[Revision] GS2: Economy- IR/Diplomacy/Treaties-Agreements affecting India’s ECONOMIC INTERESTSDevendra Vishwakarma
- [Block 1] Economic Bodies-IMF, BRICS Bank, AIIB
- Why IMF quota-governance reforms
- Why need BRICS, AIIB?
- BRICS Bank, Shanghai
- AIIB, Beijing
- [Block-2] WTO, treaties affecting Indian interests
- WTO: structure-function
- WTO: SPS agreement
- [Block-3] WTO AoA, Peace Clause, Food subsidies, TFA, Bali
- WTO: AoA & De-Minimus
- WTO: Bali Summit and Peace clause
- WTO: TFA-Trade facilitation agreement
- [Block-4] US Policy affecting Indian interests
- Fed Tapering
- Capital account liberalization/Convertibility
- What is Capital account liberalization?
- Capital acct.liberlization: anti arguments
- Special 301 report
- US FATCA Act (done)
- USA Totalization pact (not done)
- OCI-PIO reforms (during Modi visit)
- [Block-5] ASEAN, SAARC, Pak
- India-ASEAN FTA in services and investment
- FTAs hurting Indian Economy: yes or no?
- SAARC POWER Pact
- MFN status in Pak
- Revision of selected IR/diplomacy topics affecting India’s Economic interests” in GS2.
- Next revision article: GS3- Planning, budgeting, resource mobilization.
- G20 BEPS agreement=> in the upcoming separate revision note for GS3: money laundering.
[Block 1] Economic Bodies-IMF, BRICS Bank, AIIB
Why IMF quota-governance reforms
Mains-2013 already asked question about world bank vs IMF so chances of another IMF question dim. But IMF-quota reform also serves as fodder for the “why AIIB/BRICS banks setup?” question. Hence useful. Let’s check:
- Post WW2: Bretton Woods conference (’44)=> World bank + IMF + GATT(=>WTO).
- IMF Executive board decides member’s quota on GDP & other parameters.
- Quota decides voting power.
- USA: 18%; China 4% (Even though Chinese GDP running parallel to US); India-Russia 2.5%.
- 2008: Post-Subprime crisis= Western powers’ GDPs weakened.
2010: IMF reforms proposed (bracket shows votes needed to pass it)
- Increase developing countries’ quota. (70%)
- All directors be elected. No permanent chairs to US, Jap etc. (85%)
- But neither passed because US+its allies control ~40% votes.
- 2014: Brisbane G20 communique expressed disappointment & urged Obama to get it done.
|After reform||2.75%||8th Largest|
Why need BRICS, AIIB?
- Bretton woods lack of reforms. as stated above.
- BRICS : 1/5th of GDP; 2/5th population.
- Yet none of its citizen can hope to become IMF chairman given voting quotas.
- But in BRICS bank chairman, President will be Russian and Indian respectively
- Asia needs 800 billion$ every year till 2020. beyond World bank’s aukaat.
- Subprime crisis, Fed Tapering => Dollar volatility affecting import/export of BRICS. So they want to Reduce dollar domination, loans with less conditions.
- Same reason for previous Development banks: Latin Bank of America, Chiang Mai initiative, Bank of South, ADB.
|BRICS Bank, Shanghai||AIIB, Beijing|
|6th summit Fortaleza 2014=>ops.to start from 2016||
|Five members, equal voting power (not in IMF or AIIB.)||China + 21 members. S.Korea, Aussie did not join.|
|capital: 10 million x 5 members (hence equal voting)||
|3 function: loan for infra, sus.Development, BoP crisis.||
|For BoP crisis: separate contingency reserve: 100 billion. China gave highest.||2013: Jinping ‘s idea: make profit from forex reserve+ Silkroad finance+ U$ domination reduce.|
Indian interests: BRICS Bank + AIIB
- 12th FYP: need $1 trillion infra investment. FDI alone can’t fill.
- Competition =cheaper loans.
- World bank can focus on Africa=> export, piracy, extremism angles.
As such 50 dozen UN related bodies, but UNICITRAL important due to Vodafone-Nokia tax disputes.
[Block-2] WTO, treaties affecting Indian interests
- Post ww2: Bretton Woods conference (’44): Trinity of World bank (cheap loans 4 Development); IMF (BoP and exchange rates); GATT later became WTO (reduce intl. trade barriers).
- WTO Structure: ministerial conference (160); General council (Day2day, dispute res.) ; DG 4 years, Geneva
- Agreements: goods related; services related; IPR related; dispute
Settlement. A few Plurilateral agreements not signed by all.
- WTO Want to reduce tariff and non-tariff barriers.
- Absurd quality controls= one type of non-tariff barrier. WTO fixes it via SPS agreement for food/bio items and TBT for non-food items.
SPS agreement important because Indian mango & American murgi (poultry)- from two angles:
- GS2: agreements affecting Indian interest
- GS3: food processing downstream issues.
WTO: SPS agreement
- Sanitary and phytosanitary (SPS) measures
- Allows members to ban import of xyz item, to protect its own local plant, animal and human lives.
- But QC (Quality control) must be scientific. FAO-Codex standards can be used. Higher QC need scientific explanation.
- Developing countries be given additional time to comply with SPS.
|Indian challenges ban:
||USA challenges ban:
|Verdict:EU officials will come to inspect then may clear India’s ban.||Verdict:
Same points can be used for Food processing industry- downstream issues/agreements in GS3.
[Block-3] WTO AoA, Peace Clause, Food subsidies, TFA, Bali
WTO: AoA & De-Minimus
- WTO agreement on Agreement on Agriculture (AoA).
- Wants members to reduce (1) import duty (2)export subsidy (3) domestic subsidy (amber box)
- Amber subsides: disrupt trade, promote excessive production e.g. fertilizer, seed, electricity
- WTO amber subsidy quota: developed 5% of 86-87’s production; developing: 10% L.D.C: exempt.
- This is known as de-minimum limits.
India opposed because:
- USA’s 5% in 86 higher than our 10% in 86, because our agro production wasn’t that high.
- Food prices doubled since ’86. No provision for Inflation adjustment.
- We need MSP and PDS for supporting farmers and poors respectively. (total subsidy bill 1.15 lakh crore for budget 2014. Out of that 88k for NFSA)
WTO: Bali Summit and Peace clause
9th conference Dec.2013. Bali package= 3 outcomes
- L.D.C: other nations to give duty free quota free access to their products.
- Trade facilitation agreement. But India refuses to sign hence third outcome-
- Peace clause: WTO won’t hear de-minimum quota disputes against developing nations for 4-yrs. till Dec.2017 (11th Conf.). condition: said subsidy only for food security / public stockholding.
WTO: TFA-Trade facilitation agreement
Following Picture worth 200 words: