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The Alarmingly Uneven Deal of the India-EU FTA

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By Javier Delgado Rivera

For over four years now, India has been negotiating a Free Trade Agreement (FTA) with the European Union (EU) – the largest trade and investment deal the country has ever embarked on. As much as New Delhi expects to lure the European market and investments closer to India, the actual consequences for the country’s economy could be dire: the open up of public procurement, the deregulation of the banking, automobile, retail and mining industries plus the adverse impact the deal will have in small-scale farmers make of this FTA a counter-productive undertaking.

Europe is India’s major trading partner and biggest –real- source of foreign direct investment (FDI), what gives a flavour of the weight that Brussels carries in the Indian economy. In addition, the EU’s gross domestic product is about ten times larger than India’s. In paper, this asymmetry should present equal opportunities as challenges: a remarkable increase in Indian exports to the enormous European market combined with bigger FDI inflows from the continent, whereas European corporations step up or expand their businesses in India. However, a closer look at the course of the India-EU FTA negotiations reveals a different picture.

Recognizing the significance of exports to keep up with the country’s economic growth, the EU grants India with a preferential import rate, bringing down average EU tariffs on Indian imports to a mere two per cent. With India’s average duties on European products at a much higher 17 per cent, the FTA large removal of trade tariffs will have a greater negative impact on the Indian side. “Preference erosion is a key factor in determining the real economic value -and cost- of a deal with the EU,” points out Shefali Sharma, from the American Institute for Agriculture and Trade Policy.

The upcoming India-EU FTA will also deal with non-tariff barriers (NTB) to trade – a complex set of regulations on imports and investments that in the case of India, protects the country’s market from the might of global corporations. For instance, this FTA is expected to remove a number of limitations on European investments and liberalise the room for manoeuvre of EU firms if national rules are regarded as unfair or discriminatory. An illustrative case is the capacity that European tobacco companies may acquire to sue Indian states if measures to protect public health, such as overbearing tobacco warnings, are perceived as interfering with the multinationals’ investment.

Another long-held fear is the effect that opening up India’s public procurement to European firms may have. Given the size, bargaining power and expertise of EU business when it comes to working in emerging markets, it is plausible that several national players lose their bids in favour of newly-arrived European contesters. As a result, policies initially designed to boost domestic production and consumption as well as to foster Indian small and medium enterprises may well end up weakened. In developing countries, FTAs are infamous for the repercussions they frequently have in public services. Hence, the access of EU firms into the Indian health sector, energy and water supply industries should be carefully monitored.

Nevertheless, Indian officials should be applauded for having negotiated their way to limit the liberalisation of the country’s public procurement to a state level, leaving federal-planned development and infrastructure schemes out of the scope of European firms.

This FTA is likely to bring out a banking deregulation bound to strike large numbers of Indians that, in the last years, have become increasingly dependent on cheap loans to find their way out of poverty. If the Indian financial system is liberalised so that European financial institutions are removed from current restrictions to operate in the country, they will take a greater portion of the Indian banking pie. This will not make good news for poor Indians, given that “unlike their domestic counterparts, foreign banks are not required to open offices in rural areas, provide agricultural loans or to lend to people below the poverty line.” Certainly, it would add up to the pressures faced by domestic banks in more profitable urban operations, displacing resources to better compete in those threatened areas.

If New Delhi proves unable to keep the automobile sector away from the FTA, it may easily turn out to be the worse damaged industry of the whole agreement. Because of the high duties that fully-assembled cars have to pay if directly imported into the Indian market, today most EU carmakers partially manufacture their cars in India. If this trade deal removes those levies altogether along with other existing NTBs, EU automakers will have no incentive to put together their vehicles in India, and would rather ship them in from somewhere else. The price of these automobiles will then go down, undermining the competitiveness of local carmakers. Most European cars sold in India are luxury vehicles, so in order to prevent a major blow to the Indian automobile industry, it is hoped that “the abolition of tariffs [will presumably only apply] on high-end, luxury cars, while small and medium car makers retain a degree of protection,” said Pallavi Aiyar, Brussels correspondent for the Business Standard.

Along with the car industry, duties for European alcoholic beverages are proving to be one of the FTA’s trickiest items to work out. India’s flourishing, vast middle class makes a very attractive market for European spirits and wine multinationals. With a current tariff of more than 70 per cent, lowering duties for EU alcoholic beverages will considerably toughen competition on the business. In fact, neither the automobile industry nor the spirits and wine markets form part of any of India’s FTAs.

