Reviews ties, negotiates for a 'yes' on inclusion into NSG, and broaches black money issue
Shreerupa Mitra-Jha | June 7, 2016 | Geneva
Prime Minister Narendra Modi’s quick visit to Geneva had all the headline-grabbing thematic ingredients—black money, a nuclear issue, and a trade deal.
Modi, in a press statement, declared that India and Switzerland had reviewed their “multifaceted bilateral ties”.
What were the main bilateral issues that triggered an inclusion of Switzerland in the PM’s itinerary in his five-nation visit?
According to President of the Swiss Confederation, Johann Schneider-Ammann, Modi’s visit was firmed up after a recent Nuclear Security Summit in April this year. From the outcome of the meetings, it seems that there were three main agendas for the less-than-24 hour stopover in Geneva from Qatar en route Washington.
Swiss support for an elite club
India has applied for full membership at the 48-member elite Nuclear Suppliers Group (NSG)—that controls nuclear and other high technology transfer globally. The decision on India’s application will be considered at a June 9 extraordinary plenary of the NSG. Pakistan applied a week after India threw in its ring for a full membership. China has opposed India’s inclusion, also because it won’t let India get past Pakistan in this race as well as for defying India’s close relation with the US.
The membership game at the NSG is not new for India. It took a phone call from the then US president George W. Bush to the former Chinese president Hu Jintao not to block a waiver for the Manmohan Singh government’s entry into NSG -- India is not a signatory to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) which is a pre-condition for membership. Ireland, Austria, Switzerland, Mexico and Norway were some of the other countries that were opposed to India’s bid for a waiver from signing the NPT.
Delhi has taken on an active campaign, therefore, to facilitate an inclusion into the group. It has succeeded in getting the Swiss acquiescence to support its bid and intends nudging Mexico to do the same.
“Switzerland welcomes an Indian contribution to the non-proliferation of nuclear arms,” Ammann said. “We promised India support in its efforts to become a member of this group, the Nuclear Suppliers Group. The process has started and we will certainly contribute actively,” he added.
However, the Swiss president in a later exclusive press meet, parried a question on whether Switzerland would insist on India signing the NPT before gaining entry into the nuclear supplier’s club. Switzerland hopes all countries sign the NPT, he told journalists in German.
The change in the Swiss position on the NSG issue seemed like a trade-off for India’s readiness to re-open dialogue on a European Free Trade Agreement (EFTA) negotiation. Another minor quid pro quo was the fact that Switzerland and India will support each other’s bid for non-permanent membership at the UN Security Council.
Modi flew off from Geneva on a pleasant afternoon of June 6 for Capitol Hill—for what is his seventh meeting with the US president Barack Obama after assuming power in 2014. Modi already has Obama’s support for India’s entry into NSG. However, it will not be easy to get the deal through even with US president’s support.
NPT is considered by many experts to be a discriminatory regime and India’s disarmament and non-proliferation records have been almost impeccable. Even though India is the only nuclear weapon state to actively demand at the UN a convention banning the use of nuclear weapons as well as other disarmament measures, the fact that it has not signed the NPT will be used as a powerful tool against it.
India’s Foreign Secretary, S. Jaishankar, along with other heads of mission who have been lobbying on the matter in their respective countries have cited clean energy, an expansion in the nuclear power sector as well as cross-border collaborations as urgent motivations for the NSG deal.
The New York Times on June 5 came up with an editorial on why India should not be allowed into the NSG, highlighting the American anxieties on the move.
There have also been strong protests, even by senior Democrats, saying that such an inclusion would spur an arms race in south Asia.
The entry of a new member is a consensus-based decision at the NSG.
Though Switzerland’s support bolsters India’s bid, and even if Mexico agrees to do the same, there would certainly still be many a slip before, and if, India does get into the club through its current bid.
The Swiss support for NSG may have quite a bit to do with the Modi government’s willingness to re-open dialogue on a trade deal between the EFTA states comprising Iceland, Liechtenstein, Norway and Switzerland, and India that has been stuck since 2008.
“India has affirmed it's readiness to resume FTA talks with EFTA,” Modi said in a statement.
Intellectual property (IP) issues has been the main sticking point in the negotiations.
In May 2015, Schneider-Ammann, in his capacity as the minister of the economy, visited India with the intent of pushing forward the free-trade negotiations. However, IP issues, especially with regard to patents held by Swiss pharmaceutical companies, continued to play a spoiler in the negotiations.
At an event organised by the Federation of Indian Chambers of Commerce and Industry, Ammann told industry leaders “without an assurance of a strong IP law, companies would not have the incentive to innovate and invest in India”.
