India in the WTO

We still don’t know who will be given charge of India’s commerce ministry, but this announcement can be expected by Tuesday. My sense is that Mr Kamal Nath himself is keen on continuing as Commerce minister and conclude the unfinished Doha round as well as FDI and other industrial  sector reforms.

In an interview to CNN-IBN (see the text here) Mr. Nath spoke about the prospects of the Doha round:

Rajdeep Sardesai: Between 2004-09, Kamal Nath came to be identified with the World Trade Organisation (WTO) talks. Do you believe that with this clear mandate you will have a freer hand in the sense negotiating at the WTO you should be the commerce minister. Do you see a quick completion of the Doha round?

Kamal Nath: I think India needs to have a rule based multilateral system, we have a big stake in that. But today I think the Western countries who are bigger proponents of this are the ones getting cold feet and not India.

Rajdeep Sardesai: Yes, exactly that is why the US democratic administration seems protectionist.

Kamal Nath: That is what I am saying, they are getting cold feet not us.

On FDI:

Rajdeep Sardesai: Just before the elections, you had amended the Foreign Direct Investment (FDI) policy through a press note. Now investments made by a company registered in India in which a foreign company has a less than 50 per cent stake will not be considered as FDI. Some believe this has allowed foreign companies to breach sectoral limits, was this the objective to open up?

Kamal Nath: When we have a global recession, we have to make India a good investment destination. I want to separate ownership and control and this seeks to do that and get more investment.

On FDI in retail:

Rajdeep Sardesai: In your first tenure, between 2004-09 there was this ghost of Left which was always haunting you. This time it doesn’t even exist, will there be FDI in the multi-sector retailing or do you believe that this might affect the kiranewalla (small grocery shop) and that might be a concern that your fellow Cabinet Ministers will against you?

Kamal Nath: It is not FDI, it is big versus small and if it is big you can have a multi-brand Indian company, you have Reliance, ITC etc.

Rajdeep Sardesai: Will you allow FDI?

Kamal Nath: No, I am not talking about retail. As long as FDI doesn’t displace existing employment it is good but talking about the retail sector it is a very grey area.

Rajdeep Sardesai: You see it as a grey area, I thought at one point of time you believed that it would help Indian agriculture.

Kamal Nath: No, we cannot generalise on retail. Retail is not cement and motor, it is technology. If we can have access to retail technology and in fact we must not be looking at man at the moment, we must be looking for the niece and the son and the daughter. And that is the key thing to look at.

On liberalisation (FDI) in education:

Rajdeep Sardesai: The Commerce Ministry had also been wanting to liberalise high education but the HRD Ministry previously under Arjun Singh was not helpful. He is no more there but the fact is that will it happen now?

Kamal Nath: I can’t say that this will happen, I can only say that we have to ensure that our youngsters have the access to the best education in India. Why are we sending thousands of youngsters abroad, why can’t they stay here and study at a fraction of the cost?

On the need for export stimulus measures:

Rajdeep Sardesai: Exports, a critical area again. The export sector has been badly hit by recession. Your (Commerce) ministry had proposed a one year exemption in the payment of the fringe tax to these export oriented companies. Will we see that?

Kamal Nath: Exemption is about competitiveness and cost. Today, if the economy is in recession we can’t plan a package for Europe or the US. We are going to ensure that all levies and taxes are refunded and are not there for export.

Rajdeep Sardesai: But the aam aadmi is the one who is being hit. Do you think the time has come for a comprehensive package for the export sector?

Kamal Nath: There is a need for a comprehensive package to refund taxes, levies on anything that is being exported. Today you go anywhere in the world and you buy something from a shop, you refund immediately. So, you must have all taxes and levies because no taxes and levies are exported.

On differences between the Commerce and the Finance ministeries (in the previous administration the Commerce and Finance ministries had differed over SEZs and over sops for exporters):

Rajdeep Sardesai: Last time there was a feeling that the Commerce Ministry and the Finance Ministry were not on the same track. Will it be different this time with Pranab Mukherjee as the Finance Minister?

