GS-2, International Relations, Uncategorized

Crucial meetings await Parikar on sidelines of Shangri-La Dialogue

Defence Minister Manohar Parrikar is in Singapore to attend the 15th Shangri-La Dialogue. On the sidelines, he will also be holding crucial meetings with his counterparts from France and the U.S.

  • The Shangri-La Dialogue hosted annually by independent think-tank International Institute for Strategic Studies, is being held from June 3-5.
  • It is attended by defence ministers and military chiefs of 28 Asia-Pacific countries besides those of other countries.

What is the Shangri-La Dialogue?

The dialogue, also called as IISS Asia Security Summit, was launched in 2002 by British think tank the International Institute for Strategic Studies and the Singaporean government. This annual dialogue brings together defence ministers and military chiefs from 28 Asia-Pacific countries to talk about security in the region. It gets its name from the location of the meeting, the Shangri-La hotel in Singapore.

Why is the Shangri-La Dialogue important?

  • The dialogue gathers military representatives from some of the world’s most powerful countries to discuss pressing and significant defence and security issues.
  • The meeting is a chance for defence ministers, military chiefs and high-ranking defence officials to hold bilateral meetings on its sidelines.
  • It is also attended by legislators, academic experts, journalists and business delegates from around the globe, making it a vehicle for public policy development and discussions on defence and security in the Asia-Pacific.
GS-2, International Relations, Uncategorized

The fee for NSG membership

The Hindu

News:

  • China’s announcement that it intends to oppose India’s membership of the Nuclear Suppliers Group unless it agrees to sign the Non-Proliferation Treaty (NPT).
  • For the past year, India had made admission to the 48-member NSG a focus of its international outreach, though membership has been a goal since the India-U.S. civil nuclear agreement was signed in 2008.
  • Several major countries including the U.S., Russia, Germany, the U.K. and Australia have openly backed the bid, despite the fact that India is not a signatory to the NPT, widely considered to be a key criterion for NSG membership.
  • In 2015, India reached out to many other NSG members, including those such as Ireland and Sweden that are members of the pro-disarmament group, the New Agenda Coalition, and have traditionally been opposed to its admission.
  • Clearly, China’s stand is a combination of its fraught relations with India as well as its desire that its “all-weather friend” Pakistan not be disadvantaged in the process.
  • However, this is not the end of the road for India’s NSG ambitions.
  • For this, the government must begin an internal debate to appraise its own position on the NSG membership, and to figure out how far it is willing to go to secure it.
  • It will?
    • 1. Have to reckon with the possibility that NSG members could object to an “India-specific” ruling, and that other non-NPT countries, including Pakistan and Israel, may also benefit from any flexibility that is shown in India’s case.
    • 2. There is a possibility that India could receive a “second class” membership, and not be considered a “nuclear weapons state” by the NSG.
    • 3. Membership of the NSG, a body set up specifically in response to India’s nuclear test in 1974, will eventually require India to curtail its nuclear weapons programme.

U.S. President Barack Obama’s comments, made after the Nuclear Security Summit, that:

  • The nuclear arsenals of India and Pakistan are taking them in the “wrong direction”, underscore this.
  • If India aims to be part of the elite NSG club, it must have a realistic idea of what the fee for full membership is, added to the diplomatic outreach required to win support from China. A full and transparent cost-benefit analysis is crucial.
Editorials, GS-3, Indian Economy, Uncategorized

Sensitise States, don’t intimidate them

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The finance ministry is preparing a model Centre-State Investment Agreement (CSIA), for effective implementation of the Bilateral Investment Treaty it is set to sign with other countries. The draft will shortly be presented to the Cabinet for approval.

What are BITs?

BITs protect investments made by an investor of one country into another by regulating the host nation’s treatment of the investment. BIT replaces the Bilateral Investment Promotion and Protection Agreements (BIPPA) that India had signed with 83 countries since 1994.

Background:

In his budget speech, Union Finance Minister Arun Jaitley had proposed the CSIA, to be signed between the central and state governments. This will ensure fulfilment of the obligations of state governments under BITs. States which opt to sign these will be seen as more attractive destinations by foreign investors.

Main features of CSIA:

Some of the features include an enterprise-based definition of investment, non-discriminatory treatment, protection against expropriation, an Investor State Dispute Settlement (ISDS) provision requiring investors to exhaust local remedies before commencing international arbitration, and limiting the power of tribunals to awarding of monetary compensation.

