UK-India Trade

Tony Baldry Excerpts

Wednesday 25th January 2012 Westminster Hall

[John McDonnell]

There are real opportunities for the UK Government, with their vast experience of trading relations with India, to influence the FTA in a more realistic way, which will achieve all our objectives.

There was a previous assessment in 2008 by the organisation Traidcraft, with which many hon. Members have worked. It concluded that there were real concerns. It stated that

“the proposed…FTA…risks stripping away the very tools that India could use to re-balance the gains from growth and to ensure that the poor are not further marginalised.”

That reflected not just statements from NGOs, but a statement from the UN itself.

The joint report, published in December, focused on undertaking a right-to-food impact assessment—the impact on people’s ability simply to feed themselves. The results are worrying and warrant serious consideration by the Government in relation to the final drafting session for the FTA.

The FTA is designed to liberalise substantially all areas of trade. It contains sections on services, investment, public procurement, intellectual property rights and many other areas. It will oblige India to eliminate 90% of its tariffs applied to the EU within about seven years. The assessment by the NGOs focused on a limited number of farming or agricultural issues. I will give just some examples. Some 14 million Indian farmers are currently involved in dairy production. Most of them are small-scale, marginal or landless farmers. Their market access, incomes and right to food would be threatened if tariffs for EU skimmed milk power were cut from 60% to zero as planned.

[Tony Baldry (Banbury) (Con)]

India’s economy is growing at 7% a year. Does not the state of India have some responsibility itself to ensure that the benefits of that growth in its economy are more evenly shared among the people of India?

[John McDonnell]

Of course. In the negotiations to which I am referring, it is important that the UK Government in particular, with their influence in Europe, enable the transitional period of the next seven years to be used effectively, so that it does not impoverish people but ensures the growth and wealth of both countries.

I am giving just three examples; I am worried about a shortage of time. The dairy industry will be faced with agriculture in the EU continuing to be heavily subsidised. Reform of the common agricultural policy has not happened, so EU farmers will be relying on export refunds. The dairy quota has been abolished. They will increase their production and therefore put at risk many poor Indian farmers.

The risk is the same in relation to poultry keeping. About 50% of India’s landless and marginal farmers use poultry keeping to supplement their livelihoods. Again, they will be at risk as a result of the reduction from 100% to zero in the current tariffs that is taking place.

About 37 million people in India work in the retail sector. There are 10 million street vendors. It is envisaged that if multi-brand retail is opened up to EU retailers, such as Carrefour, Metro and Tesco, that will bring 1.8 million jobs, but possibly at the cost of 5.7 million people working in that sector.

There are concerns about land distribution, which is highly unequal in India, where 83.29% of farmers have an average land holding of less than 2 hectares and own only 41.42% of agricultural land. There are real concerns that the FTA’s protection for increased inward investment will hold up land reforms.

There are real concerns about third-country impacts. In the case of Bangladesh, the EU’s own assessment says that there could be a 0.5% loss of exports, which does not sound significant, but as the Bangladeshi garment workers union has pointed out, that could cost 150,000 women their livelihoods.

Given the FTA’s implications for India’s poor—I remind Members that the latest estimate is that 224 million people, or 26.9% of the population, live with chronic hunger—and given our concern about the significant weaknesses in the EU’s initial impact assessment, it falls to this Parliament and this Government to ensure that the FTA secures fair trade.

I congratulate the Government on having been courageous in maintaining their support for aid to India, but that support could be wiped out as a result of the FTA’s unfairness. May I therefore briefly suggest a number of things that could be inserted into the treaty to assist in protecting India’s rural poor?

First, before the FTA is signed, it should be agreed that the EU and the Indian Government conduct a comprehensive human rights impact assessment, and that should include the principles in the UN rapporteur’s right to food. That is in line with a 2008 resolution in the European Parliament, which agreed that such impact assessments should take place before trade agreements are signed.

