SITARA plea to PMO on leaving Domestic Procurement out of Free Trade Agreements

SITARA wrote to PMO – as the highest arbiter of India’s National Interest – on the dangers of providing  other countries access to Government Procurement. The letter can be downloaded here.

After decades of gifting tenders to foreign companies, preferential policies in Govt procurement are India’s last chance to reap benefits from its own procurement ecosystem. The Govt procurement market is US$500 bn, and foreign companies had so far been able to game the system in their favour.

The first leg of SITARA’s campaign, to sensitise Govt about the security risks of Chinese and foreign control of our ICT networks, succeeded with Govt taking action to limit access for Chinese companies at least, though even that battle is far from over. But other foreign companies have muscled in and Govt must use every lever at its disposal, including spectrum auctions, to ensure domestic companies get at least 50% of private Telco orders. This will ensure security of our networks apart from boosting domestic capabilities.

Including Govt procurement in FTAs (Free Trade Agreements) or CEPAs (Comprehensive Economic Partnership Agreements) would be the final blow to the Indian economy, reversing PM’s Atmanirbharta campaign. We shall soon upload our analysis of the damage done to the Indian economy by signing FTAs. Apart from the collapse of our electronics sector, there is “good” FDI to consider. Significant tariff-hopping FDI has been received in the auto sector and smartphones BECAUSE OF tariffs, eliminating them will mean eliminating good manufacturing FDI.

Hypnotized by Neo-colonial, Neoliberal narratives, Indian policy makers for far too long have bought into the narrative of integration into global value chains at the lowest end of the value chain – instead of building techno-industrial capacity at home through an R&D intensive Industrial Policy. The share of value addition in manufacturing in our GDP has accordingly plummeted further to 13%, while value addition per se has decreased 7% in 2020 from 2019. This path will not get us anywhere close to our dreams of a self-reliant, high-tech India.

In contrast, Atmanirbharta has started to achieve results in Defence and Telecom, and we must not pull the rug from under its feet through ill-thought-out FTA/CEPAs.

As for the “exceptions”, we know from hard experience that there is little capacity or appetite in Govt to monitor or implement the exclusions for SMEs, defence industry and PPP MII provided for in the UAE agreement, and these are sure to be overwhelmed by the sheer intrusiveness of the 22-page chapter on Government procurement. Once we open the floodgates, every tender will be picked up by foreign companies. Moreover, foreign firms can circumvent the exceptions by hiring legal advice. These very lawyers are the ones who handle Govt cases in court, so they know the ins and outs of our system. And that is why we could never get the Chinese to pay anti-dumping dues levied by the Ministry of Commerce.

An expert opined that what India needs is a Conflict-of-Interest Law, so that legal firms working for India’s national interest cannot also advise our adversaries in this battle, and former Govt employees for example cannot join companies which are working against Atmanirbharta.

Industry has been strangely quiet on the issue of FTAs, perhaps because they think that the agreements with Australia and the UAE are not a threat to the Indian economy. But at a recent meeting attended by Experts, the various implications for every sector of the economy including agriculture were painstakingly outlined. Industry does not realise that there is a provision in the Japan CEPA to extend the UAE agreement provisions to it, including  access to Govt procurement, which FOEMs are fighting to regain after the Atmanirbharta Orders on Preference to make in India were passed. We wrote to Niti Aayog and to PMO to gain back the ground ceded under pressure to MNCs. The EU and others are sure to drive a hard bargain in CEPA negotiations with India.

We urge the Ministries concerned to protect India’s right to grow and benefit from Government Procurement and not to open a trapdoor for the Indian economy to fall through.

*Image attribution – taken from https://countercurrents.org/2021/04/neo-colonialism-white-supremacy-and-the-challenge-of-china/

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