India's trade negotiation strategy continues to be flawed, failing to serve sunrise, labour-intensive and export-oriented industries such as prioritised by "Make in India" - and hurting consumers and even industry in the bargain. In the most recent incident, India responded to the European Union's ban on 700 drugs tested by Hyderabad-based GVK Biosciences by using it as a pretext for putting off talks on the India-EU free trade agreement scheduled to be held in New Delhi later this month. It is true that the EU's move is a big jolt; the pharmaceutical industry could suffer a $1.2 billion loss by some estimates. The EU-wide step came following several country-specific bans, in Germany and France among others. Indian industry has argued that these medical products have been in use in Europe for several years without any specific vigilance reports against them - though the Europeans may well retort that a vitiated testing and approval process is sufficient reason for a ban, even in the absence of compound-specific reports. Either way, there are surely specific ways in which this issue can be resolved. India has been in touch with European drug regulators to allay their apprehensions about the testing procedures in the Hyderabad facility.
However, India's stand in using this to hold the India-EU Broad-based Investment and Trade Agreement (BITA) hostage defies logic. Its negotiators, if they must serve the pharmaceutical industry's interests, could at least have let the BITA talks restart and use them as an opportunity to raise such and other prickly issues rather than shutting the door on negotiations. With global talks on multilateral trade under the World Trade Organisation (WTO) not making much headway, bilateral and regional trade agreements have emerged as the preferred route for promoting cross-border commerce. True, a clash of interests on numerous issues between India and the EU is the chief cause for slow progress towards a bilateral accord since 2007. But negotiations based on the principle of give and take are the only way to resolve these differences to mutual benefit. The issues at stake for both parties pertain chiefly to just a few sectors. India is refusing market access for European wines, spirits and automobiles, among others; Brussels says it does not have the power to grant New Delhi's demand that India be deemed a "data-secure nation" in every European country. Phyto-sanitary bans in Europe - such, as recently, on Indian mangoes - also irk Indian exporters.
The problem is that India has failed to recognise that the rules of the trade game have changed. Rather than negotiating on tariffs, countries now negotiate on non-tariff barriers, including regulatory and licensing issues. But New Delhi is still obsessed with tariffs as the major instrument of regulating overseas trade, thereby giving short shrift to discussions on intellectual property rights, trade facilitation, sanitary and phyto-sanitary standards, climate change and the like. When market access is cut off because of regulatory issues - such as in this case, of GVK-tested medicines - then India's reaction must be to negotiate, instead of cutting off talks. If necessary, the need for upgrading the local regulatory capacity using pooled resources should be discussed. Clearly, New Delhi must revisit its negotiating strategies. At the moment, mega-regional trade deals that act to harmonise regulations are going ahead without it. If India wishes to remain a part of global trade, it must participate on these terms, or risk being marginalised.