The Centre will also not make it mandatory for states to sign these agreements but if any don’t, counter-parties (other nations) will be informed.

Issues associated with CSIA:

  1. Obligations under international law.

According to some experts the Centre-State Investment Agreement (CSIA) does not make any sense from the perspective of international law. It is because whether a central government enters into any such agreement with states or not, the actions of state governments will continue to bind the Indian state. Irrespective of a foreign company running into trouble with any state, the liability will be on the Centre.

Also, the Centre’s proposal to warn their counter parties about non-compliant States before they make their investment in the State does not carry much legal significance.

  1. Cooperative federalism.

There are also practical considerations in this proposal. India is a quasi-federal structure with a multiparty system. The Centre and State governments are often politically non-aligned. In this context, a proposal by the Centre to enter into investment agreements with States as an optional arrangement may further sour fragile Centre-State relations for two reasons. First, the State governments will not like the shifting of the blame for violation of a BIT from New Delhi to State capitals. Second, the State governments will also not like the Centre informing India’s BIT partner country that a particular State government has not signed the agreement and thus, by implication, is not a safe destination for foreign investment.

Conclusion:

One of the objectives of the proposal could be to sensitise State governments about India’s BIT obligations given the fact that many regulations of State governments directly impact foreign investors. However, this objective would be better served by institutionalising the involvement of State governments in the process of treaty-making. A forum such as the NITI Aayog, which has all the Chief Ministers as members of the governing council, could be used to create a Centre-State consultative process on treaty-making. Also, this sensitisation should not be restricted to BITs but also extend to other international agreements like the World Trade Organisation treaty, numerous Free Trade Agreements, and Double Taxation Avoidance Agreements. Cooperative federalism requires that Centre and States work together, which in turn would ensure better implementation of international treaties.

GS-2, International Relations, Uncategorized

East Asia Summit (EAS)

webbannereas860

East Asia Summit is a unique Leaders-led forum of 18 countries of the Asia-Pacific regionformed to further the objectives of regional peace, security and prosperity.

Why is EAS important?

10 East Asia Summits have been held so far. India has been a part of this process since its inception in 2005. Think of it this way –

  • EAS has held its annual meetings without fail since its inception
  • As members – it has 10 ASEAN nations + 8 strategic partners including US, China, India, Japan
  • This is what our PM said in the 9th EAS – “No other forum brings together such a large collective weight of global population, youth, economy and military strength. Nor is any other forum is so critical for peace, stability and prosperity in Asia-Pacific and the world.”

6 priority areas of regional cooperation within the framework of the EAS

  1. Environment and Energy,
  2. Education,
  3. Finance,
  4. Global Health Issues and Pandemic Diseases,
  5. Natural Disaster Management, and
  6. ASEAN Connectivity

India’s involvement in regional collaboration in these 6 priority areas

#1. Education

At the 4th East Asia Summit (EAS), held in Thailand on 24-25 October 2009, the EAS Leaders endorsed the proposal for the revival of Nalanda University.

source: outlookindia.com
  • Nalanda was a renowned Buddhist centre of learning, in Ancient India. It taught students in medicine, mathematics, astronomy and politics
  • The University envisages seven schools located at its campus in Rajgir
  • Ministry of External Affairs has offered 6 scholarships to students from Cambodia, Myanmar, Lao PDR and Vietnam to pursue higher studies at Nalanda University

#2. Global Health Issues and Pandemic Diseases

  • Australia and India are co-chairs of the Task Force for Access to Quality Medicines and other Technologies Task Force (AQMTF)
  • India has also hosted a Round table on Trauma Care and Nursing on 15-16 October 2015, in New Delhi

#3. Natural Disaster Management

  • 2012: India hosted an ‘EAS-India Workshop 2012: Building Regional Framework for Earthquake Risk Management’ in New Delhi
  • 2014: India also hosted the first Meeting of the 24×7 Points of Contact among the National Disaster Response Agencies of East Asia Summit (EAS) countries
  • Launch of Virtual Knowledge Portal (VKP). What is this?

The Virtual Knowledge Portal (VKP), a web based tool to share knowledge and best practices related to natural disaster risk assessment, mitigation and response among EAS countries. It is hosted by Natural Institute of Disaster Management, New Delhi.

