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The first edition of Fountain Ink is thoughtprovoking. I picked up the issue with some trepidation thinking that the writer’s style would be difficult to read. But my apprehensions vanished as soon as I finished the edit pages. Hats Off! May your tribe grow! T N Raghu, Chennai

At the very first, I would like to congratulate you and your team for a successful first issue. The very first impression was that it brought back the memories of Reader’s Digest. As I started reading it, I found that it unleashed a great reading experience and new perspective to various issues. I really liked each of your articles.

It’s a simply superb production. The stonepelter’s tale and the article on Telangana are the cream of this issue. The important thing about the stone-pelter story is its simple narrative. Whether AFSPA will be withdrawn from J&K remains to be seen. But every one should know about the disappearance of thousands of Kashmiri youth and about the widows of the valley.

Pramathesh Borkotoky

S A Z afar, Kol k ata.

I would like to congratulate you for the debut issue. I like this one. The reportage from Srinagar portrays the the true version of azadi people there want from the governnment. It’s like a person sat next to me and narrated the whole story. Your magazine will be a new addition to my home.

I like your magazine. The stories are neatly arranged and a pleasure to read. I hope you will follow same spirit in the future. Kudos to your team. K S Pugazhenthi

Vijay Babu M, Karaikudi

Kasturi Villa, Flat No.GB-1, No.8, 2nd Street, Parmeshwari Nagar, Adyar, Chennai-600020 feedback@fountainink.in

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The POSCO formula In its POSCO-India Package for Displaced & Affected families, the company claims: “Our approach is: First Rehabilitation then displacement”. Ironically, however, the step for rehabilitation begins with displacement and in the case of the transit camp, the rehabilitation is no better than the displacement itself. WHAT BEYOND RESISTANCE The India growth story has so far skated around the really hard questions. Amid the glittering malls and roads flooded with cars the fate of Patana seems distant and unreal. But the answers are the difference between dignity and a living death. What will happen to these villagers if they are displaced forever? The questions are not restricted to resistance and violence; there are more fundamental questions about democracy and development. As for POSCO, the challenges before it are not simple. After land and the port, it needs water and iron ore, to be mined from Khandadhar. But that land is ready to resist, too. The government has decided to allocate POSCO 600 million tonnes of the highest grade iron ore of Khandadhar, but the project has to resolve many issues. It requires the felling of almost six lakh trees. Ecologists are gravely concerned

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at this massive deforestation. They have observed in a letter, “This activity will entail conversion of non-forest land into forest land to carry out afforestation and in the process deprive another lot of people of access to common land... It seems that the decision is driven by a desire to crush the spirit and livelihoods of the people of the area.” These tales of resistance also open up deep questions about the future of democracy at the grassroots, and the relationship between freedom and development. Does development strengthen democracy at the ground level and empower people? The study of resistance struggles might prove that it is those movements that strengthen democracy in India. At the heart of this all lies the question of freedom and equality, equality and growth with inclusiveness embedded in democratic power. Failure may lead to unimaginable injustice, violence and chaos.


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ESSAY The future of Hindustani music REPORTAGE Inside POSCO country PHOTO STORY Colours in the desert

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o

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ne of the significant attributes of India’s globalisation programme, in the last two decades, has been to enter into numerous international economic treaties to integrate with the global economy. India was one of the founding members of the World Trade Organization (WTO) and participated in the Uruguay Round of negotiations (held from 1986-1994) that led to the formation of the WTO on January 1, 1995. India is a member of the G20 (a coalition of 20 countries on agriculture that is negotiating with developed countries on trade in agriculture). Apart from this, India has already signed, or is in the process of negotiating more than 20 Regional Trade Agreements (RTAs) with other countries, or trade blocks. A delay in completing the Doha round of negotiations is being perceived by many countries as frustrating the objectives of achieving greater market access in the export markets, mainly of developed countries like the US and the European Commission (EC). Recently, India signed comprehensive economic partnership agreements (CEPA) with Japan and Malaysia, aimed at increasing trade and investment flows. India is also negotiating a free trade agreement (FTA) with the European Union (EU). Apart from the FTA with EU, India has an ambitious future plan to enter into FTAs with developed countries like Australia and New Zealand, covering not just trade liberalisation, but also investment, intellectual property (IP) and competition policy. In the recent past, India has signed CEPAs with Singapore and Korea. India has also signed more than 70 Bilateral Investment Treaties (BITs) and is in the process of negotiating many more such BITs with countries like the US.


