Why dairy is RCEP sticking point
Topic: GS –II: International relations
Milk is the country’s largest “crop”. In 2018-19, the estimated production of milk, at 187.75 million tonnes (mt), was more than that of paddy (174.63 mt) or wheat (102.19 mt).
- Milk is, moreover, a source of liquidity for farmers, as it is sold daily and generates cash to take care of routine household expenses, unlike other crops that are marketed only once or twice a year.
- But milk matters equally to consumers in India, because it meets the animal protein/fat requirements of a significant portion of the population that is vegetarian.
- Milk, in the Indian context, is also a ‘superior’ food with income elasticity of demand greater than one. This means that as incomes rise, the demand for milk goes up even more. The moment families experience some upward mobility, they are likely to put desi ghee (butter fat) rather than vanaspati (vegetable fat) on their rotis.
So, where does the RCEP come in?
- Global dairy trade takes place not in milk, but in the solids that derive from it — mainly milk powder, butter/butter oil, and cheese. India isn’t a major player in the world market. Till the eighties, it used to import up to 50,000-60,000 tonnes of skim milk powder and 10,000-15,000 tonnes of butter oil annually, largely channelised through the National Dairy Development Board.
- Over the past couple of decades, with sustained production increases, the country has become self-sufficient, or even marginally surplus.
- If dairy products are covered under an RCEP deal, India may have to allow members of the bloc greater access to its market, whether through phased duty reductions or more liberal tariff rate quotas (TRQs). There is an already existing TRQ for milk powder, which enables import of up to 10,000 tonnes per year at 15% customs duty, and quantities beyond that at the regular rate of 60%. The Indian dairy industry is resisting any enhanced TRQs or other import concessions, even if extended only to RCEP countries, as opposed to the US or European Union.
Which are the major global dairy players within the RCEP group?
- Only New Zealand and Australia. The two countries together exported 19,37,000 tonnes of milk power, 5,18,000 tonnes of butter/fat and 4,94,000 tonnes of cheese in 2018, accounting for 44.5%, 58.3% and 24.8% of the world trade respectively in these commodities. New Zealand, in particular, hardly has a domestic market for dairy products. In 2018, 93.4% of its milk powder, 94.5% of its butter, and 83.6% of its cheese production was exported.
- India’s milk powder and butter/ghee shipments, by contrast, have barely touched 1,30,000 tonnes and 50,000 tonnes even in their best ever years of 2013-14 and 2018-19 respectively. But the country is the world’s biggest market for milk and milk products — which will only grow with rising incomes and high elasticity of demand. Access to this market will obviously benefit the predominantly export-oriented dairy industry of New Zealand and Australia.
- What New Zealand and Australia would really be eying is the Indian market for commodities, viz. milk powder and fat. That is where the volumes are — which Malaysia and Indonesia successfully exploited in palm oil, as did Argentina and Brazil in soyabean oil and Ukraine in sunflower oil.
- RCEP could perhaps end up doing to dairy what the free trade agreement with the Association of Southeast Asian Nations (ASEAN) did in palm oil, fear many in the industry in India.
RCEP: Opportunity, fears in regional trade deal
Topic: GS –II: International relations
Commerce Minister Piyush Goyal is in Bangkok for the eighth Regional Comprehensive Economic Partnership (RCEP) ministerial meeting, which will continue until October 12. The meeting, which is likely to be the last one at this level, is expected to work out the unresolved issues in the negotiations on the mega trade deal that is to be concluded later this year.
What is the RCEP?
- The Regional Comprehensive Economic Partnership (RCEP) is a trade deal that is currently under negotiation among 16 countries — the 10 member countries of the Association of Southeast Asian Nations (ASEAN), and the six countries with which the ASEAN bloc has free trade agreements (FTA).
- The ASEAN, which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, has FTAs with India, Australia, China, South Korea, Japan and New Zealand.
- Negotiations on the details of the RCEP have been on since 2013, and all participating countries aim to finalise and sign the deal by November.
What does the RCEP propose?
- The purpose of RCEP is to create an “integrated market” spanning all 16 countries, making it easier for products and services of each of these countries to be available across this region.
- ASEAN says the deal will provide “a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region”.
- The negotiations are focussed on areas like trade in goods and services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, e-commerce, and small and medium enterprises.
Why is the RCEP important?
- It is billed as the “largest” regional trading agreement ever — these countries account for almost half of the world’s population, contribute over a quarter of world exports, and make up around 30% of global Gross Domestic Product (the value of all goods and services produced in a year).
How have the talks progressed?
- Of the 25 chapters in the deal, 21 have been finalised. Chapters on investment, e-commerce, rules of origin, and trade remedies are yet to be settled, and ministerial guidance is being sought at the ongoing meeting in Bangkok.
How does India stand to gain?
- Sections of Indian industry feel that being part of RCEP would allow the country to tap into a huge market, if the domestic industry becomes competitive. Pharmaceuticals and cotton yarn are confident of gains, and the services industry too, may have new opportunities.