#4. Launch of Regional Comprehensive Economic Partnership (RCEP)

At the 7th EAS in November 2012, the Leaders of 16 EAS participating countries launched the Regional Comprehensive Economic Partnership (RCEP)

What is RCEP?

Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the 10 member states of the ASEAN and the six states with which ASEAN has existing FTAs (Australia, China, India, Japan, South Korea and New Zealand).

source: asiafoundation.org

 

 

 

Want to read more?

GS-3, Indian Economy, Uncategorized

Trading charges

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In February, 2016, U.S. President Barack Obama signed the Trade Facilitation and Trade Enforcement Act of 2015.

  • The focus of the law is to enhance enforcement of IPR over the U.S.’s trading partners. It introduces important measures relating to intellectual property rights (IPR) issues.
  • This law is expected to impact India’s ability to develop an IP policy suited to its own developmental needs.

Present scenario:

The Special 301 list, brought out by the United States Trade Representative (USTR), has consistently featured India, most often as a Priority Watch List (PWL) country, since its institution in 1989.

  • This has caused some disquiet within India, which has been disappointed that its proactive steps to improve domestic IP protection and engage with the U.S. have been unsuccessful in placating the U.S.

Why be concerned about this?

  • Countries featured on Special 301 list are those that the USTR believes have either national laws or regulations that detrimentally affect U.S. trade or the rights of IP holders.
  • If a trading partner is on this list, the U.S. believes that the country is providing inadequate IPR protection, enforcement, or market access for persons relying on intellectual property.
  • Also, any country classified as PWL is subject to USTR scrutiny in the form of investigations and possible sanctions under the procedures set out under the Trade Act, 1974.

How the new law further aggravates the existing problem?

Trade Facilitation Act will increase the level of pressure to comply with the USTR’s requirement for countries like India that feature on the PWL for more than a year.

  • The Act specifically requires the USTR to develop action plans with benchmarks for PWL countries. The USTR has traditionally developed action plans in consultation with the country in question. However, under Trade Facilitation Act, the USTR is not required to consult with the listed country.
  • Also, Benchmarks refers to legislative or other institutional action that a sovereign country like India will need to establish to facilitate U.S. trade. And instituting benchmarked changes remains the only way to remove a country from the Special 301 list no matter how harsh they are. Since the role of USTR is focussed on U.S. trade, it is not obliged to take developmental or public health needs of the trading partner into account when developing action plans or listing benchmarks.
  • A country that refuses to comply with the benchmarks within a year can face appropriate action, resulting in further unilateral investigations followed by punitive trade sanctions. Such trade sanctions can include denial of preferential duty for exports, which developing countries rely on to export goods to the U.S.
  • The Act creates a new position within the office of the USTR titled ‘Chief Innovation and Intellectual Property Negotiator’ (IP negotiator). The IP negotiator is required to “take appropriate actions to address acts, policies, and practices of foreign governments that have a significant adverse impact on the value of U.S. innovation.”
  • Also, with a view to facilitating unilateral actions, the Act creates a Trade Enforcement Trust Fund for legal actions against foreign countries to ensure “fair and equitable market access for U.S. persons.”

Is it not possible to seek any help from the WTO?

Under World Trade Organisation jurisprudence, legality of unilateral actions over sovereign countries remains questionable. Hence, the U.S. may stay away from imposing unilateral sanctions, but tries to bring about change in a country’s domestic IP law through mechanisms like the Special 301 list.

Thus, under U.S. laws, compliance with WTO obligations is immaterial. A country that is compliant with WTO rules can be the subject of investigations if the USTR believes that U.S. trade is detrimentally affected by that country’s IP laws. Thus, India’s traditional defence that it is in compliance with WTO obligations has limited reach.

Conclusion:

India should be concerned about the heightened pressure that is bound to follow with the passage of the Trade Facilitation Act, especially on issues where its compliance with its TRIPS obligations is not disputed. As India continues to strategically engage with the U.S., it is time to develop a coalition of like-minded countries to monitor demands for legislative actions that result in WTO-plus standards.

GS-2, International Relations, Uncategorized

Significance of RCEP for India?

Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between –

  • The 10 members of ASEAN
  • Additional members of ASEAN +3 = China, Japan, South Korea
  • Members with which ASEAN countries have FTA = India, Australia, New Zealand

RCEP includes more than 3 billion people, has a combined GDP of about $17 trillion, and accounts for about 40 percent of world trade. By any means, this is a huge community in making.

