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National Trade Unions Raise Concerns over India's Free Trade Agenda

05 November 2018
Representatives of Indian Trade Union Centers met in New Delhi on 23 October to discuss challenges posed to labour by the NDA government's trade agenda at the World Trade Organisation (WTO), Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs).

New challenges such as the push by Multinational Companies (MNCs) to curtail regulation of the digital economy and digital services providers through Free Trade Agreements such as the Regional Comprehensive Economic Partnership (RCEP) was highlighted as an arena of grave concern. Further, the controversial investment arbitration tribunals, where foreign investors have successfully sued governments, including India for multi-million dollar compensation awards, are back on the table through the RCEPs Investment chapter. As labour unions across the Asia Pacific region are taking note of the RCEP challenge to employment, trade union rights and national sovereignty, the Indian unions resolved to bring these issues to the attention of the NDA Government and decide on a future course of action at meetings of their executive committees.

RCEP is a mega regional Free Trade Agreement (FTA) involving 16 Asian economies, that covers trade in agricultural and manufacturing products, services, intellectual property rights (IPR), foreign investment, government procurement, the digital economy, amongst other issues. The intention is a deep liberalisation that intrudes into the domestic policy arena, resulting in constraints to the ability of the governments both at the centre and state level to formulate sovereign policy. RCEP negotiations began in 2012 and the 24th trade round was held in Auckland, New Zealand (17-24 October 2018).

Prof Biswajit Dhar, from Jawaharlal Nehru University (JNU), highlighted that neoliberal policies are facing a backlash both in the developed and developing world. “The crisis of globalisation is now in the belly of the beast, i.e. in the United States of America (USA). Thus the discourse in the USA is about protecting jobs and reviving domestic industry. However, US President Trump’s protectionist policies are not so much a reversal of neoliberal globalisation, but a knee jerk response to China's rising economic power. The aim is to maintain US political and economic hegemony, not for a new trade policy that allows policy space for developing countries,” he explained. Nevertheless, the current ‘trade wars’ provide the opening for a paradigm shift on trade policy. Whether southern governments will seize the opportunity remains to be seen.

India has suffered heavy losses from the process of global integration and the economy is today in a crisis situation. This can be seen in the imbalance in the trade account where the deficit has grown by 50% last year, foreign exchange reserves (as of September 2018) can only cover for 9 months of imports, and the rupee is at an all-time low. The current situation is closely linked with trade and investment policies that have weaken domestic production capacity and increased the dependence on imports in all major sectors. India’s trade deficit has increased with most FTA partners.

As one of the responses to the current trade imbalance, the government has increased import tariffs, on steel, garments and electronics. “Paradoxically, India is negotiating FTAs, such as RCEP, that will remove its ability to use this policy tool. The GoI wants to show that it is part of a globalised world and play the competition game. But this very game has put the whole economy at risk. This is a schizophrenic policy”, Prof Dhar concluded.

Labour leaders at the meeting asserted the need for a white paper from the Government on achievements in terms of jobs and income in the process of global integration. “Such a paper issued by the Government should clarify on the gains for the Indian economy from lowering tariffs and fostering foreign investment.

Prof Satyaki Roy, from the Institute for Studies in Industrial Development (ISID), explained that countries part of RCEP want an ambitious agreement with the intent to promote global value chains. However, 83% of manufacturing workers are already in Asia, which leads to competition between workers in the region. As a result of the tight control over the value chain by MNCs, mostly based in developed countries, Asian producers are price takers, creating a race to the bottom. Further, MNCs insist on so called 'transparent costing' through which they are able to identify gains in productivity and pressurise local producers to transfer most of the gains to the parent company. This consolidates the trend of limited margins for local producers and limited sharing of productivity gains with workers. This leads to an absolute exploitation of labour, squeezing incomes in developing countries and even leading to deceleration of growth. Informality of employment is a requirement of the system.

“The narrative around global value chains is that it is possible to go up the ladder. But that is a lie. The structure of this production system is skewed. It is not possible to go up the ladder without a targeted policy intervention that aims at increasing productivity in specific sectors while protecting wages and ensuring decent work”, said Prof Roy. In this context, signing a free trade agreement with countries already engaged in global value chains would increase competition, pushing the race to the bottom and lowering wages, put more pressure for informality, including through anti-worker labour reforms.

