📰 A shot at economic logic
India needs to anticipate the promising impact of the African Continental Free Trade Area
•The 12th Extra-Ordinary Summit of the African Union (AU) which concluded on July 8 at Niamey, the capital of the Niger Republic, saw 54 of 55 of its member states signing the African Continental Free Trade Agreement (AfCFTA) for goods and services. Of these countries, 27 have already ratified it. Actual cross-border free trade could start by July 2020 with an elimination of custom duties on 90% of the tariff-lines. If taken to its logical conclusion, this audacious project would eventually create an African Common Market of 1.2 billion people and a GDP of over $3.4 billion — the metrics are comparable to India’s. The AfCFTA would be world’s largest FTA, and in a world dependent on African markets and commodities, it would have global impact.
•However, there are three main reasons to be sceptical about the viability of the AfCFTA. First, the African Union (founded as the Organisation of African Unity in 1963) has been largely ineffective in dealing with the continent’s myriad problems such as decolonisation, underdevelopment, Islamic terrorism and the Arab Spring. The AU’s grand plans, including the Muammar Qadhafi-funded Africa Unity project, have been spectacular flops. It is, therefore, natural to take the AfCFTA, the AU’s most ambitious project so far, with a ladleful of salt. Second, serious political, organisational and logistical challenges to the AfCFTA notwithstanding, the national economies in Africa are generally weak with a low manufacturing base. They also lack competitiveness and mutual complementarity. Only a sixth of Africa’s current total trade is within the continent. Third, the AfCFTA seems to be countercyclical to the ongoing global protectionist trends as seen in the U.S.-China trade conflict, Brexit and the stalemates at the
World Trade Organisation and the United Nations Conference on Trade and Development. World trade is likely to grow only by 2.6% in 2019, a quarter of last year’s figure. Commodity prices are stagnant and globalisation is often being reversed. With Africa accounting for only 3% of global trade, can the AfCFTA defy the contrarian global tendencies?
•Still, there are reasons to be cautiously optimistic. Given the strong global headwinds including a cooling Chinese ardour for Africa, greater collective self-reliance through African economic integration makes eminent sense. Further, the AfCFTA can build upon the experience of the continent’s five regional economic blocks. While the AU Commission is not famous for efficient planning, it has prepared an extensive road map towards the AfCFTA with preliminary work on steps such as incremental tariff reduction, elimination of non-tariff barriers, supply chains and dispute settlement. In December 2018, it organised the first Intra-African Trade Fair in Cairo with 1,086 exhibitors signing $32 billion in business deals. A new breed of African transnational corporations such as Dangote, MTN, Ecobank and Jumia have continental ambitions. Indeed, the logistical and financial networks across the continent are poor and customs formalities are foreboding, but these can be eventually overcome with stronger political will. Moreover, vigorous “informal” trade across porous national borders is already a fact of African life.
•Thus, by adopting the AfCFTA, African leaders are only following the economic logic. Looking into the future, a recent UN projection showed that nearly half the world’s population growth between now and 2050 would come from sub-Saharan Africa, the population of which would double to nearly two billion. This surge in consumer base would make the proposed AfCFTA even more important.
From the Indian angle
•Africa is already an important economic partner for India with total annual merchandise trade estimated at $70 billion or nearly a tenth of our global trade. India is Africa’s third largest trading partner. While India’s global exports have been largely stagnant, those to Africa have surged. For instance, exports to Nigeria in 2018-19 grew by over 33% over the previous year. Africa still has unfulfilled demand for Indian commodities, especially foodstuff, finished products (automobiles, pharmaceuticals, consumer goods) and services such as IT/IT-Enabled Service, health care and education, skilling, expertise in management and banking, financial services and insurance.
•India needs to anticipate the AfCFTA’s likely impact on its interests and try to influence and leverage it to enhance India-African economic ties. In principle, African economies becoming more formalised and transparent would be in India’s interest. While local manufactured items and services may ultimately compete with Indian exports, Indian firms can co-produce them in Africa. If handled in a proactive manner, the AfCFTA is likely to open new opportunities for Indian stakeholders in fast-moving consumer goods manufacturing, connectivity projects and the creation of a financial backbone. India donated $15 million to Niger to fund the Niamey AU Summit. As the next step, New Delhi can help the AU Commission prepare the requisite architecture, such as common external tariffs, competition policy, intellectual property rights, and natural persons’ movement. It can also identify various African transnational corporations which are destined to play a greater role in a future continental common market and engage with them strategically. The cross-linkages of a three million strong Indian diaspora spread across Africa can also be very valuable.