What is the significance of RCEP for India?

From India’s point of view, the RCEP presents a decisive platform which could influence its strategic and economic status in the Asia-Pacific region and bring to fruition its “Act East Policy.” It is expected to be an ambitious agreement bringing the 5 biggest economies of the region – Australia, China, India, Japan and South Korea – into a regional trading arrangement.

There are three immediate benefits that its trade policymakers should note-

#1. The RCEP agreement would complement India’s existing free trade agreements with the ASEAN and some of its member countries.

This consolidation can address challenges emanating from implementation concerns vis-à-visoverlapping agreements, which is creating a “noodle bowl” situation obstructing effective utilization of these FTAs.

It will also help achieve its goal of greater economic integration with countries East and South East of India through better access to a vast regional market ranging from Japan to Australia.tpprcepchart

NOTE: India is not a party to two important regional economic blocs: the Asia-Pacific Economic Cooperation and the Trans-Pacific Partnership. The RCEP would enable India to strengthen its trade ties with Australia, China, Japan and South Korea, and shouldreduce the potential negative impacts of TPP and TTIP on the Indian economy.

#2. Gets India closer to ASEAN

  • Clubbing with the ASEAN has been a principal policy priority for both China and India.
  • At present, while China has clubbed with the ASEAN+1, ASEAN+3 and ASEAN+6,
  • India is clubbed only under the ASEAN+6 framework

#3. India can leverage its capabilities in IT, Healthcare, Education and services

  • The RCEP will create opportunities for Indian companies to access new markets
  • India is well placed to contribute to other countries in RCEP through its expertise in services

Countering TPP with RCEP

New Delhi fears the TPP, although years away from reality, could mean losing some textile and drugs exports to countries like Vietnam, which has embraced both the TPP and the RCEP.

TPP is set to change the landscape of global trade. For India, it is most likely to affect sectors likeleather goods, plastics, chemicals, textiles and clothing. 

We will discuss more about TPP in a later discussion but suffice to say that RCEP’s realisation is important for India.


 

Questions for you

  1. What’s the history behind ASEAN+1, ASEAN+3, ASEAN+6 and how is ASEAN+6 related to RCEP?
  2. Apart from RCEP, TPP – there is another arrangement called as Trans-Atlantic Trade and Investment Partnership (TTIP). What do you know about it?
  3. With China not clamping down on its excess steel production, how do you think these FTA arrangement will pan out? Or will they not? What is USA’s stance on this?
  4. It would be worthwhile to investigate the loyalties of the ASEAN nations wrt. China OR India. What are the major countries in ASEAN and who are they friends with. Why would you say so?
GS-2, International Relations, Uncategorized

Nuclear Security Summit (2010 – 2016)

The 4 NSS held in this series were – 

  • 2010 – Washington
  • 2012 – Seoul
  • 2014 – The Hague
  • 2016 – Washington

How did this all begun?

The nuclear security summit initiative began with an April 2009 call by U.S. President Barack Obama to hold a global summit on nuclear security in 2010 as part of an effort to “secure all vulnerable nuclear material around the world within four years.”

Broad goals – 

  1. Address the threat of nuclear terrorism by minimizing and securing weapons-usable nuclear materials,
  2. Enhancing international cooperation to prevent the illicit acquisition of nuclear material by non-state actors
  3. Taking steps to strengthen the global nuclear security system

The pledges secured under this summits are referred to as “gift baskets”.

It isn’t relevant to go back in time and revisit the 1st, 2nd and 3rd summit but let’s have a look at the 4th (and the final one) –

A primary goal of the 2016 summit is to approve 5 action plans for international organizations and initiatives that will continue the work of the summit process.

The five groups are the UN, the International Atomic Energy Agency, Interpol, the Global Partnership Against the Spread of Weapons of Mass Destruction, and the Global Initiative to Combat Nuclear Terrorism.

Since these organisations are at the forefront of the summit, it would be worthwhile to know about them for IAS Prelims. Hail google!

Question:

Write a critical note on the outcome of the recent Fourth Nuclear Security Summit held in Washington.

While you answer this question – keep some points in mind – Russia gave it a miss, Iran was not invited.

Pakistan had ratified the Convention on the Physical Protection of Nuclear Material 2005 Amendment, but it still has not adhered to the International Convention for the Suppression of Acts of Nuclear Terrorism.