Kamal Nath: Well, I think the job of the Finance Ministry is to collect the revenue and see that they do resource management so any Finance Ministry would do that. But you need to weigh it off, you may not export and you may be having an economic impact because of that.

On financial sector liberalisation:

Rajdeep Sardesai: The new Government this time is largely free of the pressures of allies and therefore you will expected to push it with reforms. Last time, every time you were asked about reform you said look my hands are tide. Your hands are no longer tide, will it be different this time?

Kamal Nath: Let’s not say that there were no reforms in the last government. There were reforms in the financial sector which we didn’t do but let us recognise this. We should remember that the reforms that were asked by those financial icons of the Western world, the ones which were wound up.

Rajdeep Sardesai: So, are you among those who think that it is good to be cautious about financial sector liberalisation?

Kamal Nath: No, it depends which reforms we are talking about. We are looking at the reforms which are India specific; we can’t be talking about reforms all over the world. Today the most important reform is the reform in the governance. Reform in our Labour Act, the labour laws must be made employment generating.

On labour law reforms:

Rajdeep Sardesai: So, you would support reforms in labour laws which allow companies to hire and fire easily?

Kamal Nath: We must recognise this that for example if a textile company wants to hire some people to complete an order in four months but they can’t take that order because he can’t hire them for four months. So at that point of time, we are losing on that amount of employment.

Rajdeep Sardesai: But will the politicians allow this kind of labour laws reform? The problem is this is where the politics seem to clash with good economics.

Kamal Nath: No, I am all for the reform in labour laws which generate employment, provide employment security. We have to have this because employment generation is our No 1 priority with the young population.

On Special Economic Zones:

Rajdeep Sardesai: But let’s look at land because there has been controversy over Kamal Nath’s policies as commerce minister when it came to the Economic Zones. You were looked at someone who was liberally granting Special Economic Zones (SEZs), some suggested that it was little more than a land scam. And now you have got Mamata Banerjee who after Nandigram and Singur is going to get tough with any attempts made to liberalise land acquisitions.

Kamal Nath: Let us not talk in the abstract. There are SEZs today on the ground, you can measure easily how much investment is coming to the nearest rupee. We can measure how much employment has been generated, how much export has happened so all that are stories of the past. There are concerns in high density states.

Rajdeep Sardesai: But after Singur and Nandigram, won’t there be pressure to sort of modify your land acquisition policies, your own minister will suggest that.

Kamal Nath: I am all for that and that is what I am suggesting that there was a Cabinet committee, there was a group of ministers selected for that. That has moved the new land acquisition rehabilitation suggestive policy and that parliament had approved that and now this Parliament will take it up.

The videos of this interview (in 5 parts) can be watched here.

A follow-up to my earlier post on election manifestos and the WTO:

The 2009 election manifesto of the BJP released yesterday includes a paragraph on international trade agreements. The message is of a tough negotiating stance that will challenge protectionism, safeguard national interest, and renegotiate past commitments if necessary. Food security, health, and interests of workers in technology-based industries are flagged as important issues. Reciprocity and market access is emphasized. All this is of course only election rhetoric, as no positions on substantive issues (except retail trade, see below) are laid out.

International Trade Agreements

The BJP shall fight against the protectionist trend which is emerging in some developed countries. We will safeguard the country’s interests in all bilateral and multilateral trade agreements by avoiding to accept any new unilateral or less than reciprocal commitments. Our Government will renegotiate all such past commitments that are inconsistent with national interests, especially to ensure food security and affordable health care. We will not hesitate to roll back any concessions and facilities not reciprocated by the counterparts. The BJP will safeguard the interests of our vast technical manpower and ensure maximum market access in future agreements depending upon the offers made by the trade partners.

The manifesto has a separate section on retail trade. No foreign investment in retail trade if the BJP comes to power in New Delhi. 

