More give than take in secret trade deals

Trade negotiations have been likened to a game of poker. Players do not reveal their hand too early because it would give away their game to the opposite side and invite undue pressure from global and domestic lobbies.

As India’s trade negotiations with the EU and the UK pick up momentum after being in the doldrums for years, there are plenty of statements from both sides that the talks are going well but all sides are holding their cards close to their chest. Over the past two months, ministers from both sides have been announcing that negotiations are being expedited to the benefit of both sides. Such anodyne statements cover the nitty-gritty of trade talks which are gruelling for developing nations like India that need rich country markets for their products. This turns into an impossible balancing act for Indian negotiators who have to weigh the benefits of giveaways in terms of a concession that would hurt their domestic industries and their citizens.

This exercise becomes more complex in the case of free trade agreements (FTAs) which are more comprehensive, covering investments too. Rich nations use FTAs to seek more concessions from developing countries, especially on intellectual property rights (IPRs) that are required by the World Trade Organization. The bigger headache for New Delhi right now is Brussels, since the European Commission has recently notified its Carbon Border Adjustment Mechanism or CBAM, a measure that will affect a range of India’s metal exports to the EU, starting October this year. More products will be affected down the line.

The EU has given itself a halo with CBAM, which it describes as a “landmark tool” to help fight climate change. While the 27-nation bloc says it is a tool to put a “fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries,” other countries have called CBAM a coercive and punitive measure. BASIC countries—the group of Brazil, South Africa, India and China—say it violates the principles of the UN Framework Convention on Climate Change (UNFCCC) as well as the nationally determined spirit of the Paris Agreement. They see it as nothing but a unilateral proposal for introducing trade barriers.

What is becoming clear is that India is going into the accelerated phase of the FTA talks with a weakened hand. One analyst estimates that the implementation of CBAM would hit India's metal sector significantly, since 27 per cent of India's exports of iron, steel, and aluminium products worth US $8.2 billion go to the EU. Not just that. The EU is also India’s third largest trading partner.

While neither the Indian nor European Commission negotiators are revealing much, the ambassador of an EU bloc nation said bluntly that it is India which will have to make concessions to make the FTA “deep and comprehensive”. The ambassador of Ireland told Mint in an interview that the “Indian government needs to understand that it will have to make concessions to achieve this. And the reality is that the EU accounts for 14% of India’s exports while India comes up to 2% of the EU’s exports.”

This column, however, is more concerned about India’s stance on the persistent demand from the EU, UK and the US for a watering down of the country’s patent laws in trade deals. Will India give in to the demand for regulatory data protection and patent extension? Some media reports say New Delhi will not yield since it is determined to protect the country’s generic drug industry and its public healthcare programmes which rely on inexpensive generic medicines. Data exclusivity or regulatory data protection has been on the table with the EU for a decade. This is a sticking point in FTA deals with other countries, too. Data exclusivity is a type of intellectual property protection which ensures that a generic drug manufacturer cannot rely on an innovator firm’s data for a specific period for gaining drug approvals. This slows down the entry of generic drugs into the market and impacts access to critical medicines across the board. Another demand in recent parleys, according to industry sources, is a provision to extend the patent protection on drugs beyond the current 20 years. This proposal would allow innovator pharma companies to milk the market with the additional years of monopoly.

The India Pharmaceutical Association (IPA), a lobby group of the top drug manufacturers in India, has written to the Union commerce and health ministries that the provision to extend the monopoly of patent holders by extending the life of a patent on a medicine beyond 20 years would delay the entry of generics inordinately. In its representation, IPA points out that it is common practice among some innovator companies to create minor variations to proprietary medicines and to seek another full term of patent protection repeatedly. India’s Patent Act disallows this. However, the other side has also been active in its lobbying. The Organisation of the Pharmaceutical Producers of India, a club of foreign drug-makers in India, is pushing for what it terms a more robust and meaningful regime of IPRs.

The irony is that decisions that will affect millions of Indians are shrouded in secrecy. India appears to be following the template set by the US and other developed countries in keeping the public out of such talks. If it were not for WikiLeaks, which released the draft texts of certain lethal FTAs like the Trans Pacific Partnership Agreement and helped scuttle it, citizens in these countries would not be aware of what was being discussed behind closed doors, although business lobbies had full access to the negotiations. The complete lack of transparency in such negotiations is astounding, especially since these developed countries claim to be torchbearers of democratic values. The limited ballot box of the global marketplace is clearly more important than the votes of millions of citizens whose fate is tied up in the outcome.

It would be wise to recall what economist Jeffrey Sachs says about FTAs. These are primarily aimed at protecting investors and giving them unrestricted powers vis-à-vis the state, he warns. “What is forgotten in the rah-rah of free trade rhetoric is that simply open trade or open investment by itself has no guarantee of meeting the criterion of raising wellbeing broadly, much less across the board,” he says. One hopes the Narendra Modi regime is listening.

This was first published in the 16-31 July, 2023 print edition of Down To Earth

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