An Indian perspective on the EU/India FTA
After several rounds of negotiation, the Free Trade Agreement (FTA) had reached its long anticipated final round of talks in 2011. Since 2007, two of the world’s largest economies have been negotiating to improve, facilitate and regulate bilateral relationships in trade and investments and government, as well as intellectual property rights regimes. The aim is to establish a comprehensive FTA, both compatible with and complimentary to the WTO rules and obligations.
However, some differences persist on several matters, such as on how to open the Indian markets for automobiles, wines and spirits, and agriculture. On these matters, the EU has demanded a much stricter enforcement of intellectual property rights.
Such demands come on top of those made by EU financial institutions and powerful lobby groups like the European Services Forum (ESF) for removal of all restrictions pertaining to branch licenses, foreign ownership (of both public and private banks), and shareholder voting rights, among others.
In essence, the EU is seeking greater market access and export gains for its banks through this agreement and it seems that the European banks are primarily interested in serving three niche segments in the Indian market: up-market consumer retail finance, wealth management services and investment banking.
Unsurprisingly, this focus ignores the needs of the poor and low-income people residing in India even though no ban or restriction prevents foreign banks from serving them. The unavailability of finance to these individuals is a key hindrance to development progress, particularly in rural India and where poverty is rampant.
With no obligation to open branches in underserved (primarily rural) areas, European banks will not be obliged to aid poverty relief by serving the vast number of rural households excluded from the formal banking system.
In respect of intellectual property rights, global companies have fought for the harmonisation of patent exclusivity rights to provide patent protection for even slight modifications to the molecular structures of key medicines and chemicals. Presently, Indian laws do not provide any such protections and to acquiesce to these EU demands would be difficult for India to accept.
Extending these protections would benefit these global companies a great deal, but would also delay competition from generic drug manufacturers and, thus, impede the accessibility of key materials and medicines to the parts of India that so badly need them. The patent regime, when implemented, should provide a satisfaction to the European pharmaceutical firms and a right to the Indian pharmaceutical industries to sell generic medicines in third countries easily and comfortably.
The FTA is expected to boost trade from $75bn to $100bn over five years. A trade deal of this magnitude and scope is supposed to deliver synergy benefits for the economies of both jurisdictions. There is no doubt that the proposed union will not only open the greater market access to both the unions but will also facilitate the exchange of trade and services mutually. However, it is critical that the agreement includes fair provisions that will benefit all Indians and all of India, and not just those already well placed to benefit to begin with.
Dilip Kumar Niranjan is a Partner and Karan Gandhi is an Associate at Singh & Associates, a law firm based in New Delhi, India.