India may need to explore possibilities to negotiate with China and Pakistan to create a Regional Nuclear Security Summit process to prevent proliferation of weapons usable nuclear materials.

Editorials, GS-2, International Relations, Uncategorized

Four corners of a good deal

Article Link

The U.S.-Japan-India trilateral has gained momentum in recent years, with regular meetings and a variety of collective exercises. This proves that India has begun to exert its leadership in the Asia-Pacific region.

  • But, it is not possible for India to be a world leader or an Asian leader without first being a South Asian leader. For this to happen, the support of Australia is also necessary.
  • Few experts have been pitching for a greater cooperation between the U.S., India, Japan, and Australia. But, often this quadrilateral relationship is depicted only in defence terms. The four-way arrangement has made much less progress and has largely been limited to some meetings and naval exercises several years back.
  • But, a closer relationship between these four key democracies is necessary for India’s overall growth and can also boost India’s tenuous energy security in a big way.

India’s energy dependency:

India’s energy deficiency and ever increasing needs are well-known. It is also true that for Indian economic growth to return to double digits, energy supplies must increase by three to four times over the next few decades.

  • Deficits, however, are immense — including, for electricity alone, peak demand deficits of 25% in some southern States. This has made India largely depend on other countries to meet its demands.

Key facts:

  • 80% of India’s oil is imported.
  • Coal imports have also increased by as much as 56% in a single year.
  • India also imports 40% of its uranium.
  • Import of natural gas is also increasing.

Concerns:

India’s dependency on other countries is always fraught with risk.

  • Many, if not most, of its hydrocarbon imports come from unstable or faraway regions.
  • Two thirds of its oil comes from West Asia, and distant Venezuela is also a key source of oil. Additionally, India sees great potential in gas-rich Central Asia. However, because Pakistan denies India transit rights to Afghanistan, India lacks direct access to the region.
  • India is now planning to enhance its access to Central Asia by developing the Chabahar port in southern Iran. However, so long as Afghanistan remains unstable, access to Central Asia via Chabahar will be difficult.
  • TAPI pipeline project is a good move. But, Afghanistan’s security problems make this gas pipeline an unlikely prospect.
  • Meanwhile, the lifting of sanctions on Iran following its nuclear deal with the U.S. opens up energy possibilities for India, which has reduced its imports from Iran in recent years. However, New Delhi faces serious competition from other importers rushing to cash in.
  • India has also lost out many opportunities in this sector, while China has seized them.

How can Australia be a game-changer?

Australia can provide immense energy benefits to India. It already provides sizeable quantities of coal and uranium cooperation between the two countries has also been explored.

  • Australia is a top global producer of LNG. And in recent times, India has shown a strong desire to capitalise on Australia’s gas riches. With LNG prices having fallen by 75% since 2014, the timing could not be more ripe to explore deeper energy cooperation — particularly given the volatile location of Qatar, the top current source of India’s LNG imports.
  • Additionally, India could leverage a closer relationship with Australia to engage more deeply with the latter’s neighbour, Indonesia, which provides India more than 60% of its current coal imports. This would also help advance India’s “Act East” policy.
  • A closer relationship with Australia and Indonesia would further ease the burden on India’s naval forces of protecting energy assets in areas more far-flung than Southeast Asia.
  • Additionally, Indonesia and Australia — despite their proximity to the South China Sea and their susceptibility to Islamist militancy, including attacks by the Islamic State — are far more stable than West Asia, which would ease concerns about the security of Indian energy assets and imports originating in these two countries.

Way ahead:

The time is ripe for India to explore ways to increase cooperation with Australia. One way to achieve this is by reviving the quadrilateral relationship. This could also enhance energy engagement with the U.S. and Japan.

  • Besides, all four countries have an interest in energy infrastructure development. Japan, US and Australia have all signed on to the India-led International Solar Alliance. Japan and India are also offtakers for U.S. LNG projects.

Conclusion:

In recent years, a major roadblock to the quadrilateral relationship was Australia, which withdrew from the arrangement in 2013, citing concerns about China’s reaction. But, now with the new government the country has expressed renewed support for resurrecting it. For India, reviving the quadrilateral relationship may not make much sense from a national security perspective. However, viewed through the lens of energy security, it arguably makes very good sense.

