From the TUC

The gulf between an EU-India free trade agreement and decent work

09 Aug 2012, by Guest in International

Over the summer break, EU trade negotiators will be in India trying to hammer out a trade agreement that would cover a quarter of humanity with new rules on everything from foreign investment to migration.

Under the negotiations, which have dragged on since 2007, Europe wants India to open up further to trade and investment in a range of areas such as banking, retail and pharmaceuticals. And India’s key priority is access to Europe’s labour markets for its skilled workers. At the negotiating table the parties have been squabbling over who’s “market access offers“ are bigger than the others, but the voice of workers and their concerns over the impact of the deal have been largely ignored.

On the Indian side the list of critics grows long. Many NGOs are concerned that removing agricultural tariffs, particularly for dairy and poultry under the deal will hurt Indian famers and agricultural workers.  Many of them already suffer from chronic hunger, and most of them are women.

And UNI, the global union representing service sector workers has warned of the deal bringing the so called “Walmart effect” to India: where big foreign retailers put smaller shops out of business, squeeze suppliers, and drag down working conditions generally. And the proposed tough intellectual property laws under the deal risks undermining India’s generic medicine industry and the life-saving and affordable medicines it makes.

But hasn’t such trade and investment liberalisation brought India stellar economic growth?  After all, free trade economists argue that although liberalisation may hurt workers and businesses in less competitive parts of the economy, this will be more than offset by growth in other parts of the economy that those workers can move into. That’s the conclusion of the hefty EU study into the likely impact of any deal.

The problem with this theory is that it assumes – to put it crudely – that an Indian chicken farmer can quickly retrain as an IT technician. Yet a landmark study by the WTO and ILO in 2009 concluded that countries with large informal economies often cope badly with trade liberalisation because displaced workers get trapped in poorly paid and unproductive jobs rather than being able to secure new and better ones. This is an acute problem in India with the majority of its labour force trapped in low productivity agriculture, and the cause of its jobless growth.

As India’s most famous economist, Amartya Sen and his long time collaborator Jean Dreze conclude:

There is probably no other example in the history of world development of an economy growing so fast for so long with such limited results in terms of broad-based social progress.

For them, India’s record growth needs to be ploughed back into universal health and education, be job rich and based on environmentally and socially responsible investment.

And displaced workers also need the protection of a floor of internationally-recognised labour standards, so they don’t fall between the cracks, as even the EU recognises. Yet according to the International Trade Union Confederation, India still hasn’t even signed core ILO conventions on freedom of association and combating child labour. The Indian government is refusing to include labour standards in the agreement. While Europe is pushing for them, they don’t want to make them legally enforceable. This will just make them words on paper in our experience.

And in a double standard, the EU is pushing for tough and legally binding protections for its investors under any trade agreement. These protections are increasingly being used by multinationals to sue governments in secretive international tribunals for acting in the public interest. Last month, French multinational Veolia filed a claim against the Egyptian government, for, among other things, raising the minimum wage.  The month before, Swedish company Vattenfall took the German government to the tribunal for its decision to phase out nuclear power.

What impact will the deal have on European workers? Probably very little according to the EU impact study, although it does point to some short term job losses in some sectors, particularly in textiles.  But one area the EU failed to study is the likely impact of Indian’s key demand to secure temporary rights for Indians to work in Europe, and particularly in the UK, under so called “Mode 4” provisions (named after the mode of service delivery under the WTO’s services treaty).  

While migration generally has a neutral or slightly positive economic impact on the UK economy, (and money sent back home by migrant workers is hugely beneficial), under the wrong conditions it can lead to migrant workers being highly exploited, and standards in the local labour market being undercut. That’s why the TUC has been asking for, among other things, a proper impact assessment, requirements that Mode 4 workers get fairly compensated and that the UK retains the right to adjust migration flows to ensure no loss in the quality or quantity of jobs here in Britain.

Have we been listened to? We don’t really know because the negotiations have been frustratingly secretive. The only information that we’ve been able to obtain has been through leaks. Indian trade unions and civil society have also protested about the secrecy of the negotiations.

And aside from no proper study on the migration impacts of the deal, a report of the EESC, put together by UK employer representative Madi Sharma has also asked the EU to do proper studies on labour rights, women, the informal economy, agricultural poverty and access to life-saving medicines. I doubt the EU has listened.

But to restore flagging public confidence in trade we need an open and evidence-based negotiating process. We also need a trading system that helps our Indian chicken farmer increase her income or move into a better job. This requires her to be supported by social protection, respect for labour standards, responsible investment, and a job-rich growth strategy. And it needs a trade system that only liberalises with the speed and flexibility it takes workers to fairly adjust.

Although India and Europe want to conclude the trade deal very soon, the negotiations have dragged on for five years and 14 rounds. So I suspect they have time to change course.

For more information see our TUC briefing on the EU-India free trade agreement.