Secondly, before the agreement is concluded, there should be meaningful consultation with all stakeholders, and particularly the vulnerable, with full openness and transparency. Thirdly, the tariff lines for poultry and dairy products should be exempted in the agreement at this stage. There should also be a mechanism in the treaty for identifying any other products that may need protection, particularly during the transitional period.

In addition, there should be a special safeguard mechanism to enable India to react to sudden import surges. There should also be no provisions in the treaty limiting the right to secure the redistribution of land. Finally, there should be a monitoring mechanism in the treaty to ensure the continuous assessment of the FTA’s human rights impact as a result of the trade in goods.

Those provisions are critical. We have a detailed knowledge of what has happened when FTAs have been concluded elsewhere in the world and not been properly scrutinised. They have not only failed to tackle poverty, but undermined the ability of individual Governments to reduce it. Armin Paasch’s report for Ecofair Trade Dialogue has evidenced and exposed the fundamental shortcomings of many EU FTA treaties.

It is not often that I pray in aid Peter Mandelson, but he argued in yesterday’s Financial Times that, before such a treaty is put in place, we have a responsibility to ensure that the domestic capabilities exist to enable it to be used to the best advantage of both the trading partners signing it. That has not happened in this case.

We have a few weeks to resolve this matter. If we do not act at this critical stage, the traditional Indian and UK relationship of good trade, which those of us who have spoken in the debate are urging should continue, could be undermined.

--- Later in debate ---

[Tony Baldry (Banbury) (Con)]

I shall make three brief points. First, following on from the comments of the hon. Member for Hayes and Harlington (John McDonnell), there is no stronger advocate in the House than I of the need for the UK to have a strong international development programme. As a former Chair of the Select Committee on International Development, I think we all owe a duty of care to the very poorest in the world. However, India, which has a nuclear programme and a space programme, and which spends a considerable amount of its GDP on defence, also has a duty of care and a duty to ensure that the growth of its economy is more fairly shared among its people. We should be careful that we do not find ourselves in a position where the west and Europe are somehow expected to look after India’s poor, while India’s middle and upper classes continue to get wealthier and, on occasions, disregard the poorest in their community.

My second point is this. When I was fortunate enough to be a Minister in John Major’s Government, we set up the Indo-British partnership initiative, so there has been no shortage of UK Governments seeking to engage with India and increase trade with it. However, as my hon. Friend the Member for Wimbledon (Stephen Hammond), who introduced the debate, accurately described, we have been falling down the league table very fast. Twenty years ago, we were very high in the league table, but we are now in something like 15th position. Some of the countries that have overtaken us, such as Nigeria, may well have done so because they are selling a lot of oil to India, but some work needs to be done by the Foreign Office, BIS and UK Trade & Investment to analyse why we are falling down the league table. What are other countries doing that is moving them further up it? In part, as my hon. Friend said, it is because the Indian Government still restrict activities in areas of the economy where Britain is strong, such as banking, insurance and legal services. However, that does not, of itself, necessarily explain why we are falling down the league table. We therefore need a solid piece of work and analysis in Whitehall by the Foreign Office, BIS and UKTI as to why that is happening.

My third and final point is this. Yesterday in the House, the Foreign Secretary announced a further round of sanctions on Iran. Two days ago, the Indian Oil Minister announced that India would seek to purchase considerably more oil from Iran, given the lowering of the price of Iranian oil. India has aspirations to join the Security Council, but it cannot show two faces: it cannot show one face to Europe, as a partner to Europe and the international community, and seek to be a member of the Security Council, but then show a different face to some of its neighbours in Asia. If international sanctions against Iran are to be effective, every responsible nation must enforce them, and that includes India and China. They cannot take advantage of the fact that the European Union and many other countries are imposing oil sanctions on Iran to seek to purchase cheaper oil from Iran for gold, which would have various other consequences. India must be a full player in the international community if it is to be taken seriously.

[Mr Charles Walker (in the Chair)]

Thank you, Mr Baldry, for your brevity.