•Finally, once the AfCFTA is accepted as beneficial game changer, the African elite could perhaps contemplate crossing another Rubicon: an India-African FTA.
•Before Africa was “discovered” by the West, it had a thriving overland trade. Large camel caravans ferried commodities such as ivory, gold, mineral salt, precious stones and slaves across prosperous trading centres such as Timbuktu, Ghana, Kano, Burnu, Agadez, Edo, Zinder, Ghat, Addis Ababa, Dar es Salaam and Cairo. Subsequent colonialism and mercantilism destroyed internal trade routes, replacing them with an ecosystem in which Africans had better links with their foreign “mentors” than among themselves. By the AfCFTA, the Africans are only trying to correct this historic distortion.
📰 The importance of democratic education
Without it, we will continue to allow unhealthy scepticism about democracy to grow
•A persistent concern exists about democracy’s failure to fulfil our expectations. While our votes are forceful ‘paper stones’, effective in getting rid of governments we dislike, they are powerless to give us effective, efficient, good governments. Why do we have to put up with corrupt rulers with criminal records — qualities that obstruct good governance? Why tolerate those who strive to do more good for themselves than for the people, who have neither vision nor wisdom? Why have mediocre politicians who shun contact with people with ability and talent?
Better, wiser governments
•Some cynics may respond to this crisis of democracy by arguing the following: to achieve our national goals, we must assemble the best team to govern. Such a team cannot be elected by popular mandate but instead by those who have the intellectual wherewithal to select those fit for it. To such people, democracy — which is committed to the principle of one person, one vote, and which extends franchise to all regardless of ability — can never produce the best team.
•They might draw an analogy from cricket where we play to compete at the highest level and win — something not possible if the best cricketers are not selected. But this is not achieved by popular vote. Instead, we rely on experts — a selection committee consisting of experienced cricketers. If popular mandate can’t give us the best team that realises our national goal in cricket, why expect a different result in politics? Why not select our government by a similar procedure involving experts?
•So, to reiterate the conundrum: democratically elected governments in our times are neither efficient nor wise. They show a propensity to fail at achieving their national goal — a high quality of life for all people. Then why not abandon democracy? Or at least introduce an eligibility criterion, restricting the vote to those with formal education? Won’t education help in identifying the best political representatives? A democrat need not reject this argument. She may respond that this need not entail abandoning universal adult franchise but the distribution of education to all. This seems a decent solution. Sustainable democracies require a high rate of literacy. The more educated we are, it might be claimed, the better we become at choosing the best people to run our government.
•But this argument is flawed. Literacy and education by themselves do not create good citizens or yield mature democracies. Many are formally illiterate but are politically astute and even possess qualities of good citizenship. Conversely, many educated people are prone to being self-obsessed, undemocratic, and even authoritarian. Primary, secondary or even higher education by itself does not guarantee good citizenship.
•The solution then is not just education per se, but universal education of a certain kind, one that is focused on improving the quality of our democracy. Our current education system does not focus on education in democracy or what we might call democratic education. Nor does it build on elements of democratic culture embedded in our traditions.
Core elements
•What then are the core elements of democratic education? For a start, it requires the cultivation of democratic virtues. For instance, the ability to imagine and articulate a minimally common good. This requires that we distinguish what is merely good for me from what is the good of all. And since each of us may develop our own distinct idea of the common good, to find an overlapping common good. Relatedly, an ability to handle difference and disagreement and to retain, despite this difference, the motivation to arrive at the common good through conversation, debate, dialogue and deliberation.
•The ability to imagine and conceive a common good is inconsistent with what the Greeks famously called ‘pleonexia’, the greed to grab everything for oneself, to refuse to share anything, to not acknowledge what is due to each person, to have no sense of reciprocity or justice. It follows that the idea of the common good cannot be developed without some sense of justice. Democratic education requires training in not succumbing to pleonexia. Also crucial is a spirit of compromise, of moderation, and a willingness, within acceptable value parameters, of mutual give and take. None of this is possible without other general capabilities such as listening patiently to others, being empathetic to the plight of others, and having a commitment to continuing a conversation with people despite disagreement.