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This essay argues that the Indian Parliament must play a greater role in the making of these economic treaties. Presently, there is no system of parliamentary ratification or even effective parliamentary supervision of international treaties in India. This is despite “entering into treaties and agreements with foreign countries...” (Entry 14) is a subject in the Union list and thus the parliament is competent to legislate on matters related to treaty making. So far, Parliament has not passed any law on this subject. Parliament’s role comes in only if a binding international treaty requires changes in India’s domestic law. However, in such a situation, Parliament does not debate whether India should or should not accept the international obligations—it only debates how the binding obligations, already accepted by the executive, should be implemented. Even if Parliament decides not to amend or make domestic laws required by the treaty, the treaty will nevertheless continue to bind India internationally. The essay will make a case for greater role of the Indian Parliament by highlighting the onerous nature of these economic treaties, especially the WTO treaty, and will also give examples of how

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India had to change its laws and regulations due to the obligations imposed by the WTO treaty. Finally, the essay will give examples of the United States and Australia as the possible models that India can learn from.

The nature of WTO obligations

The WTO treaty covers an array of subjects that have implications for all the three sectors of the economy—agriculture, manufacturing and services. It covers rules on agricultural and industrial tariffs and subsidies and hence determines how individual countries can apply tariffs, the quantum of such tariffs, and the subsidies that countries can provide to their agriculture and manufacturing sectors. The WTO rules on agricultural trade also determine whether a member country (like India) could provide subsidies to its farmers, how and under what conditions it can restrict the imports of agricultural goods to protect domestic agriculture, and vulnerable and marginalised farmers. The WTO treaty also deals with other subjects such as anti-dumping, trade in services, and performance requirements related to investment. Rules on these subjects, too, have a direct impact on many aspects of the domestic economy.


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For instance, if India wishes to impose an anti-dumping duty on cheap imports, then it has to determine dumping as per the definition in the Anti Dumping Agreement of the WTO—it cannot substitute the WTO definition on dumping with its own interpretation. Similarly, if India decides to open a certain service sector by scheduling its commitments under the General Agreement on Trade in Services (GATS) in the WTO, it cannot then reverse the liberalisation of the service sector, save in the manner which is given in the GATS agreement. The reversal cannot happen based on the domestic laws of the country, as any such reversal will be in breach of treaty obligations. Let us look at specific examples where India’s law had to be changed due to obligations imposed by the WTO treaty:

The product patent regime

One of the most significant changes that India had to make due to WTO obligations was the introduction of the product patent regime in pharmaceuticals from January 1, 2005. The Trade Related Intellectual Property Rights (TRIPS) agreement in the WTO imposes an obligation on member countries to provide patents for any inventions—whether products or processes—in all fields of technology. Developing countries like India were given a 10-year transitional period to implement these obligations. The Indian Patent Act of 1970 recognised product patent except on pharmaceuticals and agriculture. The reason behind not introducing product patents on pharmaceuticals was to keep the prices of the mediDecember | 2011

cines low by encouraging the growth of the generic pharmaceutical industry in India. The generic pharmaceutical industry in India took advantage of the lack of product patenting on medicines and became a massive source of medicine supply within India and also in many other countries. A simple statistic can explain the significance of generic manufacturing of medicines in India: The generic production of the HIV treatment fulcanazole in India kept the price at $55 for 150 milligrams as compared to $697 in Malaysia and $817 in the Philippines. Hence, India benefited immensely by not having a product patent regime in pharmaceuticals from 1970 to 2004. However, from January 1, 2005 the situations changed due to WTO obligations. Now India does not possess the regulatory discretion to have generic manufacturing of the patented medicine without honouring the conditions given in the TRIPS agreement such as paying adequate remuneration to the patent holder. Section 5 of the old Indian Patent Act, 1970, that provided the exception to product patent by not extending it to pharmaceuticals, has been omitted in the new law. In other words, the new Patent Act does not recognise the distinction between pharmaceuticals and other products for the purpose of patents. In view of the new regime, concerns have been expressed about the possible impact of product patenting on prices of medicines, and, hence, their accessibility to the poor. It has also been argued that a product patent regime on phar-


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maceuticals will have an adverse impact on the right to health of Indian citizens. The introduction of product patents in pharmaceuticals demonstrates the profoundness of the obligations imposed by a trade treaty like the WTO.

Protecting plant varieties

Another important change that India has made in its laws is the adoption of a legal regime for plant variety protection. In order to understand this legislation, it is important to first know the obligation that the TRIPS agreement imposes. Article 27.3 (b) of the agreement says that all member countries are to provide for the protection of plant varieties either by patent or by an effective sui generis system or by any combination thereof. This obligation implies two things. Firstly, even those countries that did not recognise plant variety protection were now bound to provide plant variety protection. Secondly, this protection is to be given either by providing for patents on plant varieties, or by a separate system. India explored a sui generis regime and developed a law to protect plant varieties known as the Protection of Plant Varieties and Farmers Rights Act (PPVFR). This law provides a legal framework whereby plant varieties could be protected in India. December | 2011

A law to protect plant varieties has a direct link with agriculture, and with the rights of the farmers in India: such as the right to save, use, sow, re-sow, exchange, share or sell farm produce, including seeds. The PPVFR Act has attempted to strike a balance between rights of commercial plant breeders and farmers by having certain pro-farmer provisions such as recognising the basic rights of farmers to save, use, sow and exchange seeds. What needs to be appreciated is that due to the obligations imposed by the WTO, India had to bring some fundamental changes in its agriculture sector that could have serious implications on farmers.

