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The European Union, under its Global Europe initiative, has since 2006 been pursuing trade agreements with its major global trading partners. An EU–India Free Trade Agreement is currently under negotiation; if successfully concluded it is likely to have knock-on effects on other countries’ trade with both India and the EU, the trade of the “innocent bystanders” excluded from the agreement. The authors consider the implications of the EU–India Free Trade Agreement for various groups of other countries, including ...
The European Union, under its Global Europe initiative, has since 2006 been pursuing trade agreements with its major global trading partners. An EU–India Free Trade Agreement is currently under negotiation; if successfully concluded it is likely to have knock-on effects on other countries’ trade with both India and the EU, the trade of the “innocent bystanders” excluded from the agreement. The authors consider the implications of the EU–India Free Trade Agreement for various groups of other countries, including the ACP countries and those in South Asia, the latter group being most strongly impacted. The analysis considers not only trade in goods but also trade in services, and focuses not only on quantities but also on the prices at which trade is conducted. The authors, L. Alan Winters and others at the Centre for the Analysis of Regional Integration at Sussex, then consider how excluded countries might respond to the Free Trade Agreement, both at an individual level and at a systemic level.
Preface; Summary; Contents; List of Tables and Figures; List of Abbreviations; Introduction and Summary; PART I BACKGROUND: 1) The effects of preferential trading arrangements (PTA) on excluded countries: Welfare not quantities; 2) EU Trade Agreements: What can we expect an EU-India Agreement to Cover?; 3) The Effects of a potential EU-India FTA on the EU and India; PART II EXCLUDED COUNTRIES AND THE MARKETS FOR GOODS: 1) Trade Similarity; 2) Trade Diversion and Trade Re-orientation: Aggregate Analysis; 3) Trade Diversion and Trade Re-orientation: Sectoral Analysis; 4) Terms of Trade Effects; References; PART III SERVICES: 1) The importance of services in a potential EU-India FTA; 2) Barriers to services trade between EU-India and areas of interest in a possible FTA; 3) The coverage of services in FTA; 4) The welfare effects of preferential services liberalization; 5) Specific case studies from EU-India; 6) The role of investment; 7) Conclusion; References; PART IV POLICY RESPONSES: 1) Individual Excluded Countries; 2) Multilateral Responses; References; Index.
Posted April 28, 2009
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In June 2007, the European Commission and the government of India started negotiating a far-reaching Free Trade Agreement which could have significant effects on the Indian economy and poverty reduction efforts.
India is seeking lower levels of liberalisation than initially proposed, in order to protect its sensitive sectors, and wants to exclude key areas - for example government procurement - from the negotiations altogether. Thus far, the EC has rejected these proposals and has insisted that India and the European Union (EU) are 'equal players in this negotiation and should have a high level of ambition'.
Yet India's GDP is 6% of the size of the EU's and it has the largest numbers of poor people of any country in the world. 792 million (nearly three quarters of the population) live on less than a dollar a day. This is equivalent to the entire population of Africa, the Caribbean and Pacific countries combined. For the EU, trade with India makes up 2% of its total trade, while for India the EU is its largest trading partner, making up 20% of its total trade.
Developing countries entering into trade agreements with richer country partners which lock in far-reaching liberalisation and de-regulation commitments face serious risks to their vulnerable sectors - such as small farmers, small and medium enterprises (SMEs) and workers - as well as reduced flexibility to implement national policies.
The FTA could harm India's interests:
. Immediate risks from liberalisation to a wide range of vulnerable sectors - from agricultural products, including dairy, to light manufactured products such as paper. In the auto-parts sector the EU's own assessment predicts that the FTA will have a 'notably negative' short-run impact and cause a significant loss of jobs.
. Less government revenue, increasing the pressure on the Indian government to either cut public spending or increase taxes to compensate.
. The potential for India to use its vast government procurement market to address inequalities by directing spending towards marginalised sectors could be curbed.
. The potential to oblige banks to lend loans to SMEs and rural customers - as was successfully undertaken by India in the past - could become more difficult.
North-South FTAs harm the less developed partner - because they reduce the national self-reliance that is vital to the growth of domestic industries. The proposed EU-India FTA - based on the EU's Global Europe Strategy - would strip India of the policy tools that it needs to grow and to reduce poverty.
The EU sees its free access to other countries' natural resources as its right. The EU's 'Global Europe' strategy is an aggressive agenda to secure access for European companies to markets in the developing world. It strengthens the EU's drive to reduce tariffs in third countries and to attack national regulations that it calls 'barriers to trade'. It wants 'the ability to invest freely in third markets' on behalf of its companies and to be able to open public procurement markets to its companies. The 'Global Europe' strategy is about as close as it is possible to get to a plan for entrenching European economic dominance without using the military.