And what are the concerns?
- Several industries feel India needs to be mindful of the amount of access it gives to its market. There is fear that some domestic sectors may be hit by cheaper alternatives from other RCEP countries. Apprehensions have been expressed that cheaper Chinese products would “flood” India.
- Critics are also not confident that India would be able to take advantage of the deal, given its poor track record of extracting benefits from the FTAs with these countries. India’s trade gap with these countries may widen if it signs the RCEP deal, they say.
- Industries like dairy and steel have demanded protection. The textile industry, which has already raised concerns about growing competition from neighbouring countries with cheaper and more efficient processes, fears the deal would impact it negatively.
- There are some differences within industries. The bigger players in steel, for example, are apprehensive of the potential impact on their businesses; however, makers of finished goods have argued that limiting steel supply to domestic producers through higher import duties will put them at a disadvantage.
Global Competitiveness Index
Topic: GS -III: Economic Development
The latest edition of the Global Competitiveness Report, which was first launched in 1979, ranks India at 68th position among 141 countries – that’s 10 ranks below its 2018 position in the same index. The slippage this year, however, is not just because India’s score in the Global Competitiveness Index fell, albeit marginally, but also because several other close competitors surged ahead.
What is GCI?
- This is the fourth version of the global competitiveness index – hence referred to as GCI 4.0 – and it was introduced in 2018. The 141 countries mapped by this year’s GCI account for 99 per cent of the world’s GDP
- The basic notion behind the GCI is to map the factors that determine the Total Factor Productivity (TFP) in a country. The TFP is essentially the efficiency with which different factors of production such as land, labour and capital are put to use to create the final product. It is believed that it is the TFP in an economy that determines the long-term economic growth of a country.
So what factors does GCI map?
- According to the report, the GCI 4.0 is “the product of an aggregation of 103 individual indicators, derived from a combination of data from international organizations as well as from the World Economic Forum’s Executive Opinion Survey”.
- The GCI 4.0 tracks data and/or responses on 12 factors divided into 4 broad categories. The first category is the “Enabling Environment” and this includes factors such as the state of infrastructure, institutions, the macroeconomic stability of the country and its ability to adopt new technology. The second category is “Human Capital” and includes health and level of skills in the economy. The third is the state of “Markets” such as those for labour, product, financial and the overall market size. The last category is “Innovation Ecosystem” which includes business dynamism and innovation capability.
- Each of these 12 factors will further include sub-factors. For example, within “Institutions” under the “Enabling Environment” category, the GCI tracks the performance on detailed factors such as the performance of the public sector, the level of transparency and corruption, the state of corporate governance, the incidence of terrorism etc.
- Overall, there are a total of 103 individual factors that GCI 4.0 maps to arrive at the final result.
How are countries ranked?
- According to the report, “a country’s performance on the overall GCI results as well as each of its components is reported as a ‘progress score’ on a 0-to-100 scale, where 100 represents the ‘frontier’, an ideal state where an issue ceases to be a constraint to productivity growth”. For example, the average GCI score across the 141 economies that were studied this year was 60.7. This means that the ‘distance to the frontier’ stands at almost 40 points.
How did India fare?
- India’s 2019 overall score (61.4) fell by merely 0.7 when compared to its 2018 score. But this slippage was enough for it to slide down 10 ranks in the list. The report states: “In South Asia, India, in 68th position, loses ground in the rankings despite a relatively stable score, mostly due to faster improvements of several countries previously ranked lower”. Some of the countries that were close to India and made rapid progress were Colombia (which had a score of 62.7, up 1.1 points from last year, and now ranked 57th), Azerbaijan (62.7, +2.7, 58th), South Africa (62.4, +1.7, 60th) and Turkey (62.1, +0.5, 61st).
- India trails China (28th, 73.9) by 40 places and 14 points. But within South Asia (see chart), it is the best performer and is followed by Sri Lanka (the most improved country in the region at 84th), Bangladesh (105th), Nepal (108th) and Pakistan (110th).
C40 World Mayors’ Summit
Topic: GS-III: Environment
Delhi Chief Minister Arvind Kejriwal called off his visit to Copenhagen to attend the C40 World Mayors’ Summit after he failed to receive the mandatory clearance from the Ministry of External Affairs (MEA).
- Kejriwal was scheduled to address the conference, where he was to speak about Delhi’s anti-pollution measures.
- The C40 summit is being held in Denmark’s capital, and attendees include mayors representing over 90 cities from around the world. United States Congresswoman Alexandria Ocasio-Cortez is also in Copenhagen for the event.
What is the C40 World Mayors’ Summit?
- The C40 World Mayors’ Summit is a three-day conference where city leaders from around the world share ideas on green urban development, and on ways to get national governments to act on climate issues.