The BJP understands the critical importance of retail trade in the context of employment and services provided by them, and thus favours a dominant role for the unincorporated sector in retail trade. Towards this end, it will not allow foreign investment in the retail sector. After agriculture, the retail sector is the largest employer of nearly four crore people.

We will:

1. Adopt all necessary measures to safeguard the interests of small and tiny retail vendors.

2. Ensure availability of working capital needs for such vendors through credit at not more than four per cent interest.

3. Study the feasibility of a slab-based ‘Compound Tax’ for traders to free them from needless harassment and end corruption.

4. Set up an empowered committee to recommend welfare measures, including a pension scheme, for small traders.

Other items that are interesting from a WTO/ international trade perspective are the promises on labour:

The BJP will holistically address the long-pending issue of labour reforms, bearing in mind the long-term interests of the working class. It will do so through close consultation with representative bodies of labour and employers. We are committed to ensure the following:

1. Making secret ballot compulsory for trade union elections, by suitably amending the Industrial Disputes Act.

2. Launching a training programme for trade unions to play an effective and positive role.

3. Setting up a ‘Workers Bank’ to deal with the banking requirements of labour in the organised and unorganised sectors.

4. Ensuring adequate compensation for any labour that may be retrenched, with the first option being redeployment.

5. Setting up a National Child Labour Commission.

6. For labour in the unorganised sector, revise minimum wages; expand safety net.

And a special mention for the diamond industry that has been hit by the global economic crisis:

Hindustan Diamond Corporation will be provided full support to help the diamond industry tide over the crisis caused by the global economic slump. It will provide raw diamonds to the cutting and polishing units and bank them for future trade.

The BJP manifesto can be downloaded here.

According to the Economic Times:

The government is considering sops for exporters who train women in skilled activities for their units. Some incentives could also be in store for women entrepreneurs engaged in foreign trade, commerce secretary G K Pillai has said.
Addressing a conference on gender sensitisation in trade policy organised by United Nations Conference on Trade and Development (Unctad) and the department of commerce, Mr Pillai said there has been no mention of gender sensitisation in the FTPs announced so far.
“This time, we are looking at specific gender issues in the FTP. Specific facilities to increase the capabilities of women engaged in the sector will be encouraged,” he said.
Speaking to the media on the sidelines of the event, Mr Pillai said certain incentives could be given to women engaged in export and import activities. Exporters helping women take on high-skill activities in their units could also be given sops, he said. The FTP is likely to be announced in the first week of April.

This might be a good example of how international ideas affect domestic trade policy. Gender sensitization in trade policy has been long championed in international discourse. And now it is starting to filter into India’s domestic trade regulation.

Mr Pillai also commented on how foreign buyers are affecting labour standards in India:

Mr Pillai pointed out that globalisation, in some ways, was bringing about positive changes in working conditions for women in India. He said foreign buyers laid down minimum standards of working condition, which units they sourced their goods from had to follow.
“The minimum standards prescribed are often higher than the domestic standards,” he said, adding that it led to a more favourable working environment for women.

The Indian Express reports

At a meeting called by the Commerce Ministry last Thursday and attended by minister of state for commerce Jairam Ramesh, minister of state for labour and employment Oscar Fernandes and women and child development minister Renuka Choudhary, it was decided that the export promotion councils (EPCs) of five key sectors ‘where there is a perception that the use of child labour is significant’ will not only prepare a plan for abolishing the use of child labour, but also examine their entire supply chain to ensure that sub-contractors and suppliers are not using children.

The five key sectors are apparel, handicrafts, gems and jewellery, sports goods and carpets. There are plans to conduct an annual external social audit and to also focus on abolishing child labour in certain identified geograhical areas including cities like Varanasi, Badhoi, Jalandhar, Surat and Bhavnagar.

On the prevalence of child labour in India, note the same new report:

…According to the 2001 census, about 1.26 crore children in the age group 5-14 were working instead of being in school. The states that are the worst offenders as per the census were Uttar Pradesh (0.19 crore), Andhra Pradesh (0.14 crore), Rajasthan (0.13 crore) and Bihar (0.1 crore).

