Upping the ante: Economic Diplomacy Under the NDA Regime
Policy choices that privilege the rights of big business have been the hallmark of the NDA’s economic diplomacy in its first year. Benny Kuruvilla1 argues that the Government’s stand on WTO, Intellectual Property and FDI does not augur well, not only for people and the environment but also, for India’s role as a leader of the developing world.
In India shifts in foreign policy take place incrementally, often over decades, and one year is too short to glean a Modi imprint, a punishing travel schedule notwithstanding. When it assumed power in May 2014, the National Democratic Alliance (NDA) government inherited complex and multiple challenges on the domestic and external front. Domestically, the Indian economy was beset with weak macro-economic fundamentals and serious structural infirmities, the manifestations of which included a deep-seated agrarian crisis, stagnating industrial production, declining public services and rising unemployment. This was of course a legacy of India steadily shifting gears to the right from 1991. Since then coalition governments (of various hues) at the centre, have doggedly pursued policies of economic liberalisation that brought increased foreign investment and high growth rates, albeit with rising inequality and marginal impacts on decent jobs and social indicators.
Externally, India was implicated on several counts. In the post-2008 financial crisis world, growth continued to be sluggish in Europe and the United States. The World Trade Organisation (WTO) is crippled by a two-pronged impasse. While free trade apologists have jettisoned it for bilateral and regional free trade and investment agreements, developing countries are hard pressed to show benefits on long-pending issues such as access to northern markets for industrial and agricultural products. Democratisation of the World Bank and IMF continues to be a non-starter. This situation has also opened the door for institutions proposed by the BRICS such as the New Development Bank (NDB) and the Contingency Reserve Arrangement (CRA) to counter the Bretton Woods twins. Fifty-six countries, including India, have joined the China-led Asian Infrastructure Investment Bank (AIIB) that was launched in October 2014. An assessment of the NDA’s foreign policy needs to be situated within this context.
Trade and Investment Liberalisation
Agriculture continues to be the key to break the WTO Doha Round logjam. Flawed rules under the Agreement on Agriculture (AOA) allowed rich countries in the OECD subsidies upto $258 billion in 20132. In a travesty of justice, developed countries are using the same AOA to challenge the ability of developing countries to subsidise their poor farmers through price support for food security purposes. At the Bali Ministerial in December 2013, India won the right to use a ‘peace clause’ that would then pave the way for a permanent solution on food security3. It also refused to sign a deal on trade facilitation (TF) unless both deals were part of a single package with similar time frames. Inexplicably in November 2014 (after Prime Minister Modi’s visit to the US), the NDA government inked a bilateral agreement with the US on both food security and trade facilitation4. Close to 200 global civil society organisations had cautioned against rushing to sign the TF agreement without a clear commitment on issues of interest to developing countries. They argued that the TF would lead to further privatisation of ports and impose regulatory and cost burdens on developing countries with the main beneficiaries being transnational shipping and logistics firms5. With the next WTO Ministerial slated for December 2015 in Nairobi, news from Geneva indicates that major developed countries, led by the US and the EU, have taken intransigent positions, clearly indicating that they will not allow a permanent solution on food security any time soon.
Unrelenting US pressure against the Indian Intellectual Property Rights (IPR) regime has been another contentious area. This includes putting India on a priority IPR watchlist, investigations by the US International Trade Commission and a forceful pitch by President Obama on behalf of US pharmaceutical companies at the January 2015 US-India business summit in Delhi. Longer and broader monopoly patent rights over medicines have been opposed by health groups across the world. India’s patent regime, legislated in the public interest, allowed for the creation of a robust generics industry. It is now a key supplier of low-cost essential medicines, including over 80 per cent of all HIV medicines used in developing countries, earning it the title of ‘pharmacy of the developing world’. Rather than resist this pressure from the US and other developed countries such as Japan, here again, the NDA has faltered. As part of its attempt at revision of various laws, a draft IPR policy has been released for comments and in a brazen show of its priority, the government formally invited US experts to provide inputs. Analysis by the National Working Group on Patent Laws shows that the draft policy reflects the interests of big business by taking on a maximalist IPR agenda and if implemented could further compromise India’s self-reliance and technological advancement not only in pharmaceuticals but also in manufacturing, services and agriculture.
Prime Minister Modi with President Obama during the CEO roundtable organised at the India-US Business Summit in New Delhi, January 26, 2015. Photo: Reuters/ Jim Bourg.