•More important is the ability to participate in a particular historical narrative or, as the political theorist Jeremy Webber puts it, a “commitment to a particular debate through time”. Members of a political community become better citizens when they relate to critical issues through historically inherited terms of debate, a continuing narrative, a specific ongoing conversation. The reflection of that debate in political decision-making is central to the members’ feeling of engagement and participation. For example, there is a particular way in which the question of religion has been framed in India, as also issues of nation, caste and gender. Individuals become effective and meaningful citizens only by learning the terms set by debates around these specific issues. Since a useful entry to them is available through rich debates in the Constituent Assembly, a familiarity with them is a crucial ingredient of democratic education in India.
•It also follows that democratic education involves a basic understanding of our society and its history, of its multiple cultural, intellectual and religious traditions, which set the terms of specific debates. I am frequently appalled at my own ignorance of the historical trajectory of our complex social problems. And saddened to find that my highly educated friends do not know that a constitutional minority in India is not just a numerically small group but one potentially disadvantaged by virtue of that fact; some mistakenly believe that religious minorities have reservation in jobs and in institutions of higher education; massive illiteracy continues to exist about the atrocious nature of our caste system; many continue to think that ‘secularism’ is a wholly western concept, as if ‘religion’ is not! Only a proper democratic education can remove these misunderstandings and flaws.
•What then is democratic education? Conceived broadly, it is a historically specific enterprise, determined by the inherited vocabulary of specific political languages and the terms of debates in a particular community. It is designed specifically to enable conversation on issues central to a particular community, to strive for agreement where possible and to live peacefully with disagreement where it is not. In short, it involves social and historical awareness and key democratic virtues.
•Many of these understandings and virtues can be inculcated by a good liberal arts education. The 2019 National Education Policy recognises this but alas insufficiently. And as far as I can tell from my skimpy reading, it has virtually nothing to say about how this relates to democracy. So, it appears relatively innocent of the more specific requirements of democratic education. Without proper democratic education, I am afraid we will continue to perpetuate bad democratic practices, allow unhealthy scepticism about democracy to grow and eventually imperil it.
📰 Taking a myopic view of foreign-made generic drugs
The U.S. is using the Ranbaxy experience to create a bogey
•Allegations of widespread fraud concerning generic drugs manufactured overseas, especially in India, were recently highlighted in the U.S. Much focus was on the contamination found in one drug made by Ranbaxy. I do not wish to support Ranbaxy’s deplorable behaviour. Nor do I wish to belittle the importance of the ongoing efforts to fix India’s drug regulatory framework. The point here is that this focus has been deployed to undermine foreign generics.
•For instance, the Ranbaxy saga unfolded 14 years ago. Since then, several pharmaceutical companies, both foreign and local, generic and innovative, have been implicated in similar or worse behaviour. Notable examples include those of Martin Shkreli’s Turing Pharmaceuticals, which hiked the price of a drug to 5,000%, and Purdue Pharmaceuticals, a company currently implicated for causing the opioid crisis. The strategy of raising fears of ‘contaminated’ foreign generics has successfully prejudiced Americans against valid generic drugs, even though they have remained a viable option.
•This frenzy about contamination of drugs is due partly to the expansion of the Food Safety Modernization Act (FSMA) to include global inspections. One objective in thus empowering the Food and Drug Administration (FDA) was to work with regulators of foreign countries and create a universal Current Good Manufacturing Practice (CGMP) system for drugs.
FDA’s regulatory overreach
•Instead, the FDA has positioned itself as a ‘global regulator’. For example, in a recent statement, it mentioned that it inspects all brand-name and generic manufacturing facilities around the world based on information from whistleblowers or out of concern for drug safety. Arguably, this amounts to regulatory overreach as there is no international instrument standardising American CGMP practices as the global standard.
•Further, under the FSMA, if a foreign facility refuses inspection, the FDA’s power is limited to refusing the food/drug entry into the U.S. America’s interest in good manufacturing practices to protect its citizens is commendable. Nevertheless, given Washington’s current zeal to propel exports, if India or China pass legislation to inspect U.S. food or drug manufacturing facilities, U.S. companies may not readily welcome the move.
