There is nothing called a Free Trade Agreement

In a recent comment the Gujarat CM Narendra Modi expressed grave concerns on the outcome of a little known Free Trade Agreement FTA that the Indian government is hastily attempting to sign with the the European Union His concern was that the impact of this proposed EU FTA on the domestic dairy and animal husbandry industry in India would be debilitating if cheap European dairy products supported heavily by EU subsidies get inroads to Indian consumers His fears are not unfounded In February this year the EU 201420 budget was announced Of the 960 billion euros budget a mammoth 38 per cent was allocated purely for farm subsidies which will without doubt make EU farm and dairy products ridiculously cheap This is true for other industries as well One could well imagine world class corporations like IKEA and Carrefour competing with domestic brands at prices that are cheaper than those of domestic products If these are the things to come then the socalled lsquoFreersquo Trade Agreement could well turn out to be our costliest trade agreement Since any FTA encourages direct imports it is not a natural builder of employment rather a reducer of the same as over time domestic industries shut down giving way to cheaper imports In the year 2000 EU and Mexico signed a socalled lsquoGlobal Trade Agreementrsquo Within three years postGTA Mexicorsquos GDP growth was crawling at 1 per cent with their trade deficit touching a figure of 80 per cent The ruralurban employment gap got wider thus creating lot of social and local tension in the region Indian FTAs are leading to similar results only A joint study by Corporate Europe Observatory and FDI Watch slammed the proposed EUIndia FTA The authors of the study mention ldquoThe EU and the Indian government have handed the negotiation agenda over to corporate lobby groups ignoring the needs of their citizensrdquo And the issue is not just limited to dairy and agricultural products A paper titled lsquoIndiaEU free trade agreement ndash should India open up banking sectorrsquo concludes the following ldquoThe provisions in FTAs are likely to further destabilise the financial system and so make future crises more likelyrdquo Oxfam Meacutedecins Sans Frontiegraveres Stop AIDS Campaign Health Action International HAI Europe and ActUp Paris protested against the EUIndia FTA outside the European Parliament in April 2013 because access to critical medicines and aid for disadvantaged communities would be gravely affected by the EUIndia FTA An April 2013 paper by Indian automobile industry body SIAM on the EUIndia FTA mentions ldquoThe EU FTA is a retrograde step and will have a severely damaging and long term irreversible effect in several ways for the Indian economy auto industry and consumer at largerdquo Similar are the statements of other industry bodies like CII FIEO etc which are strongly cautioning the government against signing FTAs India signed an FTA with Japan in 2011 Imports from Japan grew by over 3 per cent to 125 billion in 201213 while our exports to Japan fell down to 626 billion from 632 billion one year ago India signed a free trade agreement with ASEAN nations in 2009 Look at the economics since then Indiarsquos trade deficit with the ASEAN group has increased to 18 billion in 201213 from 149 billion in 200910 Is it any wonder that in the year 201213 Indiarsquos current account deficit reached a historic high of 43 per cent of GDP one reason the rupee has now plummeted to record lows and was Rs6186 per dollar on August 7 2013 a never before seen low When it comes to poverty reduction the world doesnrsquot really require such hollow and lopsided policies like FTAs rather what we require are fairer wealth distribution policies Today the wealth accumulated by the hundred richest persons in the world is enough to end global poverty four times over Shockingly the wealth of the top 1 per cent has increased by 60 per cent over the last two decades and was not even affected by the last financial crisis And there is every likelihood that any FTAdriven Indian economic growth if at all would be a jobless one and might not be sustained in the long run We donrsquot need FTAs with other nations to increase their wealth we need poverty reduction policies for our people and the government should realise this at the soonest The author is a Management Guru and Honorary Director of IIPM Think tanku00a0