The NDA government is also inexplicably negotiating a Bilateral Investment Treaty (BIT) with the US when its Finance Ministry is in the process of revising India’s current treaty framework6. The revision process was necessitated due to several arbitration cases against India by foreign companies7. There has been a global backlash against BITs with countries like South Africa and Brazil revoking the right of companies to sue governments. Institutions such as UNCTAD have also cautioned on BITs’ ability to attract Foreign Direct Investment (FDI) and impacts on democratic policy space. It is then only prudent that the NDA puts on hold all BIT negotiations until inputs are sought from interested parties, including parliamentarians and civil society groups. There is also concern that the US BIT framework, which is skewed towards investor protection, will unduly influence the outcome of India’s revision8.
The NDA’s misplaced enthusiasm for BITs fits in well with the Modi government’s flagship programme—the ‘Make in India’ campaign—that is expected to attract FDI which will, in turn, spur manufacturing and help tide over the crisis of jobs. Of course, the beleaguered manufacturing sector needs a boost (it contributes only 12 per cent to the GDP), especially small and medium enterprises, which hold the key to job creation and fostering entrepreneurship. The problem is that ‘Make in India’ is not about domestic small and medium enterprises, the backbone of manufacturing through the supply of ancillaries. Neither is it about ensuring transfer of technology and fostering innovation. So far, it has been about road shows in Davos and Hannover, convincing foreign companies about the ‘ease of doing business’ with a slew of deregulatory initiatives that will undermine labour laws, environment protection and ensure easy access to land. Responding to industry (foreign as well as national) demands, NDA has initiated a move to harmonise central labour laws. The new codes on wages and industrial relations indicate easing of conditions for firing workers with restrictions on collective bargaining, formation of trade unions and enacting a national minimum wage9. The recent land ordinance facilitates the acquisition of productive agricultural land by exempting social impact assessments and dilutes farmers’ consent10.
Whither South-South cooperation and solidarity?
The July-2014 BRICS Fortaleza Summit announced the creation of the New Development Bank (NDB).With an initial capital of $50 billion, NDB is expected to shake up the world of development finance and challenge the hegemony of institutions controlled by the US and Japan such as the World Bank and Asian Development Bank(ADB). While the NDB would be located in Shanghai, India won the right to nominate its first president. New Delhi has been a long-standing critique of the lack of democracy in the North-dominated Bretton Woods Institutions and policy conditionalities attached to loans. It is, therefore, imperative to ensure national democratic oversight over new multilateral institutions from the South. This also applies to India’s engagement with the $100-billion China-led Asia Infrastructure Investment Bank (AIIB). Further, rather than competing with the World Bank on large-scale infrastructure funding, these institutions should, through a process of consultations within the country and between its members, arrive at lending priorities that are reflective of the goals of equity, justice and sustainable development. With the recent nomination of banker K V Kamath as the first president of the NDB this task just got harder11. Kamath’s main expertise is in private sector banking; he is the non-executive chairman of ICICI Bank-India’s largest private bank and has had a long stint at the private sector arm of the ADB.
India has consistently punched above its weight on foreign policy. Sixty years ago in Bandung, Prime Minister Jawaharlal Nehru played a key role in advancing the idea of an independent development path for the third world nations based on solidarity, cooperation and peaceful coexistence. The 1955 Bandung spirit then coalesced into concrete international projects such as the Non Aligned Movement (1961), Group of 77 (1964) and the United Nations Conference on Trade and Development (1964). On April 24, southern leaders once again gathered in Bandung to celebrate the historic event. Prime Minister Modi chose to skip its 60th anniversary and India registered a notional presence. Bandung 2015 was an important moment for leaders from the South to catalyse new projects on south-south cooperation for a more equitable world order. Clearly, the current global context of multiple crises requires the articulation of a vision of internationalism from the South for another development model that is economically, socially and environmentally just. The NDAs first year belies any hope of such expectations from India.
1leads the South Solidarity Initiative (www.southsolidarity.org) , a knowledge hub hosted at ActionAid India and is based in New Delhi. The views expressed are personal and he can be reached at [email protected]
2http://www.reuters.com/article/2014/10/06/us-foundation-food-subsidies-idUSKCN0HV1NK20141006
3The peace clause was a limited but temporary reprieve that would allow countries such as India to continue with subsidy programmes like the Minimum Support Price (MSP) for farmers without being challenged by other WTO members. India also had to comply with onerous reporting requirements, prove that the subsidies are not trade distorting and add no new programmes.
7http://www.downtoearth.org.in/content/treaty-too-many
11http://www.wsj.com/articles/india-taps-k-v-kamath-to-lead-new-brics-development-bank-1431331618
Disclaimer: The views expressed here are the author's personal views, and do not necessarily represent the views of Newsclick
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