Distressing the Indian countryside

The possible FTA-triggered influx of cheap, heavily subsidised European agricultural products right into the Indian market should worry Indian farmers. Brussels allocates near 40 per cent of its entire budget to endow EU farmers, creating a large surplus of low-priced fruits and vegetables ready to export. It seems inevitable that, if tariffs are reduced or completely lifted, dumping will displace large chunks of Indian agricultural products from the country’s markets, hardening the lives of many small scale and subsistence farmers.

On the top of this, if the India-EU FTA ends up fully protecting the intellectual property rights of European agribusiness, these very farmers may see the price of seeds, the bloodstream of their livelihood, substantially going up. As Shefali Sharm says, “the EU advocates for a system of plant variety protection that favours plant breeder’s over farmers rights to seeds.”

Indian negotiators should prevent this trade pact from distressing the living conditions of millions of rural dwellers in India- just like members of the European Parliament (EP) have been doing to protect EU farmers. In a resolution issued in May, the EP called to shield European farming businesses by taking into account “any negative impact on European agriculture, particularly in opening up of markets, GMOs, milk, beef, intellectual property protection and origin labelling.”

Moreover, the powerful European agricultural lobby is pressing EU negotiators to not include certain products in the liberalisation bill, fearing that Indian exports will distort the EU market of certain commodities. A good example is the claim made by Cope-Cogeca – the main farmer lobby in Europe- that the EU should not incorporate rice in the FTA “due to the extreme market volatility for this product and erratic behaviour of India in imposing export bans.”

The mining industry is another sector prompting European investors to rub their hands. As the FTA liberalises the investment regime, European multinationals will be allowed to ship larger quantities of minerals out of India. A profitable business that will multiply mining concessions and therefore, revenue collecting in mineral-rich but poverty-stricken Indian states. That will augment these Indian states’ coffers, though adivasis and other marginalised communities may not welcome with such enthusiasm those European companies. “Deregulating investments in natural resources could displace people from their habitat and sources of livelihood. Furthermore, the misuse of raw materials would exacerbate ongoing struggles against land grabbing,” told Dharmendra Kumar, director of India FDI Watch, to this author.

Grey clouds over the retail sector

In order to contain foreign corporations from dominating large sections of India’s retail, investments of global multinationals in the country’s multi-brand retail are today partially restrained. If, as it has been discussed, the prospective India-EU FTA eliminates such constraints, European giant retailers such a Carrefour, Tesco or Metro Group will size a rather larger part of the Indian retail market, severely hurting the massive, unorganized sector of the Indian economy.

The unattainable standards -not necessarily in quality, but in appearance- of products sold in those supermarket chains may impede local suppliers to work with European outlets. Even if farmers are able to meet the newly-introduced requirements, it is not unusual that, once small-scale producers rely on big buyers to sell their products, wholesale retailers cut down prices, engulfing farmers in a trap that leads to “massive job and livelihood losses,” as a letter of leftist members of the EP put it recently.

In the cases where large outlets do not engage in such practice, farmers, small shop owners and street vendors are anyways likely to get hit by the increase of more competitive products on offer at the supermarkets’ shelves.

The exposure that this FTA will cause to India’s informal sector and small farmers is even recognised in a study carried out by the European Economic and Social Committee, an EU’s advisory body. The report claims that the current course of negotiations fails to “assess the likely economic and social risks of the FTA on Indian society.” In a country where, according to the United Nations Development Programme, “more than 90 per cent of the working population is in the informal sector,” such type of findings should be taken seriously.

Not all about bad news

One of the main bones of contention to conclude this FTA is the negative of Brussels to relax working and residence permits for skilled Indians. If New Delhi’s negotiators are eventually capable to persuade their European counterparts, the agreement will not only loosen up existing requirements for Indians professionals to work in the EU, but could also ease the EU criteria to recognise qualifications. Coupled with the liberalisation of legal services that this pact will bring about, banking, accounting and IT experts may want to keep an eye on the opportunities that this FTA might deliver.

Even if the EU is under fire for its unrestrained defence of corporative interests, Brussels should be credited for trying to safeguard Indians from the worse effects of the European multinationals expansion in the country. The India-EU FTA should “ensure that investors respect core International Labour Organization standards [with an emphasis on child labour], social and environmental governance, and international agreements so as to ensure a balance between economic growth and higher social and environmental standards,” stated the EP in a resolution in 2009.

A tough one to swallow

It is far from certain that the great lost of tariff revenues that this FTA will cause to the Government of India –being the EU India’s larger trade partner- will be compensated by a theoretical surge of FDI from and exports to the European market. “Undoubtedly, this [trade agreement] will have serious implications for government spending in social sectors,” asserted to this author Dharmendra Kumar.