Editorials, Environment, GS-3, Uncategorized

Why the WTO is right in the solar panel dispute

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A World Trade Organization (WTO) panel has ruled against India in a dispute raised by the US over the country’s solar power programme, requiring the government to offer a level playing field to both foreign and domestic manufacturers of solar panels.

  • The panel found that the domestic content requirement imposed under India’s national solar programme is inconsistent with its treaty obligations under the global trading regime.
  • This is the second case that India has lost to the US at the WTO. In June 2015, the WTO’s appellate body upheld an earlier ruling against an Indian ban on poultry meat and eggs supplied by American producers. The ban had been imposed to prevent an outbreak of avian influenza.

What’s the issue?

It all started with the announcement of India’s national solar programme, which was launched in 2010. This programme aims to “establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country as quickly as possible”.

  • To incentivise the production of solar energy within the country, the government under the programme agrees to enter into long-term power purchase agreements with solar power producers, effectively “guaranteeing” the sale of the energy produced and the price that such a solar power producer could obtain.
  • Thereafter, it would sell such energy through distribution utilities to the ultimate consumer. However, a solar power producer, to be eligible to participate under the programme, is required compulsorily to use certain domestically sourced inputs, namely solar cells and modules for certain types of solar projects.
  • In other words, unless a solar power producer satisfies this domestic content requirement, the government will not ‘guarantee’ the purchase of the energy produced.
  • In 2013, the U.S. brought a complaint before the WTO arguing that this domestic content requirement clause imposed under India’s national solar programme is in violation of the global trading rules.
  • Specifically, it said, India has violated its “national treatment” obligation by unfavourably discriminating against imported solar cells and modules. Thus, indicating a clear violation trade commitment.

How India defends its move?

India principally relied on the ‘government procurement’ justification, which permits countries to deviate from their national treatment obligation provided that the measure was related to “the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or use in production of goods for commercial sale”.

  • India also argued that the measure was justified under the general exceptions since it was necessary to secure compliance with its domestic and international law obligations relating to ecologically sustainable development and climate change.

What the WTO Panel says?

However, after a detailed examination, the panel concluded that India, by imposing a mandatory domestic content requirement, had violated its national treatment obligation.

  • In so far as the government procurement derogation was concerned, the panel found that the product being subject to the domestic content requirement was solar cells and modules, but the product that was ultimately procured or purchased by the government was electricity.
  • The domestic content requirement was therefore not an instance of “government procurement”.
  • Besides, the panel also found that since India failed to point out any specific obligation having direct effect in India or forming part of its domestic legal system, which obligated India to impose the particular domestic content requirement, the general exception was not available to the Indian government in the instant case.

Was India really wrong?

The ruling has been described as yet another instance of archaic trade rules trumping important climate imperatives. It is being seen as undermining India’s efforts towards promoting the use of clean energy. However, this criticism is not entirely justified.

  • There appears to be no rational basis for how mandatory local content requirements contribute towards promoting the use of clean energy.
  • Besides, by mandatorily requiring solar power producers to buy locally, the government is imposing an additional cost, usually passed on to the ultimate consumer, for the production of clean energy. The decision may therefore stand to benefit the interest of the ultimate consumer.

How should the policy be?

If the objective is to produce more clean energy, then solar power producers should be free to choose energy-generation equipment on the basis of price and quality, irrespective of whether they are manufactured locally or not.

  • It is entirely possible to give preferential treatment to clean energies (in the form of tax rebates for solar power producers and so on) without requiring mandatory local content.

Way ahead:

The panel ruling, however, is not final and reports indicate that India will prefer an appeal to the appellate body. Simultaneously, India may be exploring the option of filing a counter complaint against the U.S., with several states in the U.S. such as Michigan, Texas and California having also reportedly been accused of employing mandatory local content requirements in the renewable energies sector.

Conclusion:

In a bid to support its ‘Make in India’ campaign India is coming out with such policies. However, India must resist the temptation of adopting protectionist measures such as domestic content requirements which are inconsistent with its international obligations. Domestic content measures, despite their immediate political gains, have a tendency to skew competition. Manufacturers must remain free to select inputs based solely on quality and price, irrespective of the origin. The government must continue working towards building a business and regulatory environment which is conducive to manufacturing. This would require systemic changes in the form of simpler, transparent and consistent laws and effective dispute resolution mechanisms.

