A New Negotiating Agenda: How India Could Address Issues of Sustainable Development in Trade Negotiations

February 23, 2022

India and many developing nations have maintained opposition to the development of enforceable norms on trade and sustainable development at the bilateral/regional or multilateral fora (WTO). However, new economic and political realities require India to reevaluate her stance. This paper will first discuss why India may have to address the linkage of trade and sustainable development in Free Trade Agreement negotiations and how such an engagement could prove to be a winning proposition. Consequently, this paper will broach how India could negotiate TSD clauses that serve multiple purposes. First, enable India to reach its ambitious sustainability objectives. Second, safeguard existing and future market access from protectionism. Third and finally, buffer the inevitable short-term losses that will be incurred during the period of adjustment.


Introduction and Context

Sustainable development comprises of three intertwined pillars of economic viability, environmental protection and social equity. There is a growing trend among developed countries to incorporate provisions linking Trade and Sustainable Development (TSD) in Free Trade Agreements (FTAs).

Nearly all the recently concluded FTAs by the US and EU include provisions on TSD. Most such provisions in FTAs cover issues of environment and labour protection. This happens without appreciating the fact that Sustainable Development is a holistic concept which inherently speaks about economics as an important dimension, without which countries cannot adopt higher standards of environment and social protection. The latter two dimensions in turn are primarily based on Multilateral Environmental Agreements (MEAs) and International Labour Organisation’s (ILO) core standards respectively.

There is no doubt that trade can be a crucial facilitator for sustainable economic development. CUTS International has time and again explored this relationship and recommended policy actions suitable for  synergising the efforts of various stakeholders in this area. However, when it comes to developing enforceable norms at the bilateral or multilateral fora, most developing countries equate this linkage of TSD (part of the more contentious “trade and…” issues at the World Trade Organisation) to the opening of a pandora’s box of trade protectionism.

Western trade unions continue to clamour that poor labour and environmental standards make developing countries more competitive, thereby stealing their jobs. Reams of research done by several organisations, including CUTS, have shown that this is not the case.

On the other hand, developing countries fear that TSD obligations could result in developed countries imposing trade restrictions based on a stringent formulation of sustainability. Such strict labour and environmental regulations are divorced from the dire socio-economic realities of developing nations and unfairly penalise them. How could India, a country with more than 134 million people surviving on less than $2 a day, guarantee labour standards that are often not met by the world’s largest economy?

These concerns were voiced by CUTS International in its Third World Intellectuals and NGOs’ Statement Against Linkages (TWIN-SAL) in 1999, spearheaded by the noted trade economist, Jagdish Bhagwati, demanding that instead of trying to kill two birds with one stone, the international community should get another. Thus, even though environment and labour protection are worthy goals for countries to pursue locally, there exist specialised multilateral and regional institutions where developing countries can (and are) contributing as active participants. Resultantly, these “trade and…” discussions are at best, unnecessary, and at worst, an attempt to legitimise trade protectionism.

Further, the best strategy to attain higher environment/labour standards is through export-based growth and economic development. Redirecting the gains from trade liberalisation would meet the same objectives sought by these ‘social clauses’, but in a just manner.

Regardless of the legitimacy of these arguments, new economic and political realities cannot be denied.

First, India is engaged in a multitude of FTA negotiations with important and developed trade partners that place significant importance on TSD chapters. As a country focused on export-led growth, it should brace itself for some challenging tradeoffs. Second, India herself has very ambitious domestic and international commitments on these issues. In so far as trade is a common thread that can connect different spheres of international governance and facilitate greater synergy, India should try to formulate rules that complement her efforts to attain sustainability. Third, without changing India’s position on keeping environment and labour outside the WTO’s negotiating agenda, India can attempt to utilise bilateral and regional fora to test its comfort with TSD linkages in a limited setting.

This paper will first discuss why India may have to address TSD in FTA negotiations and how such engagement could prove to be a winning (though challenging) proposition. Consequently, this paper will broach how India could negotiate TSD clauses that serve multiple purposes – enabling India to reach its ambitious sustainability objectives while safeguarding market access from protectionism and buffering the inevitable short-term losses that will be incurred during the period of adjustment.