A prejudiced dialogue
•In 2018, out of the 4,676 human pharmaceutical sites inspections that the FDA conducted worldwide, 61% were of foreign-based facilities. Similarly, out of 1,365 human drug CGMP surveillance inspections conducted, 55% were conducted at facilities outside the U.S. The FDA’s publicising of its ‘global vigilante experience’ paints a picture of foreign-manufactured drugs as ‘defective’ or ‘contaminated’ while not fully acknowledging some of the regulatory failures within America. To provide a perspective, the ‘drug recall list’, a list of drugs deemed defective in spite of having cleared FDA regulatory approvals for the last 14 years, runs into over 149 pages. I cite this to merely highlight that a prejudiced dialogue that does not capture all perspectives can create imprecise impressions.
•As such, when the FDA inspects production facilities, there are both smaller and bigger issues that will come up. There is no scale to determine whether the problems portrayed in the final report are simple ones, such as one tap not working, or more impactful ones, such as use of contaminated water. The absence of a proper scale provides a loophole, enabling the regulator to cherry-pick and treat all instances of non-compliance as egregious violations.
•In addition, in the U.S., there is no proper legal definition of the oft-used term ‘contaminated drugs’. Section 351 of Title 21 of the U.S. Code defines ‘adulterated drugs’ and when a drug is deemed ‘adulterated’ for being contaminated, the regulator needs to specify whether the adulteration relates to the manner of preparation, the packaging standards or the manufacturing practices.
•For India, the discussion in the U.S. is notable not only because it houses generic manufacturing facilities but also because India is a nation on the verge of breaking into the innovation market. Thus, it is time India took a more robust role to ensure public availability of facts on both the importance of generics and their limitations. The country needs to create strong voices and partnerships that can highlight the benefits and pitfalls alike to create a robust space for innovation that can coexist with access to medication. After all, innovation and policy failings need not be an excuse to deny access to lifesaving medication to productive workforces.
📰 Towards a free trade agreement: on India-U.S. ties
India and the U.S. should aim to progressively eliminate trade and investment barriers
•Trade turmoil has been putting at risk the U.S.’s strategic partnership with India. In the last two months, the U.S. has withdrawn from India preferential tariff benefits under its Generalized System of Preferences (GSP) programme, and India has imposed retaliatory tariffs in response to tariffs that the U.S. applied last year on steel and aluminium.
•Conflict and disputes are not new to the U.S.-India relationship. They have ranged from trade in jute and almonds in the period of the General Agreement on Tariffs and Trade to poultry and solar panels under the World Trade Organization (WTO). But this moment is different because the conflict may run deeper with more serious implications. If the two fail to relieve the building tension, a tit-for-tat trade war mimicking that between the U.S. and China may follow. The U.S. is India’s single most important export market; India is a huge and growing market for U.S. investment and exports. An escalating series of retaliation and counter-retaliation could undermine efforts to advance what might be the most consequential bilateral relationship in the 21st century.
Resolving differences
•On the positive side, a serious effort by both to solve some trade problems could even lead to a new and exciting set of opportunities. But this will require moving from effective management of current tensions to thinking big for the future. Assuming the two sides can come together to resolve outstanding issues such as the GSP, U.S. tariffs on steel and aluminium and India’s retaliatory tariffs, and differences on e-commerce, they can set the stage for building a trade relationship that better complements the strategic one.
•A starting point would be to empower the Office of the U.S. Trade Representative and the Ministry of Commerce and Industry to develop some problem-solving cooperative efforts under the existing Trade Policy Forum on issues such as digital trade, regulatory coherence, and intellectual property rights, matching their earlier successes on the WTO Trade Facilitation Agreement.
•This future work would be better advanced if India created a new career trade staff that reports directly to the Prime Minister’s Office. The U.S. administration has experienced trade staff, even at senior levels, who build negotiating skills over their careers and relationships of rapport and trust with their foreign counterparts. India could better serve its trade interests with the same kind of approach. This is a scenario that could evolve into a new relationship of common purpose on trade. Trade disputes will continue to crop up, as they do even in the healthiest of relationships, but these would be best pursued through the WTO.