Uncategorized

Importance of the TPP deal

The Trans-Pacific Partnership or TPP is one of the biggest trade deals in history. It was signed in February in New Zealand by 12 Pacific Rim countries. The TPP involves 12 nations (the US, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam). Together these countries account for the 40% of the global economy and 26% of world trade. The TPP, as yet, does not include China.

The TPP is aimed at dismantling tariff and non-tariff barriers to trade and investments between the participant countries. It also hopes to streamline regulations to implement among other things common standards for the protection of foreign investments and intellectual property rights. However, the TPP has not come into force yet and will have to be ratified over the next two years. In this time period, at least six member countries must approve the final text of the deal for the TPP to be implemented. The TPP is expected to serve as model for future trade deals in other regions.

The pact aims to deepen economic ties between these nations, slashing tariffs and fostering trade to boost growth. Member countries are also hoping to foster a closer relationship on economic policies and regulation. The agreement could create a new single market something like that of the EU. The deal is a remarkable achievement given the very different approaches and standards within the member countries, including environmental protection, workers’ rights and regulatory coherence – not to mention the special protections that some countries have for certain industries.

Those in favour say this trade deal will unleash new economic growth among countries involved. Those against fear it could mean jobs will move from the US to developing countries. They also do not like the fact the five-year talks were held largely in secret.

It is being said that the TPP has high potential to promote economic growth and improve people’s living standards by facilitating the free cross-border movement of key factors of economic activity, such as goods, people, money, and information. Failure to bring the TPP into force would be a great loss to not only the TPP countries such as Japan and the US but also the global economy.

Criticisms:

  • Some experts argue that the Trans-Pacific Partnership (TPP) is a secretive, multinational trade agreement that threatens to extend restrictive intellectual property (IP) laws across the globe and rewrite international rules on its enforcement.
  • The TPP would have extensive negative ramifications for users’ freedom of expression, right to privacy and due process, as well as hindering peoples’ abilities to innovate.
  • The TPP suffers from a serious lack of transparency, threatens to impose more stringent copyright without public input, and pressures foreign governments to adopt unbalanced laws.
  • Some critics also claim that TPP paves the way for companies to sue governments that change policy on, say, health and education to favour state-provided services.
  • The TPP will also intensify competition between countries’ labour forces.
  • But the biggest criticism has been of what the campaigners allege were secretive negotiations, in which governments were said to be seeking to bring in sweeping changes without voters’ knowledge. However, defenders say the reason the negotiations were not made public was because there was no formal agreement on them.

Negatives of this agreement:

  • Most of the gains in income would go to workers making more than $88,000 a year. Free trade agreements contribute to income inequality in high-wage countries by promoting cheaper goods from low-wage countries.
  • That would be especially true of the TPP because it protects patents and copyrights. Therefore, the higher-paid owners of the intellectual property would receive more of the income gains.
  • The agreement regarding patents will reduce the availability of cheap generics, making many drugs more expensive.

India and TPP:

The TPP will likely affect India’s exports to the member countries of TPP. It is estimated that, once this deal is in place, trade worth $2.7 billion will be diverted away from India. The costs could be even higher if India is unable to participate in global supply chains due to the TPP’s rules on standards, labour and environment policies. And, standardisation of intellectual property regimes across the TPP countries and rules on expropriation may make it more difficult for India to attract foreign investment over, say, a Vietnam. Besides, it might even alter India’s bargaining power and negotiating positions.

For India, the agreement provides an opportunity to reflect on its approach to multilateral trade talks, while underscoring the need to build a strong multi-disciplinary cadre of specialist free-trade analysts and negotiators. Though the World Bank projects a limited ‘trade diversion’ impact on non-members, including aggregate GDP losses of about 0.1 per cent by 2030, India could suffer market share losses in certain categories of exports as a result of preference erosion. With the South Asian Free Trade Agreement (SAFTA) having made little to no difference to India’s terms of trade in the neighbourhood, and the country having ceded substantial ground at the latest Nairobi meeting of the World Trade Organisation, it is high time the government proactively girded for the challenges ahead. Like China, where an editorial in the state-run Global Times exhorted the Asian giant’s leadership to focus on strengthening its own economy than worry about the TPP, India too needs to aim at setting its house in order. From ensuring the creation of a domestic common market through adoption of the long-delayed Goods and Services Tax, to building its own multilateral bloc of emerging and developing economies that can act as a bulwark against TPP-like groupings, India has its task cut out.