Swiss pharmaceutical companies have burnt their fingers in India, with courts ruling in favour of making cheap, affordable, generic-versions of medicines for the poor. India makes use of the Trade-related Intellectual Property Rights (TRIPS) flexibilities at the World Trade Organisation— through “compulsory licensing”, for example-- and its own national patent act – for instance, through section 3 (d)—eating into the profits of the powerful pharmaceutical lobby.
The Swiss pharma firm Novartis lost a seven-year battle in 2013 to protect the patent of its cancer drug Glivec in India’s supreme court. There have been other such instances as well where the pharmaceutical companies have been seething at judicial decisions in India. However, there has been a softening of such stances in recent times. In January 2015, Cipla lost a case against Novartis in the Delhi high court and was stopped from making or selling a cheaper copy of the Novartis’ respiratory drug Onbrez, citing infringement of patent rights.
Modi along with his high-level delegation had an economic round table with top Swiss business heads numbering about 20 or so, which lasted for around an hour. Among them were representatives from the Swiss watch-making industry and pharmaceutical companies, like Novartis. Modi invited them to India, telling them that he wants to create mini Switzerlands in India and also spoke of creating a skilled global workforce with its 500 million plus youth.
Scneider-Ammann announced that he will dispatch a high-level negotiating team led by Marie‐Gabrielle Ineichen‐Fleisch, head of the World Trade Division at the State Secretariat for Economic Affairs (SECO), to re-launch the EFTA trade talks, end of this week.
In 2015, exports to India increased by 6.6 percent compared to last year, while imports fell by around 10 percent. Switzerland is one of the 10 largest investors in India.
Ammann, talking to a few journalists after the Indian PM left, said that the levels of ambition for Swiss companies are the same as they were in 2013 —these are issues that will be discussed by the Swiss negotiating team when in India. But since India now has a new national patent policy, things look more optimistic for a trade deal coming through.
The Indian government constituted a think tank on IPR that helped draft the national IPR policy in May this year. The think tank has also recommended the creation of specialised courts to resolve IPR disputes, as well as training of judges on the matter. The new IPR policy has been frowned upon by some as a softening of India’s stance on IP matters, especially its potential impact on access to medicines for the poor.
In April 2015, Ineichen-Fleisch, the chief negotiator for the upcoming trade talks, had said that the Swiss pharmaceutical sector was unhappy with India using TRIPS flexibilities.
But it is not just the Swiss companies but also the American pharmaceutical lobby pressuring Modi to toughen its stance on IPR. A recent US Trade Representative’s report called ‘Special 301’ has again put India on its “priority list” for its IP laws. Health activists and NGOs have launched a protest outside the White House in conjunction with mobile billboards that will circle the District of Columbia during the prime minister's ongoing visit.
“Millions of families across the globe rely on the low-cost of Indian generic drugs and would be at risk of having their lifelines cut if pharmaceutical lobbying groups influence Prime Minister Modi and change India's intellectual property (IP) policies to favour pharmaceutical monopolies,” said a group of international medical humanitarian organisations in a press statement.
Public Citizen, an NGO, will urge India -- often referred to as the "pharmacy of the developing world" --to defy pressure from US lawmakers and pharmaceutical industry representatives and protect access to affordable medicines.
Notwithstanding the Swiss optimism on the potential trade deal, global health activists will be closely watching India’s stance on IP issues, and hence, presumably, it will not be as smooth a ride if the high ambitions of the Swiss businessmen remain untempered.
The black money issue is the most obvious connection for a Geneva-trip of the Indian PM. In his 2014 election campaign, Modi had promised to recover billions of dollars sent to tax havens overseas. Herve Falciani, a HSBC whistleblower, claimed that Indian authorities are sitting on a “lot of information” on black money. This has proved to be an Achilles heels for Modi as the accusation of not being able to bring back the cash has time and again been hurled at him.
There are disparate numbers floating around on the issue—some reports claim that about $50 trillion of Indian money is stashed in Swiss accounts.
A UN report says that $221 billion have been sent to “special purpose entities” in low tax zones in 2015.
The so-called Panama papers leak only brought the debate back into the global headlines with renewed emphasis.
Modi in Geneva called the issue of tax evasion and black money a “shared priority” for the Indians and the Swiss.
“India and Switzerland have been fighting against tax fraud and tax evasion,” Ammann said.
“We discussed the need for an early and expeditious exchange of information to bring to justice the tax offenders. An early start to negotiations on the Agreement on Automatic Exchange of Information would be important in this respect,” Modi said.
However, Ammann refused to put a number on how much black money was to be recovered, adding only that the Swiss government will send a high-level official on June 14 to discuss the matter further.
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