“We cannot divorce exports from social issues. At the multilateral level, India’s position has been and remains that the social issue clauses cannot be brought into the WTO negotiations framework. But there will be pressure,” Ramesh admitted. According to estimates supplied by the EPCs at the meeting, the carpet sector employs 30,000-60,000 children, gems and jewelllery employs 5,000-7,000 workers and the sports goods sector employs a few thousand children, mainly in Jalandhar.

“Footballs constitute 40 per cent of our sports goods exports and the children employed in the sector are involved in stitching the footballs,” Ramesh pointed out. Child labour activists present at Thursday’s meeting admitted that child labour use in export-oriented industries has reduced significantly in the last 15-20 years, but their use in goods produced for the domestic market hasn’t dropped.

It is a good sign that Indian exporters are now taking the initiative in curbing child labour, though of course under pressure from their buyers abroad. At the same time, the govt. needs to remain focussed on child labour in non-export segments of the industry also.

The labour minister of the government of India recently spelled out India’s policy and legal reponses to child labour. See extract below. For full speech go to http://pib.nic.in/release/release.asp?relid=32620

“Elimination of child labour is an area of great concern and commitment for the Government of India. The problem of child labour is a socio-economic evil which is a direct consequence of poverty and illiteracy. Considering the magnitude and the nature of the problem, Government has adopted a gradual and sequential approach to withdraw and rehabilitate working children, beginning with those working in hazardous occupations/processes and focusing on areas of high concentration of child labour. Accordingly, the National Child Labour Project (NCLP) Scheme has been substantially enhanced to cover 250 districts during the 10^th Plan.           

The major activity undertaken under the NCLP Scheme is the establishment of special schools/centres to provide non-formal/formal education, vocational training, supplementary nutrition, monthly stipend and regular health check ups, etc. to children withdrawn from employment so as to prepare them to join mainstream schools. About 4.50 lakh children have been mainstreamed. A similar scheme for rehabilitation of working children has been started in additional 21 districts of the country under the INDO-US (INDUS) Project, which has inter-alia, strong additional component of vocational training for adolescents.   Employment of children working as domestic servants and in tea-shops and dhabas, etc. has been prohibited under the Child Labour (Prohibition & Regulation) Act, 1986 with effect from 10^th October, 2006.  A campaign has been launched for creating public awareness through media and sensitizing the concerned officials and stakeholders through meetings, workshops and discussions etc. Cooperation of other Ministries has also been sought for rehabilitation of children withdrawn from work and their families. Before moving on, I would like to emphasize the importance of Media, not only in exposing cases of exploitation of children, but also in sensitizing the public.  

Apart from regulatory measures, we need to have a multi pronged strategy – to make going to school an attractive economic proposition, improving the quality of education imparted in schools and instilling sensitivity in house holds and establishments that are prone to employing child labour. …”

For full details of the Indian govt’s response to child labour, go to http://labour.nic.in/cwl/ChildLabour.htm

The Indian government is engaged in an all-out defensive against recent allegations by European NGOs that Indian exports are tainted with child labor.  Kamal Nath the commerce Minister has dismissed these as slurs against India’s image and has threatened to retaliate if trade barriers are erected.

The allegations were made in an Observer article dated 28 october and can be read here http://observer.guardian.co.uk/world/story/0,,2200573,00.html and here http://observer.guardian.co.uk/world/story/0,,2200590,00.html

The Indian media has begun to conjecture whether the United States and the EU are attacking India for its intransigence on the Doha deal by raising the child labor issue at this juncture. The department of labor of the United States recently issued a public notice inviting information for its annual report on child labor practices in GSP beneficiary countries including India. The last date for receipt of information is 5 December 2007.  The Indian government will no doubt be making its submission, as will concerned NGOs. The public notice of the US dept. of labor can be read here   http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-21920.pdf