In the face of the drastic changes to production process brought by the expansion of the digital economy, MNCs are pushing their agenda to ensure the inability of governments to regulate data and its use. Key components of this agenda are free flow of data, no requirement for the local registration of companies for digital activities and no requirement for source code examination and algorithm regulations. This is proposed under RCEP and was already on the table in the controversial Trans-Pacific Partnership agreement (TPP) and is also proposed to be pushed in the World Trade Organisation (WTO) e-commerce negotiations.

However, this has direct implications on collective bargaining and industrial relations. Source code and logarithms are used to calculate wages of drivers, for instance in transport aggregators such as Uber or Ola. There is evidence especially in the services sector that data increasingly determines the relationship between the employer and the employee. Data-driven decisions in production and services provision are making working conditions so specific that it contributes to the fragmentation of the workforce and atomisation of collectives. Unions have started taking up the challenge and are responding with frameworks for ethical artificial intelligence and workers' data rights. Participants concluded that as data is becoming a means of production, we need to identify what parts of data belong to society, to workers, or to the collector of the data. It was proposed that, together we should develop an agenda for community ownership of data.

A key point of discussion was the largely discredited mechanism called ISDS (Investor State Dispute Settlement) available to foreign investors when they feel that host Governments have implemented policies and laws that could harm their ability to make profits, or that they have not protected investors' interests well enough. Shockingly, compensation awards can be more than the investment itself and ultimately come from the public exchequer. In addition, such a system is based on the premise of giving away public policy for private gain of Indian and foreign MNCs. ISDS courts have been criticised for their established biased to favour MNCs, as only States can be asked to pay compensation.

Among RCEP countries, India has had the most number of ISDS cases, as it has been sued 24 times for a total of over US$ 13 billion. After cases were brought against India, the UPA Government had reviewed its bilateral investment treaty (BIT) policy but it was a limited exercise. Despite terminating more than 50 BITs, most treaties are still in effect due to the sunset clause (which implies that treaty provisions will continue for 10 years despite termination) and new ones are coming through the back-door, such as through the RCEP.

The case of French MNC Veolia deciding to challenge the rise in the monthly minimum wage from 400 to 700 Egyptian pounds ($56 to $99) won by Egyptian workers in the 2011 “Arab Spring” speaks of the implications of this system for collective bargaining. Veolia claimed Egypt’s new labour legislation contravened undertakings made by the city of Alexandria under their public-private partnership agreement on waste management and asked for compensation in June 2012. While the outcomes are secret, it is highly likely that Veolia did receive a settlement compensation from the Egyptian government.

The final session stressed on the need for democratic scrutiny of trade treaties as FTAs, BITs and ISDS are shrouded in secrecy. Impact assessments both before and after, as part of a review process, are not public in India. The private sector has privileged access to the discussions that trade unions, and the public in general do not. As a response to the criticism of secrecy, token civil society consultations are organised at RCEP trade rounds, but these fall short of providing a meaningful space for dialogue. Further, the federal system of the Indian State is undermined as issues that should be the prerogative of State Governments are decided at the Central level. Similarly, the Parliament is sidelined as India does not have a ratification process in place. Thus, decisive components of the national economic structure and the terms of its integration in the global economy have been formulated outside democratic processes and scrutiny resulting in serious damage to national development and national sovereignty.

It was shared that at the regional level, Public Services International, along with other Global union federations, has launched an Asia Pacific network, Unions for Trade Justice to coordinate efforts and campaigns on key FTAs negotiations and on labour actions for trade justice.

Representatives from All India United Trade Union Center (AIUTUC), All India Central Council of Trade Unions (AICCTU), Center of Indian Trade Unions (CITU), All India National Life Insurance Employees Federation (AINLIEF), Nagpur Municipal Corporation Employees Union (NMCEU) joined the one-day briefing The briefing was organised by global union federation Public Services International, the Forum against FTAs, Third World Network (TWN) Trust, Transnational Institute (TNI) and IT for Change.

The PSI delegation included V Narasimhan from AINLIEF, Jammu Anand from NMCEU, R Kannan, PSI South Asia Sub Regional Secretary and Susana Barria, PSI Asia Pacific Trade Campaigner.

For more information, contact Susana at +91 99588-12915, susana.barria@world-psi.org. Also visit the website of Unions for Trade Justice at https://tradejusticeunions.org/ (to receive regular updates through our mailing list sign up here)

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