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Human Rights in the EU-India FTA: Is it a viable option?

01-03-2012

Jatkar, A. 2012. Human Rights in the EU-India FTA: Is it a viable option? GREAT Insights, Volume 1, Issue 2. March-April 2012. Maastricht: ECDPM

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In recent years there has been a growing trend towards the inclusion of social protection clause with human rights language in preferential trade agreements. The path has been espoused by major economies such as the US, the European Union and Canada, and has been up by a few developing countries.(1) 

As a result of such inclusion of human rights clauses, experts suggest over 70 per cent of governments are now participating in PTAs having human rights clause.(2) Developed countries include the human rights clause in their PTAs in various ways such as in the preamble or by way of non-derogatory clause. However, it is worth noting that most of these agreements including social protection clause with human rights provisions do not provide any linkage between the two and are at best in line with the exception clause contained in Article XX of General Agreement on Tariffs and Trade (GATT). They may sometimes increase the number of exceptions in addition to the GATT provision.

Whatever form it may take, it is argued by some analysts that human rights provision is ‘legal inflation’. The common criticism is that rich countries are using trade agreements as an instrument to inflict their values and norms in order to globalise their social policies or regulatory approach. Some also consider that inclusion of human rights provisions in PTAs is nothing but a new form of protectionism in disguise. They emphasise that trade agreements are not an appropriate forum to address human rights issues. These arguments gain more momentum when the trading partners in an agreement involve a developed economy and a developing economy.

In the context of the EU-India FTA, a recently adopted European Parliament resolution contains a number of non-trade issues. This is a cause of concern for India. Some of the major non-trade issues that find place in the negotiations between the two parties are human rights, labour standards, animal welfare and environmental standards. This article aims at understanding whether social protection clause with human rights provision is viable for the EU-India FTA.

Context of the EU-India FTA Negotiations

The negotiations between the EU and India began in 2007 and so far eleven rounds of negotiations have been held. India is a priority for negotiations because of its market size and its future potential, but also because of the high level of protection it enforces on the EU’s exports and investors. On the other hand, India is keen on an FTA with the EU because it is the country’s third largest trading partner in the world.

The negotiations have so far been controversial and mostly held behind closed doors. Reportedly, one of the main roadblocks has been the EU’s insistence on including non-trade issues in the FTA, to which India is strictly opposed. The major argument behind the opposition to the inclusion of social clause from India is that the EU is using human rights issues and environmental and labour standards as protectionist ploy.

At present, both parties are hopeful to conclude the negotiations by the end of 2012. However, the EU continues to insist that India should improve its labour standards, human rights and animal welfare issues, amongst other non-trade concerns.

Why is the Human Rights Clause a Cause for Concern?

The most important link between trade and human rights is that trade increases human welfare in general by generating economic growth. While the impact of trade on human rights is not automatic, the inclusion of social clauses in trade agreements (with sanctions-based approach to deal with legal commitments) can, in effect, weaken the positive linkage between trade and human welfare. This argument can be sustained by reviewing the case of child labour and discrimination against Dalits and Adivasis, issues that the EU is trying to include in the India- EU FTA.(3) 

One of the main reasons why developed countries such as the EU and USA are pushing for the inclusion of labour clause in trade agreements is because they believe that developing countries that have lower labour standards gain an unfair advantage over the developed countries when it comes to labour-intensive industries. The developed countries are also facing rising unemployment and income disparities – things that they are attributing to the phenomenon of cheap labour in developing countries.(4) 

To cite the case of child labour, India’s main export destinations for its carpets are Europe and the US, both of whom are stringent in their child labour laws. The drop in demand for India’s carpets by these major export destinations is attributed partly to the fact that India’s carpet industry employs a large number of children who work in exploitative conditions, mostly in the informal sector.(5) 

A Consumer Unity & Trust Society (CUTS) study on child labour in the Indian carpet industry found that on an average a child’s earning was just enough to cover some basic needs. Another study estimated the amount of monetary resources that India would need to send its child labour to school and to compensate their families for the loss of income. It suggested, in the Indian context, the enormous cost of US$14.62 to 18.94bn every year. Moreover, besides providing free primary education, a mechanism needs to be created to attract the child to come and stay in school.(6) Thus inclusion of social clause in the FTA, without understanding the underlying cause behind this social malaise is not only impractical but has a potential to hurt the child itself.

Turning to the issue of Dalits and Adivasis, a resolution from the International Trade (INTA) Committee of the European Parliament on the EU-India FTA states that there are concerns over the “continuing persecution of religious minorities” and specifically makes calls to ensure that the FTA will benefit disadvantaged groups in India such as the Dalits and Adivasis.