The quantitative restriction case

Another instance of India changing its policy regime due to WTO obligations is related to a dispute between the US and India in the WTO. In this case, known as the Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products case, the US alleged that quantitative restrictions (QRs) maintained by India were inconsistent with India’s WTO obligations. Imposition of QRs implies that a country restricts the quantity of a particular import. For instance, a country may allow only 10,000 units of steel to be imported.


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Countries have a QR regime in place for imports for reasons such as to protect and shield domestic industry from cheap imports, to tackle the balance of payment problems, etc. As a general rule, WTO rules require countries to eliminate QRs barring certain exceptional circumstances such as safeguarding external financial position to tackle balance of payment difficulties. US was successful in this case and the WTO judicial body ruled against India. With a view to comply with the WTO ruling, India entered into an agreement with the US to remove QRs on 1,429 products by April 1, 2001. India removed the QR on these 1429 products in two phases: QRs on 714 tariff items was removed by March 31, 2000 and the QRs on the remaining 715 products were removed on March 31, 2001. It is important to note that this policy change was not autonomous and was necessitated by the WTO ruling, and by the fact that India lost the dispute to the US in the WTO. In other words, had the WTO not ruled in favour of the US, India could have continued with its QR regime. Had India not complied with the WTO ruling, the US could have retaliated against India by imposing higher

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tariffs on Indian goods going to the US.

The auto component’s case

A key instance where India had to amend its policy due to losing a case in the WTO is related to a dispute involving the US and the European Commission (EC). India, due to balance of payments, problems followed a policy of import restrictions. As a part of this policy, India adopted a public policy notice known as the auto components licensing policy under the Foreign Trade (Development and Regulation) Act of 1992. This policy had two important components that were challenged by the US and the EC in the WTO—the local content requirement and the trade balancing requirement. Under the local content requirement, auto makers investing in India had to indigenise, that is, have at least 50 per cent of the components used in the car manufacturing from India by the third year or earlier, and 70 per cent by the fifth year or earlier. The trade balancing part of the policy broadly required that car manufactures should export volume, which is equivalent to the volume of imports made by them in order to ensure that there is no


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adverse impact on the foreign reserves of India. The US and the EC challenged this as a violation of India’s WTO obligations, which prohibits a country to discriminate between domestic and imported goods. It was argued that India, by making it mandatory for the auto makers to use components manufactured in India created a regime that discriminated in favour of domestic goods over imported goods. It was held that India violated the WTO rules and auto policy was changed.

What other counries do

The issue here is not whether or not India ought to enter into such trade treaties. The issue is that given the profound and stringent impact of these international treaties on the Indian economy, and the people of India, the executive alone should not be entrusted with the job of negotiating and ratifying these treaties. Parliament’s substantive involvement might not be needed for all treaties; but it should certainly be for treaties that have a significant impact on the economy. Different models can be considered in this regard. First is the US model. Under the US model, a treaty which the American president has entered into can only be ratified and bind the country if it has been approved by two-thirds of the Senate. In the US, the legislative ratification is a must for an international treaty obligations. The only exceptions to this are the executive agreements. These are made by the President, on his own authority, and are valid treaties within the international law framework. This distinction has led December | 2011

to the categorisation of the treaties as “self executing” and “non-self executing”. The former set of treaties operate on their own, whereas the latter set of treaties will require enabling acts before they can function in the country. This model gives direct control to the Senate in treaty-making. Second, is the Australian model. Under the Australian Constitution, the power to enter into treaties is an executive act and is the formal responsibility of the executive rather than Parliament. The role of Parliament comes in only in cases where the implementation of treaty obligations requires the enactment of legislation. However, this does not mean that Parliament has no role to play in the process of treaty-making. All treaties, except those that the government of the day considers urgent or sensitive, are tabled in both the Houses of the Parliament for at least 15 sitting days before undertaking any treaty action that is binding. Importantly, these treaties are tabled with a National Interest Analysis, which analyses the reasons behind the government signing the treaty, examines the impact that the treaty is going to have on the economy and polity, and underlines the consultative processes that have been followed up to the signing of the treaty. Another healthy practice in Australia is the constitution of the Joint Standing Committee on Treaties (JSOT). This committee inquires into matters arising out of treaties examines the National Interest Analysis presented by the government of the day. These processes provide an ample parliamentary supervision over


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the entire process of treaty-making by the executive. The Australian model is an example where although, constitutionally, Parliament has no role in the process of treaty making, it plays an important role in the process by debating the benefits that may accrue to Australia by signing a particular international treaty. India can follow any of these two models. Furthermore and importantly

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to change the practice of treaty making no constitutional amendment is needed. The parliament exercising its law-making power under Entry 14 to enact a law on this will serve the purpose. Effective parliamentary supervision will increase the domestic acceptance and legitimacy of these economic treaties, which are often criticised for imposing undue restraints on India’s economic sovereignty.


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