Even though the India-EU FTA is expected to more than double the bilateral trade to EUR 160 bn by 2015, two leading European think tanks estimate that EU exports to India will increase by 56.8 per cent, while India’s to the EU will do a mere 18.7 per cent.

Since the outset of these FTA talks, business interests have been driving the negotiations, while areas like sustainable development and poverty reduction have been neglected. It does not imply though that New Delhi cannot strike vital conquests in some of these social areas, as the data exclusivity exclusion in medicines research proves – allowing generics to be produced when it is in the benefit of the public health.

This FTA runs the risk of hurting millions of Indian families who rely on vulnerable jobs to barely make ends meet. The agreement is widely assumed to be concluded at the end of the year, so there is still some room to better protect these livelihoods. Time is running out to make of the India-EU FTA signing something to celebrate instead of something to bemoan.

Javier Delgado Rivera is a Brussels-based freelance research-journalist with a focus on the European Union (EU) ties with Asia. You can check out his stories at www.euasiaintelligence.com & follow him on twitter at @EUAsiaIntel
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Sanskar Shrivastava is the founder of international students' journal, The World Reporter. Passionate about dynamic occurrence in geopolitics, Sanskar has been studying and analyzing geopolitcal events from early life. At present, Sanskar is a student at the Russian Centre of Science and Culture and will be moving to Duke University.

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Economy

Joao Vale e Azevedo: pessimistic prospects could be tackled by collectivity

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As we enter the new year, the effects of 2021 are now echoing in the economy in 2022. According to the World Bank’s latest Global Economic Prospects report, global growth is expected to decelerate markedly from 5.5 in 2021 to 4.1 in 2002 and 3.2 percent in 2023. This has been proposed both in the case of developing and major economies, such as the case of the United States.

In 2021, governments around the world have suggested that it was a year of rebirth. However, current numbers are not showing that and so not everyone is trusting on this bet. This is the case of Joao Vale e Azevedo, chairman of KUNST Global – an equity firm based in London, Geneva, Zurich and Luxembourg. For him, the forecast is still negative for 2022 as inflation keeps on running critically in the US and in many European countries. But unlike in the 1970s and 1980s, the solution won’t lie in governments printing money like they did in the past.

The chairman of KUNST Global also doesn’t think that the so-called commodity crisis is temporary as the news might say. In fact, Azevedo believes that there is more to it than the effects of the pandemic. While the Covid-19 crisis has ignited the growth of e-commerce, Azevedo claims that this intensification in demand for goods would happen anyway and the problem is actually in the distribution industry: “It is unable to meet this increased demand. There is no labor, no trucks, nor ships. The offer is no longer able to meet the market demand and this is not a contingency, it is a physiological fact.”

Finally, the third and possibly the most concerning problem is the price of energy. “This is really a worrying question, and not only for our distant future, as it has been up to now, but also for our present,” explains Azevedo. “We are witnessing it on a daily basis: electricity and gas bills have skyrocketed. Families and companies, which were already suffering from the pandemic, do not know how to cope with the increases.”

Although propositions like moving from coal to gas or from oil to electricity may point the way out, Azevedo thinks we are completely deprived of the infrastructure and funds necessary to manage this change. What is more, the chairman of KUNST Global argues that present politics lacks long-term vision, which means politicians are often too focused on electoral cycles instead of considering the future – thus mining any possibility of investments for change.

In addition to that, Azevedo has been keeping a close eye on the war in Ukraine. In his opinion, if Russia persists in carrying on the war, not only this country will be doomed to bankruptcy, but the whole West could face a domino effect. “Regardless of this, the war in Ukraine means greater market instability, rising energy prices that are already out of control, and a further increase in inflation, which could reach double the current levels,” he adds.

However, not all hope is lost. Hopefully, the war in Ukraine will find a rapid resolution, which is something that could catalyze even more this sense of collectivity that Joao Vale e Azevedo sees growing after two years of pandemic. “The fact that we have had fewer opportunities for interaction has meant that we are now more aware of the value of those interactions, and probably also of human life. We are a stronger community. The challenges that await us are very difficult, but together we are much better prepared to face them,” he concludes.

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How People Around The World Are Investing Their Money

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One thing that everyone should aim to do with their spare cash is to invest it – as wisely as possible, but at least in a way which is going to lead to potentially high returns. If done correctly and with a bit of good fortune, it is perfectly easy to improve one’s wealth to a considerable degree this way, and it is therefore well worth people considering this.

As it happens, there are a lot of investment options that people are making use of all over the world, with some that are especially popular right now. Let’s take a look in some detail at some of the major ways in which people are investing their money – and making some considerable gains, in many cases.

