 "Trading charges")
Never has this popular narrative been shown up for the nonsense it is as much as during the past few months, marked with louder and shriller cries of discontent over the prospective free-trade agreement with the European Union. Front-page stories have been published in most major newspapers warning that India always "loses" from every FTA it has signed. Industry lobbyists are working the phones, inundating every journalist they know with press releases warning of the Indian economy's imminent extinction in August if the FTA is signed this July. Activists of varying levels of blind foolishness have taken to the streets, turning up with black flags every time a European leader comes to visit. And bureaucrats who claim to be involved in the stalled negotiations insist with superior smiles that they are "defending India's interests".
Break it down even further. Let's say that rubber producers in Kerala are suffering because India lowered tariffs on imports of rubber from Southeast Asia under an FTA. Is that a straightforward loss even to industry in general? No; for it means that companies that use rubber as a raw material - tyre-makers, say - have access to cheaper raw material and can improve their competitiveness globally. And, again, Indian consumers benefit. When democracies work well, they weigh the gains of the voiceless many against the angry dissent of the few, and undertake reform, such as in 1991. If the India-European Union FTA doesn't go through, then it will be a failure of our democracy.
Some critics point out that FTAs are capable of "trade diversion", in which, if FTAs are signed with inefficient producers, then the gains in consumer welfare are insufficient to make up for the loss in tariff revenue. This is true. Except it requires you to believe that tariff revenue is as likely to aid in welfare creation in India as are cheaper goods - again, contrary to the logic of 1991. Oh, and it is particularly untrue when the FTA is signed with a large, efficient trading partner such as the European Union.
The two sectors objecting most vociferously at the moment, judging from the number of calls their public-relations people are making, are the dairy and automobile sectors. The dairy sector points out that their equivalent in Europe is subsidised. True. But the Indian private dairy sector has made great strides recently, adding to agricultural revenue. It needs to be able to export, as well, to improve its quality and production standards - it shouldn't just be competing domestically. In any case, the prices of dairy products have risen sharply in this high food-inflation period, and most agree that, like with other high-protein-content foods, this is because supply isn't keeping up with demand. Opening up greater supply is an important way to fix that. The automobile sector is even less worthy of governmental concern. It has grown of late entirely thanks to innovating in the wrong direction - towards hefty, dieselised sports utility vehicles. This is, in any case, unsustainable. Giving India's rich an alternative source for the tank-like cars they apparently want at the moment will mean that the distortions that have permitted the auto industry's lopsided and deceptive growth will end, and it may begin to better serve India's growing aspirational class.
Then there's the vexed question of medicines. Activists may well have spammed your inbox by now complaining that Europe intends to take away our cheap medicines. Perhaps, perhaps not. Among the problems, we are told, is subjecting Indian generics to international arbitration, and permitting European inspectors to seize medicines in transit if there's a reasonable suspicion they're counterfeit. I'm sorry, but this is simply the powerful Indian generics industry defending its interests; activists are serving, as Marxists would say, as the industry's "useful idiots". And this isn't as much about patent protection as it is about counterfeiting and fraud. India has protected its generics makers for far too long, even as concern has grown in destination countries about widespread counterfeiting, causing East African countries in particular to have doubts about India's safety as a manufacturing location. (Several countries there have passed laws controlling access to Indian-made generics; popular SMS-based services allow patients to try and check if their Indian generics are from a counterfeit batch.) In a post-Ranbaxy world - remember, senior executives of that company are accused of saying "who cares if a few Africans die" - affording India's generic manufacturers excessive legal protection is neither wise nor moral. Fake drugs kill - and they don't just kill non-Indians, for that matter. Ask Jaslok Hospital.
Finally, there's the question of services. Indian IT wants Europe to certify it as "data secure", for example. Commerce Minister Anand Sharma has indicated that this is a make-or-break requirement - truly laughable if so. Europe doesn't even certify the United States as data secure! Nor are any of India's outsourcing competitors certified thus. If the FTA is truly held up for this, it will be a travesty, and reflect very poorly on the minister's grasp of the issues. Other questions are also breathlessly posed over granting European market access to Indian service providers. I will take these issues more seriously when Indian professionals like lawyers or sectors like insurance accept that their consumers here deserve to see greater competition, and a more open sector.
Thanks to such inane and self-serving objections, the EU FTA, being negotiated since 2007, continues to stumble even at a time when inflation is running rampant in India and its exports are crumbling. India's trade negotiators have spent enough time parroting the demands of various interest groups, of professions, activists, and industries - demands amplified through the media till there's a din through which it is becoming increasingly difficult to hear the clear voice of economic reason. It is time the prime minister reminded them that their job is also, and primarily, to help voiceless consumers. At least Manmohan Singh, surely, remembers the purpose of 1991.