Thinking big
•However, even this scenario is a limited one; the U.S.-India strategic partnership deserves higher aspirations on trade. The goal should be a more comprehensive platform for expanding trade and investment through the progressive elimination of trade and investment barriers, from protectionist regulatory measures to tariffs and restrictions on trade in services. This might even lead some day to the negotiation of a free trade agreement, which is the ultimate example of economic integration in a trade relationship.
•Neither country has been particularly successful at negotiating free trade agreements compared to others around the world — the EU just concluded one with Vietnam. Each has a strong but messy democracy with many voices against free trade agreements. Each is a tough negotiator with a passionate commitment to its national interests. But both can dream big together and trade should be central to those dreams.
📰 Asia has the lowest homicide rate, says UN report
With only 2.3 killings per 1,00,000 people it recorded the lowest rate of homicide in 2017, while the Americas had the highest.
•Asia, which accounts for 60% of the global population, recorded the lowest rate of homicide in 2017 with only 2.3 killings per 1,00,000 people while the Americas had the highest homicide rate, according to a UN report.
•The Global Study on Homicide 2019 published on Monday by the UN Office on Drugs and Crime (UNODC) said that about 4,64,000 people across the world were victims of homicidal violence in 2017, an increase from 395,542 in 1992. The number of homicides in 2017 far surpassed the 89,000 killed in armed conflicts in the same period.
•The global homicide rate, measured as the victims of homicide per 1,00,000 people, declined from 7.2 in 1992, to 6.1 in 2017, it said.
•The lowest regional rate of homicide in 2017 was reported in Asia, with 104,000 victims representing a rate of 2.3 per 100,000 population. Asia accounted for 23% of total homicide victims worldwide.
•“The study seeks to shed light on gender-related killings, lethal gang violence and other challenges, to support prevention and interventions to bring down homicide rates,” said UNODC Executive Director Yury Fedotov.
📰 Operation Milap: over 300 children rescued in 7 months
They were missing since January 2019 from across India
•The Delhi Police Crime Branch has rescued 333 children from the Capital. These children were missing since January 2019 from various parts of the country and found in the Capital, the police said.
•Additional Commissioner of Police (Crime Branch) Rajiv Ranjan said that they have also tracked down 57 people, including 14 minors, who were kidnapped, abducted, or went missing from various areas in the national capital. “Of these, 14 are minors, 37 are females. Most of these children have been rescued from bus stands, railway stations and other crowded places in the city. During the last one week, the AHTU has found 15 people who had been reported missing or kidnapped in Delh,” said Mr. Ranjan.
•The operation Milap under which children are rescued was launched in December 2014. Under this project, the Anti Human Trafficking Unit (AHTU) of the Delhi Police develops information, rescues the trafficked or kidnapped person and arrests the kidnappers, he said.
•The rescued children are counselled and also given requisite medical attention. Police are trying to find out the parents of the children rescued, so that they can be reunited with their families, the police said.
📰 SEBI gets teeth to probe new-age cases
It can fine up to ₹10 cr. if a person tampers with information to obstruct probe, destroy data
•The Finance Bill, 2019 has given the Securities and Exchange Board of India (SEBI) new powers to act against entities that tamper or destroy electronic databases or fail to furnish information when sought by the capital markets regulator, SEBI, who can now also impose penalties of up to ₹1 crore on brokers for certain violations.
•These new powers assume significance as the regulator is in the midst of probing the leak of sensitive data through WhatsApp and also recently passed fresh orders on the National Stock Exchange (NSE) co-location matter, which had been challenged at the Securities Appellate Tribunal (SAT).
•As per the Finance Bill, a new section — 15HAA — has been inserted in the SEBI Act that says if a person tampers with information to obstruct or influence an investigation, destroys regulatory data or tries to access data in an unauthorised manner then the entity could be penalised up to ₹10 crore or three times the unlawful gains, whichever is higher.
•“For the purposes of this clause, a person shall be deemed to have altered, concealed or destroyed such information, record or document, in case he knowingly fails to immediately report the matter to the Board or fails to preserve the same till such information continues to be relevant to any investigation, inquiry, audit, inspection or proceeding, which may be initiated by the Board and conclusion thereof,” stated the Finance Bill.
WhatsApp case
•Incidentally, the WhatsApp leak case or even the NSE co-location matter deal with the data being leaked through electronic means and unauthorised access to exchange data, which forms the base in most regulatory probes.