Stocks & Shares

Arguably one of the most popular forms of investment is stocks and shares – which can be incredibly lucrative if it is done in the right way, and with the right set of circumstances behind an investment. Indeed, stocks and shares remain the number one investment that people are engaging in every day throughout the world, and with good reason. Not only is it potentially something that can bring considerable returns, it is also relatively straightforward to get into and learn at least the basics of, making it a very simple and easy form of investment for most people.

It also doesn’t require a huge amount of money to get going – although having that is obviously not going to hurt one’s chances of success starting out! In fact, it’s doable to get going with stocks and shares with literally a few spare pennies – so it really is something that pretty much anyone can get into and make use of. It can also be a good way to diversify and widen out a portfolio that may include other forms of investment as well.

Savings Accounts

Although many people think of investment and savings as two different things, they are really just two sides of the same coin. You can think of saving as a form of investment, especially if it is done in the right manner and with the right approach. Of course, in order to find success with this, it is important to make sure that you are choosing the best savings account there is. That means one that has a high enough interest rate for it to be worth it, as well as having other functions that might be important to an individual – such as the ability to take money out whenever you need to, for instance.

With interest rates diving all over the world, this is quickly becoming one of the less popular forms of investment – but for now it is still worth considering, as it can be a good way to at least store your spare cash as necessary. If nothing else, you’ll probably find that you are able to find yourself in a much better financial position this way soon enough, even if that doesn’t happen as quickly as it might with certain other investments.

Cryptocurrencies

Although there is some controversy around cryptocurrencies, there is no doubt that it is one of the world’s most popular forms of investment right now. There is also no doubt that it’s possible to make a lot of money this way – as some of the world’s richest people have done so already. Even in a much lesser sense, however, it is perfectly possible for an individual with a regular amount of wealth to make money investing in cryptocurrencies. And generally, this is done in a few key ways.

First of all, you can simply buy some crypto and then hold on to it, hoping for its value to improve and selling it on once it has done so. Alternatively, you might want to consider trading crypto coins by buying one kind and then trading into another as you think it might be lucrative. This takes a bit more knowledge, patience and skill, but the returns can be significant. Either of these can work very well, however, and they are worth thinking about at the very least.

A related form of investment, in that it too relies upon blockchain technology, is NFTs. These pieces of art can be bought and traded as above, and some of them are creating huge amounts of money for people right now, so it might well be worth getting into.

Spread Betting

Another form of investment that a lot of people are getting into in the past few years is something known as spread betting. This is where you place bets on a variety of outcomes on a particular event, whether it’s a sport, a political event or whatever else it might be. With the right bet and the right outcome, this can be a really effective way to make some money, and it is best done with the attitude of it being an investment rather than a bet – as this helps in keeping things a little more sensible.

To make the right decisions, it is helpful to be patient and work out what kinds of results are likely to occur, and to find them at a good price. Searching for NHL picks and horse racing tips is a good place to start for that. However it might be done, with care and attention this can prove to be a decent way to invest some spare money, so it is definitely something to think about.

Bonds

If you are particularly keen for a very safe form of investment, it is well worth looking into bonds. Bonds are something like a savings account, but with an important difference that needs to be understood well in order to make good use of them. Essentially, you buy a bond and you will be paid back your initial investment, plus any interest that may have accrued along the way too. They are very low-risk and yet can bring you a lot of money over the long-term, so they are worth looking into for pretty much anyone looking to make a little money on the side.

Bear in mind that you won’t be able to access the money during the fixed rate period, so you should only invest whatever you don’t need to have immediate access to. However, they offer higher interest rates than your average savings account, so it can be worth it.

Precious Metals

Another form of investment that many people around the world are investing in right now is precious metals. In truth, these are always popular, and it’s not too hard to appreciate why. After all, precious metals will generally always retain their value even when everything else in the world is going through turmoil. That is especially true of gold, which still holds the standard that the global economy works by – with the exception of cryptocurrency.

As you can see, precious metals are almost certainly worth considering at the very least if you want to invest your money wisely. But make sure that you are only putting what you can afford to lose into this investment, like any other. Although it is not the highest-risk investment, it is not zero-risk either.

Those are just some of the most popular investments around the world that people are making good use of right now. Any of these could be lucrative and useful for you, so take a look at them in turn and see whether any of them are suitable for your needs and purposes. You might be surprised at how effective they can be.

