07 Feb 2018 15:43 IST

Free trade fantasies

An FTA with the US will be disastrous for India

US Ambassador Kenneth Juster’s comments on an eventual free trade pact between the two countries calls for introspection. If India agrees to such negotiations, it is likely to find itself in a trap. There is no way New Delhi can get substantial concessions from the Americans. The maximum it can hope for is increased market access for a handful of sectors such as textiles, and gems and jewellery. The US will not soften its stance on harsh work visa rules and compulsory social security contributions for short-term Indian workers. Washington has shown over the years that it only wants to make things harder for Indian IT companies in the US employing non-Americans. If anything, the protectionist Trump regime could make things worse on the visa front.

However, there would be immense pressure on India to bring down duties on a range of items; Trump has been incessantly complaining about the “unfair” trade surplus that countries like India enjoy. US efforts to make India change its IPR rules to favour global drug giants will increase several fold. Succumbing to such pressure and allowing ever-greening of patents could spell doom for India’s generic medicine producers and millions of patients. The US would also demand changes in investment rules (especially on investor state disputes) and concessions for e-commerce and multi-brand retail.

To believe that India could just say no to the demands and no harm would be done is naïve. Once negotiations are in full swing there would be no stopping the US from using geo-political pressure (for instance, on its stand vis-à-vis Pakistan) to try and get what it wants. In the past (as far back as 2008), smaller countries like Colombia have alleged facing “humiliation” while negotiating FTAs with the US. For India, handling the Americans at the WTO where many developing countries are supporting its cause, is hard enough. Trying to negotiate a bilateral free trade pact could be a disaster.

(The article first appeared in The Hindu BusinessLine.)