- According to its website, the C40 connects more than 96 of the world’s largest cities to deliver urgent and essential climate action needed to secure a sustainable future for urban citizens worldwide.
- The group is committed to delivering on climate targets set under the 2016 Paris Agreement, and sets the bar for cities to develop and implement local level plans that comply with those targets.
- The C40 group was started in 2005 by the then Mayor of London, Ken Livingstone, and got its name in 2006, since it had 40 members that year. It has 96 members at present, representing over 70 crore people, and one-quarter of the global economy.
- Cities, according to the C40 website, have the potential to deliver 40 per cent of the emissions reductions to meet the Paris targets.
- Analysts believe that cities are better equipped to deal at climate negotiations than nations, since the former do not have to deal with issues such as borders and sovereignty.
The C40 session this year
- The host city of this year’s conference (scheduled to last from October 9 to October 12) Copenhagen, plans to become carbon neutral by 2025. Apart from Mayors and Deputy Mayors, the Summit is being attended by climate experts, influencers, business leaders, innovators, changemakers, and citizens.
- C40 Summits are known for publishing important research, showcasing innovations by cities, and for forging global partnerships.
- At the 2019 Summit, the Mayor of Los Angeles will take over as chair of the group.
- The cities from India that are part of the C40 are Delhi NCR, Bengaluru, Jaipur, and Kolkata.
Nobel in Literature
Note: important only for prelims
The Swedish Academy announced the Nobel Prize in Literature for this year as well as the last, with Polish author Olga Tokarczuk winning for 2018 and the Austrian author Peter Handke for 2019.
- The 2018 award had been postponed for a year on account of a scandal involving the Academy’s close ties with a man convicted of rape and jailed that year.
- The delayed prize went to Tokarczuk “for a narrative imagination that with encyclopedic passion represents the crossing of boundaries as a form of life”, the citation said. For the current year, Handke was awarded “for an influential work that with linguistic ingenuity has explored the periphery and the specificity of human experience”.
- Tokarczuk, 57, one of Poland’s most successful authors, has found a wider English-reading audience in recent years and won the Man Booker Prize in 2018 for Flights, a translation of her 2007 novel Bieguni. Much of her work is marked by historical/mythical settings with realistic details, and themes of conflicting cultures and perspectives.
- Tokarczuk studied psychology at the University of Warsaw and made her fiction debut in 1993 with Podróz ludzi Ksiegi (‘The Journey of the Book-People’), set in 17th century France and Spain where the characters search for a mysterious book in the Pyrenees. Her breakthrough novel Prawiek i inne czasy, 1996 (Primeval and Other Times, 2010) is again set in a mythical place, yet full of realistic details. “Tokarczuk has claimed that the narrative was a personal attempt to come to terms with the national image of the past. The novel is an excellent example of the new Polish literature after 1989, resisting moral judgement and unwilling to represent the conscience of the nation,” the Academy said.
- Her magnum opus, Ksiegi Jakubowe, 2014 (“The Books of Jacob”), is a 900-page novel about Jacob Frank, a little-known 18th-century sect leader who upset the orthodox with his effort to unite the Jewish, Christian and Muslim creeds.
- Handke, 76, published his debut novel Die Hornissen in 1966, dropped out of his law course at the University of Graz, and went on to write novels, essays, dramatic works and screenplays in a vast body of work spanning more than 50 years. The Academy described him as one of the most influential writers in Europe after the Second World War.
- Son of a Slovenian-minority woman in Austria and a German soldier whom he would meet only as an adult, Handke chose to “revolt against his paternal heritage, that in his case was perverted by the Nazi regime”, and “chose the maternal line of heritage”. He once described contemporary German literature as suffering from beschreibungs impotence (description impotence) and has “found much of his own literary inspiration within the New Novel-movement in French literature”, the Academy said.
- Handke, now based in France, is widely seen as sympathetic of the Serbian far right. He attended former Serbian President Slobodan Milosevic’s funeral in 2006, and expressed sympathy for the Serbs in the 1990s Yugoslav wars, a subject he has also written about. The Academy acknowledged that Handke has sometimes “caused controversy” but added that “he cannot be considered an engaged writer in the sense of Sartre, and he gives us no political programs”.
Why 2018 in 2019
- The 2018 scandal followed the imprisonment for rape of Frenchman Jean-Claude Arnault, with whom the Academy has close ties. He is married to then Academy member Katarina Frostenson, who resigned. The couple ran a cultural club in Stockholm that received funding from the Academy. The scandal caused a rift among members over how to manage their ties with him — seven of them resigned — and exposed scheming, conflicts of interest, and a culture of silence.
- It led to the first postponement of the Literature Nobel in 70 years. A group of Swedish cultural figures set up a substitute award, the New Academy Prize, and chose their laureate as Maryse Conde, an author from Guadeloupe. This was to show that “a winner could be chosen in an open fashion, in contrast to the Academy’s secret workings”, The New York Times reported.
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