The study on Sustainability Impact Analysis of the EU-India FTA demonstrates that the social impact of this FTA is positive and is expected to induce a significant increase in the real wages of both skilled and unskilled workers in India as a consequence of the FTA. The net effect on Dalits and Adivasis would therefore, a priori, be a positive one without the inclusion of a reference to their social condition.(7) 

Furthermore, it is worth noting that discrimination on the basis of caste is prohibited under Article 16 of the Indian Constitution, and India has ratified two core Conventions on Equal Remuneration and Discrimination of the International Labour Organization (ILO). Some instances of social discrimination may happen (as in case of any society including in European countries) but it is no longer a major cause of concern. Such issues need to be seen from the perspective of their socio-political-economic dimensions rather than legal adherence to a set of already existing legislation. Also, inclusion of social clause is like trying to kill two birds with one stone.(8) These are domestic problems and trade agreements should not be used as a tool to deal with them. They are to be addressed by implementing targeted initiatives.(9) 

It is also important to understand that if India agrees to incorporate non-trade issues in its FTAs, it will have implications at the multilateral level. Many developing countries facing similar developmental challenges will be in a disadvantageous position.

Arguably, if the purpose of social protection clause is to create harmonisation of policies that are uniformly beneficial to all countries, it is difficult to justify them in the context of developing countries. It is natural that developed and developing countries would find it difficult to agree on minimum wage levels and issues related to merits of child labour, amongst others.(10)

India’s argument that non-trade issues can be discussed at an appropriate forum outside legally enforceable trade agreements is justified. It is not a case of avoiding international human rights obligations but a valid proposition to not to deal with these issues in a trade agreement whose primary objective is trade liberalisation in a gradual manner.

Way forward

India is sceptical for labour standards to be included in trade agreements because it sees labour standards as a barrier that restricts market access for its products and services. India believes that the ILO should be the appropriate body to deal with labour laws. Sanction-based approach (as in the case of trade agreements) to deal with social clause can backfire. Therefore, the ILO and other agencies such as the United Nations Children’s Fund (UNICEF) and the United Nations Environment Programme (UNEP) should be given more power and resources to deal with their core mandate. In short, social issues such as child labour are domestic problems and trade agreements should not be used as a tool to deal with them. They are to be addressed by implementing targeted initiatives.

CUTS research has shown that there is a strong positive correlation between a country’s growth and development and its human rights and other social and environmental standards. “Trade is an effective means to achieve more growth and development and human rights clauses and development chapters should not be used for protectionism, which would endanger the most important link for human rights promotion though trade – namely economic growth”.

Archana Jatkar is Coordinator & Deputy Head, CUTS Centre for International Trade, Economics & Environment. This author is thankful to Mr Bipul Chatterjee, Deputy Executive Director, CUTS International, for his valuable inputs for this article.
 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of organisation in which she works.

Footnotes
1. It is noteworthy that not all developed countries favour social protection clause with trade. For example Australia and Japan barely see any such linkage.
2. Aaronson, Susan Arial, and J.C. Chauffour, The Wedding of Trade and Human Rights: Marriage of Convenience or Permanent Match? Switzerland: WTO. 
3. Dalits are historically disadvantaged people that are given express recognition in the Constitution of India, Adivasi are indigenous people. Both benefit from constitutional protection and privileges.
4. Cottier, T. (2008). Human Rights and International Trade. In J. P. Thomas Cottier. Oxford University Press. Bhattacharya, S. K. (2004), India and the European Union: trade and non-tariff barriers’. Akaar Publications
5. Bhattacharya, S. K. (2004), India and the European Union: trade and non-tariff barriers’. Akaar Publications
6. Basudeb Guha-Khasnobis, Mehta PS & Agarwal, (1999). Eradicating Child-Labour While Saving the Child – Who will pay the costs ?, CUTS Publication, India.
7. Ecorys- CUTS-Centad, E. C. (2009). Trade Sustainability Impact Assessment for the FTA between the EU and the Republic of India. Rotterdam: Ecorys for European Commission.
8. See http://cuts-international.org/linkages-twinsal.htm , accessed on March 20, 2012
9. ILO-IPEC Programme in India aims at 80,000 children are supposed to be withdrawn and rehabilitated, see
http://labour.nic.in/cwl/ipec.htm 10 Krishna, P. (2009), The Economics of PTAs in Bilateral and Regional Trade Agreements-Commentary and Analysis. Cambridge University Press
10. Krishna, P. (2009), The Economics of PTAs in Bilateral and Regional Trade Agreements-Commentary and Analysis. Cambridge University Press 

This article was published in GREAT Insights, Volume 1, Issue 2

Economic Transformation and TradeTrade Policy and Economic Partnership AgreementsEuropean Union (EU)Human rightsTradeIndia

External authors

Archana Jatkar