WAL-MART’S IMMINENT ENTRY INTO INDIA RAISES CONCERNS
Wal-Mart, the world’s largest retail chain, is poised to enter India’s rapidly-growing retail market, through a joint venture agreement announced on 27 November with local conglomerate Bharti Enterprises. The partners plan to start opening stores in 2007.
Supporters of the deal argue that it will give Indian consumers more choice and lower prices, given Wal-Mart’s ability to source inexpensive products from around the globe. Critics counter that it could decimate the roughly 15 million small, family-owned stores that have dominated India’s retail sector. Political opponents have vowed to scrutinise the memorandum of understanding between the two companies, accusing Wal-Mart of unfairly circumventing restrictions on foreign investment.
India’s retail industry has for decades been sheltered from foreign investment. Although foreign investors are now permitted to open majority-owned outlets of single brand specialty stores such as Nike, retailers that sell multiple brands are still required to be locally-owned or licenced franchises. Under the terms of the Bharti-Wal-Mart agreement, the Indian company will own and operate the physical stores. The supply chain of these outlets, on the other hand, will be jointly managed. Companies other than Wal-Mart have already established similar partnerships.
The Communist Party of India (Marxist), part of the ruling coalition in New Delhi, has denounced Wal-Mart’s "backdoor entry" into India, and has vowed to examine the joint venture agreement "with a fine-toothed comb." CPI (M) representatives have warned of large-scale unemployment in the small-scale retail sector, and threatened to take to the streets in protest. Commerce Minister Kamal Nath has promised to verify whether any laws have been violated.
Analysts suggest that the biggest value of Wal-Mart’s entry into the Indian market could be its famously efficient logistics services — if it succeeds at harnessing India’s vast, varied and often fragmented agricultural production into a cohesive network of suppliers.
Others, however, point out that Thailand’s liberalisation of its retail sector in the 1980s and 1990s was criticised for creating an uneven, insufficiently competitive market, in which international retail giants were able to dictate the prices and conditions under which they would buy produce from farm producers.
Trade experts in Geneva noted that in the current round of WTO negotiations, India has not offered to open its retail services sector to foreign competition.
ICTSD reporting; "CPM urges UPA to block Wal-Mart entry," ECONOMIC TIMES, 29 November 2006; "India’s Bharti group ties up with America’s Wal-Mart," HAVEERU DAILY ONLINE, 28 November 2006; "Wal-Mart, You’ve Got India Now; Don’t Bungle It: Andy Mukherjee," BLOOMBERG, 30 November 2006; "Left sees red in Wal-Mart’s retail foray in India," MONEYCONTROL.COM, 29 November 2006; "Wal-Mart to alter retail landscape," TIMES OF INDIA, 28 November 2006.
US SIGNS COLOMBIA FTA, SPARKING INDIGNATION AMONG DEMOCRATS
The US presidential administration signed a free trade agreement (FTA) with Colombia on 27 November, touching off indignation among Congressional Democrats who had been seeking to have the accord modified to include tougher labour standards.
In a letter to US Trade Representative Susan Schwab on 21 November, influential Democrats warned that they may not approve FTAs with either Colombia or Peru unless they were appropriately renegotiated. After their victory in the midterm elections earlier this month, Democrats will take control in both chambers of Congress in January (see BRIDGES Weekly, 15 November 2006).
"We are dismayed that the administration has consistently declined to take the simple steps necessary to address our key outstanding concern (about the Peru agreement), which continues to be labor standards," the letter stated, adding that "our concerns apply to the Colombia agreement as well." The letter was signed by members of the House Ways and Means Committee and on the Senate Finance Committee, the Congressional bodies with jurisdiction over trade-related legislation. It was spearheaded by New York Representative Charles Rangel, who is set to become chair of the House Ways and Means Committee.
It seems increasingly unlikely that the Bush administration will try to push the two trade deals through the outgoing Republican-controlled Congress before the year’s end.
Despite his qualms about the two FTAs, Rangel has indicated that he would be willing to renew the Andean Trade Preference Act (ATPA), which currently allows many of Colombia and Peru’s exports to enter the US market duty-free. The unilateral preferences are scheduled to expire at the end of this year.
US trade officials have indicated that the Bush administration would consider working with the Democratic majority to add supplemental labour commitments to the FTAs, according to Washington publication "Inside US Trade." They have not, however, said that they would be open to renegotiating the agreements.
ICTSD reporting; "Democrats Urge USTR to Renegotiate Andean Trade Pacts," REUTERS, 21 November 2006; "US, Colombia Sign Landmark Free Trade Agreement," THE CALTRADE REPORT, 27 November 2006.