•“The new section that has been inserted imposes penalty on unauthorised access to regulatory data and system databases though it is not yet clear whether ‘regulatory data’ and ‘database’ as mentioned in the section refers only to SEBI data or even those maintained by exchanges, depositories and clearing corporations,” said Sumit Agrawal, founder, RegStreet Law Advisors, while adding that this is important considering the fact that SEBI is dealing with matters such as the WhatsApp leak and the NSE matter.
•The Centre has also explicitly allowed the regulator to impose a fine of up to ₹1 crore on brokers if they fail to issue a contract note to clients in the format as laid down by the exchanges. Earlier, only the lower limit of ₹1 lakh was prescribed.
📰 RBI board finalises ‘Utkarsh 2022’
Three-year road map to improve regulation, supervision
•The Reserve Bank of India (RBI) board, which met in New Delhi, finalised a three- year roadmap to improve regulation and supervision, among other functions of the central bank.
•This medium term strategy — named Utkarsh 2022 — is in line with the global central banks’ plan to strengthen the regulatory and supervisory mechanism, sources aware of the board meeting told The Hindu.
•“It is a three-year road map for medium term objective to be achieved for improving regulation, supervision of the central bank,” said a source.
•“Worldwide, all central banks strengthen the regulatory and supervisory mechanism, everybody is formulating a long-term plan and a medium-term plan. So, the RBI has also decided it will formulate a pragramme to outline what is to be achieved in the next three years,” the source added.
•An internal committee was formed, which was anchored by outgoing Deputy Governor Viral Acharya, to identify issues that needed to be addressed over the next three years. While around a dozen areas were identified by the committee, some board members felt that areas could be filtered and lesser number of areas can be identified for implementation in the next three years.
•“The idea is that the central bank plays a proactive role and takes preemptive action to avoid any crisis,” said another source, highlighting the IL&FS debt default issue and the crisis of confidence the non-banking financial sector faced in the aftermath.
•In a statement after the board meeting, the RBI said the board finalised the three -year medium-term strategy document of the Reserve Bank, ‘which covered, inter-alia, its mission and vision statement.’
•The board also approved the RBI’s budget for the July 2019—June 2020 period. Other matters discussed by the board included issues relating to currency management and payment systems, the statement added.
📰 Bolster public transport to reduce air pollution: EPCA
Agency asks Supreme Court to intervene for approval of Metro Phase IV project
•To reduce air pollution in Delhi, the Environment Pollution (Prevention and Control) Authority (EPCA) requested the Supreme Court to intervene in the “grossly inadequate” public transport infrastructure of the city.
•In a ‘special report’ submitted to the SC on July 1, the EPCA urged it to intervene for the approval of Phase IV of Delhi Metro, which is stuck between the Central and Delhi governments. It also requested the SC to ask the government to speed up the process to purchase more buses. “Cities like Beijing have 107 buses per lakh people while Delhi has 17 buses per lakh people,” the report stated. The proposal for phase IV of Delhi Metro was submitted in 2014 and work was to begin by 2016 and “further delay will cost the city enormously”, the report said.
•“The stalemate between the governments are on different financial aspects of the project. The Delhi government has on April 10, 2019, communicated its direction that Delhi Metro Rail Corporation would not start the work till these issues are resolved,” the report stated.
•The EPCA said there are four issues between the governments — taxes, sharing of land cost, bearing operational cost and repayment of JICA loan. Two of these are “notional”, the report stated, adding that the Centre says operational cost should be borne by the Delhi government while the latter demands a 50:50 share. The DMRC stated that the costs involved in the project costs would increase with delay.
•The Supreme Court in 1998 stated that the city should have 10,000 buses, but there are only 5,279 buses in the city, the report states. “All DTC buses are above 8-10 years. The maintenance contract for the operation of the buses is for 10 years... so replacement becomes critical as more and more buses would be phased out in the coming 2-3 years,” the report states. “It is clear that the number of additional buses that will be on Delhi roads by January 2020 would be 1,000 and an additional 650 buses could be on roads soon after. This would not be sufficient and therefore, the procurement strategies of the remaining buses must be expedited,” the report states.
•Delhi Dialogue and Development Commission vice-chairperson Jasmine Shah said, “We are in the process of procurement of 4,000 buses and 1,000-1,500 buses will hit the roads by December 2019 and the rest in 2020.”
