transfer of know-how from the EU to India, and hence the manufacture of generic drugs, would become far more expensive and complex, which would also impact on purchasers of Indian generic drugs in developing countries. Anand Grover, the UN Human Rights Council’s Special Rapporteur on the right to health, assessed the EU’s demands that India tighten its protection of patents as an attempt to remove the last vestiges of flexibility that were left to governments in the formulation of national laws implementing international instruments for the protection of intellectual property such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The free-trade agreement, he said, was being used in an attempt to introduce new proprietary rights through mechanisms known as TRIPS-plus provisions. His conclusion was that people would not benefit; the winners, he said, would be the multinationals (VDI nachrichten, 23 April 2010).

Some 70 per cent of the Indian population live in rural areas, and about 60 per cent of the Indians in paid employment earn their living from agriculture, most of them as smallholders. An agreement providing for reciprocal or virtually reciprocal tariff reductions for 90 per cent of agricultural products will therefore have completely different effects in India from those in the European Union. With regard to the unequal treatment demanded by India in view of this imbalance, the EU has been giving conflicting signals. In principle, though, it is still insisting on reciprocity. Against this backdrop and because the EU is not accompanying its demands for access to the Indian market with any concession in terms of reducing its own agricultural subsidies, Indian farmers fear that agricultural imports from the EU will put them under intense competitive pressure and cut their share of local markets. In this context, they refer in particular to the situation of 90 million people, most of them women, who work in the Indian dairy industry and whose circumstances would become a great deal worse if the EU were to achieve its goal of access to the Indian market for European dairy products, which India has so far resisted. Moreover, the global food crisis of 2008 has brought home with particular clarity the importance instrategic and humanitarian terms of food sovereignty.

A major role in shaping the Global Europe agenda has been played by lobbying organisations such as the European Services Forum, the European Banking Federation, the European Federation of Pharmaceutical Industries and Associations and Business Europe. They keep very close tabs on negotiations held in the framework of the external-trade strategy, whereas interest groups from civil society struggle to obtain access to any information on the progress of these negotiations.

So although their outcome will directly affect the living and working conditions of millions of people, the negotiations between the EU and India are conducted to the exclusion of all the relevant stakeholder groups, and not even Members of Parliament are actively involved. The offers and demands made by either side are not disclosed, nor are the draft versions of the agreement. Such disclosure, however, is essential, given the far-reaching implications of the material under discussion.