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Ridiculous Tariffs on Wines – China Australia Trade War Explicated

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China Australia Trade War
Scott Morrison (right) has not yet been able to secure a bilateral meeting with Chinese President Xi Jinping (left).(ABC News)

Earlier in November 2020, Communist China slapped Ridiculously high tariffs up to 212.1% on Australian wines. These tariffs were in the response of ongoing trade war between Communist Party of China and Australia. China is the biggest importer of Australian wines making up a whopping 39% of Australia’s total wine export. Australia has already raised concerns at a WTO meeting about China taking measures against its barley, wine, meat, dairy, live seafood, logs, timber, coal and cotton, according to a reuters report.

How did China – Australia trade war begin?

China and Australia shared one of the best times in their relationship after Kevin Rudd from the centre-left Labour party came to the power in Dec 2007. During his leadership Australia decided to pursue appease China policy which included steps such as:

  1. Chastising Taiwan for its renewed push for independence and reiterating support for a one-China policy in favor of People’s Republic of China. (Source: The Age)
  2. Signing a A$50 billion deal with PetroChina in 2009 (largest contract ever signed between the two countries) that ensures China a steady supply of LPG fuel until 2029.
  3. Unilaterally announcing departure from Quadrilateral Security Dialogue to appease China.

Nosediving of China – Australia Relationship

The course of this partnership changed when Julia Gillard from the centre-left Labour Party took over the leadership and initiated closer partnership with United States. This included revival of interest in Joining Quadrilateral Security Dialogue and stationing of US troops near Darwin, Australia.

In 2013, Tony Abbott from centre-right Liberal Party took over the leadership. During his term Australia saw some confusion in its China Policy. His Defence Minister Senator David Johnston told in a statement that Australia is seeking to balance their relationship between China and the United States. It was during his term when Australia and China established a Free Trade Agreement.

However, the relationship between Australia and China took a downturn in 2015 when Malcolm Bligh Turnbull from the centre-right Liberal Party came into power. This is the point in history which has led to current trade war situation between Australia and China.

  1. Australia became the strongest opponent of China’s territorial claim in South China Sea.
  2. Banned foreign donations to Australian political parties and activist groups in a move to target Chinese interference in Australian democracy.
  3. Revived Quadrilateral Security Dialogue with United States (Donald Trump), India (Narendra Modi) and Japan (Shinzo Abe). This was the time when Quadrilateral Security Dialogue saw hope of becoming something bigger as all four countries had centre-right governments who had a clear China Policy.

2019 Onwards: China – Australia Trade War

In 2019, relationship between the two countries further took a dip with Scott Morison from centre-right Liberal party becoming the Prime Minister. During his leadership:

  1. Australia signed a letter condemning China’s mistreatment of Uyghurs and other minorities.
  2. Suggested investigating the cause of Covid 19 in April 2020, which resulted into an angry response from China threatening to reduce Tourism and Trade.
  3. Opposed the Hong Kong National Security Law in June 2020.
  4. Reiterated its support for ethnic minorities in China and freedom in Hong Kong in October 2020
  5. Demanded a formal apology from China for posting a fake image of an Australian soldier holding a bloodied knife against the throat of an Afghan child

In conclusion, these continuous attack on China made China so angry that they deliberately leaked a list of 14 points suggesting why China is angry at Australia

China’s attempt at “buying” left wing politicians around the world

Recent trend is suggesting China’s attempt at “buying” influential left-wing politician around the world. In November, 2017 Australia’s Labour Party’s MP Sam Dastyari went against his own party on South China Sea. He later quit his party after he was found of taking financial favours from China.

In 2008, India’s Centre-left party – Indian National Congress signed a Memorandum of Understanding with Communist Party of China. Its contents are still hidden from the Government of India and the people of India.

Recent US Report has shown concern on President Elect Joe Biden not clearing doubts on his China policy.

How Can we Help Australia Post Ridiculous Tariffs on Australian Wines?

In 2020 China has directly or indirectly impacted many of our lives. Some of us have lost our jobs, some of us are taking a reduced salary. In fact, some of us are sitting at home instead of travelling; while some of us have lost our loved ones only because of communist party was incapable of controlling a virus outbreak.

As the entire world is struggling with this virus, Chinese economy continues to be on path of surpassing the US. Therefore, we should pledge to minimize buying Chinese products. It might be impossible to completely boycott Chinese products, but we can at least minimize it.

Install Cultivate Chrome Extension (non sponsored/affiliate link – We are not getting paid to post this). This plugin works on both Google Chrome and the new Microsoft Edge. It helps you understand the origin and seller location of a product on Amazon. It is a great tool to minimize your dependence on Chinese products. If you are lucky, this extension will also suggest some Made in USA alternatives

Buy Australian Wines – Australia desperately needs a new market for its wine and other products. This New Year and Christmas season, we should pledge to celebrate with at least one Australian wine!

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