India and the Trade Treaties

The world, as we speak stands on a cusp of time, where Mega Trade Deals are about to be clinched that could usher in a new economic era of Global Corporatocracy– where corporations would determine the policies of the Sovereign States; undermining the larger public interest. Centuries ago we had the British East India Company come to India as traders and subsequently colonize India and destroy her home grown Industries like Handlooms by imposing export tariffs resulting in export of raw materials vs. textiles & virtually building for the Industrial Revolution in Britain. Now, it’s the 2nd wave of Global Corporate Conquests with trade deals.
These trade treaties are not just multilateral in nature like TTIP or TTP, rather Bilateral Investment Treaties & FTA (Free Trade Agreements) which the countries sign between themselves containing provisions of ISDS which make the Sovereign State subservient to extra judicial tribunals & vulnerable to being sued by Multi National Corporations. Even countries like India in BRICS have 86 Bilateral Investment Treaties & FTA’s with Singapore, South Korea, Japan which contain the investment protection measures & it will be a mammoth task to renegotiate such treaties. At the end of 2014, there were 14 such ISDS cases pending against India. Vodafone, the U.K. telecommunications group, sought to invoke the India-Netherlands investment treaty to avoid a tax demand for 110 billion rupees ($1.91 billion) after New Delhi amended its tax laws with retrospective effect. Etisalat of the United Arab Emirates, Sistema of Russia, and Telenor of Norway were among foreign license holders that initiated arbitration proceedings relying on the ISDS provisions of investment treaties after cancellation of 2G Telecom Licenses by Supreme Court of India in Feb 2012. The case of White Industries- an Australian mining company, in a dispute with Coal India resulted in an arbitration award going against India after the panel ruled that the definition of investment included the right to any performance having a financial value.
India has proposed a new Bi-Lateral Investment Treaty (BIT) Draft that though retains the ISDS Model, substantially changes the nature of proposed dispute resolution. In this Model, the Foreign Investor will have to exhaust local remedies -judicial or administrative in the host country before taking recourse to ISDS Provision of International Arbitrations, which cannot re examine the judicial decisions of the respective courts. To make the process of ISDS transparent, disclosure of norms & code of conduct for the arbitrators have been introduced. The new BIT exempts Taxation, IPR, Public health & safety, state subsidies, government procurement, environmental protection & financial stability. But the Moot question that arises is -will this new draft BIT proposed by India be acceptable to US who is unlikely to give up on ISDS, Taxation & IPR as part of BIT that is being negotiated between two countries? These very terms could also be the stickling points in FTAs that India is negotiating with EU, EEU, Israel & other countries, and Blocs.
Effect of TPP & TTIP on India:
Mega trade deal like TPP & TTIP are bound to have significant impact on India & its trade with other countries. India cannot ignore the fact that 50% of the outward FDI is from the countries that form part of TPP and/or TTIP. With its 12 members – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam accounting for around two-fifths of the world output and a quarter of global trade – the TPP’s rules and writ will cover large chunks of the world economy and trade. How India deals with the critical issues like Investment protection, taxation & IPR as part of its Bi-lateral Investment treaties, FTAs will determine the benefits & loss to India of these mega trade deals. While India may support a robust transparent mechanism yet one may find countries like US, EU reject the Indian Model of Trade/Investment Treaties. Just yesterday the Indian government halted wide-ranging trade agreement talks with the European Union in retaliation for the withdrawal of the bloc’s authorization for some 700 medicines made in India. The Obvious reason for the Indian Pharma Products Ban seems to be a ploy to arm twist India into giving concessions on crucial aspects of Trade & Investment Treaty like Intellectual Property Rights, ISDS etc. While the Indian Government in its national interest is holding out and justifiably so; much like the case of Food Subsidies at WTO, for how long can it do so & risk being isolated at the Global Stage as the world increasingly becomes integrated into the Global Corporate State?
Another effect of the Mega Trade/Investment Deals will be that when these trade deals are struck, India will have lot of catching up to do in terms of critical infrastructure, technology & legislative norms for easing the flow of Goods & Services between the respective countries otherwise India stands to lose out not only the FDI that comes from these countries but also fall away from the Global Trade Traffic Radar & risk losing Investments and Industries to countries which are part of these Trade Deals. A lack of strategic vision for mega-RTAs like the TPP can gradually isolate India and South Asia from a significant part of the global trade space.
New Delhi will have to re-calibrate its approach as renegotiating 83 BITs already signed for ISDS provision can be a Herculean task as well as negotiating future BITs & FTAs can be cumbersome given the legitimate concerns of Investors regarding Taxation Regime, Intellectual Property Rights etc.  India must take a cue out of BRICS nations like Brazil, who is not a party to any BITs and yet receives substantial foreign investment. Brazil signed 14 BITs in 1990 but its parliament refused to ratify the Treaties because of the risk associated with ISDS provisions. Brazil has implemented some key provisions of BITs like treating foreign investors equally as part of its reforms agenda while South Africa on the other hand has terminated all its treaties & replaced its BIT regime with Domestic Dispute Resolution Fora.
Hence instead of relying purely on a treaty based approach, India must initiate domestic policy reforms like fixing Arbitration Procedure, Judicial Reforms, Stable Tax Regime & a robust Intellectual Property Rights Protection Policy. In addition to this, India will have to implement more structural reforms like Land Acquisitions and Labour Laws to provide a more lucrative & attractive market for investment. Time will be the judge as to what path India takes- whether to be fully part of this Global Corporate State by conceding on some critical issues or stand tall for her Sovereign Rights & National Interests.

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