An Invitation to take the initiative on trade issues

 

Published:  Financial Times, August 26, 2002 ,

Gene Hutchinson

Sir, Your editorial ‘A good deal on trade’ (July 29) produced an interesting letter from Mr Pradeep Mehta, secretary general of the CUTS Centre for International Trade, Economics and Environment in Jaipur, India (August 8). Mr. Mehta asserts that ‘standards, and the uncertainties they create, are getting in the way of producers getting better market access and the right price for their produce’. He continues ‘that there is negligible information exchange between developed-country consumers and developing-country producers on issues of standards’. We are surprised that he sees standards as creating uncertainty. Where is his evidence_

The International Organisation for Standardisation (ISO) has been developing international consensus-based standards for many years, and the standards are published and widely available. All relevant stakeholders are able to participate in the development process and the voting procedure provides an opportunity for any member country to express approval or disapproval.

The ISO recognises the importance of proper consumer input in standards development and the resourcing difficulties consumers have. There is therefore an arrangement that allows Consumers International (CI) – and Mr. Mehta’s organisation is a member of CI – to represent consumer interests in ISO technical work. The ISO is well aware of the difficulties of the less powerful stakeholders and long ago established policy committees – the committee on developing country matters and the committee on consumer policy – to advise on the needs of these special groups. This year the committee on consumer policy’s international workshop addressed corporate social responsibility and the role of standards. The lack of information, and hence trust, between the ‘developed-country consumers’ and the ‘developing-country producers’ was identified as an issue; and standards, in which relevant stakeholders participated, were seen as helpful.

Two current ISO initiatives are relevant to the issues raised by Mr Mehta. First, a programme sponsored by the World Trade Organisation to equip all developing country National Standards Bodies (NSBs) with the IT necessary to benefit fully from standardisation should enable developing country producers to get advice about international standards and other standards. Second, concern that the NSBs in many developing countries do not engage adequately with their various stakeholders has prompted an initiative to promote better communications. On September 24 in Stockholm the committee on developing country matters is organising an open workshop to move this initiative forward. We do hope to see Mr Mehta there.

Gene Hutchinson
Chair, Committee on Developing Country Matters
Caroline Warne
Chair, Committee on Consumer Policy
International Organisation for Standardisation
Geneva, Switzerland
(Financial Times, 26 August 2002)

Standards creating barriers to market access

Published:  Financial Times, August 08, 2002 ,

 By Pradeep S Mehta

Sir, I agree with your editorial (A good deal on trade, July 29) that the “fast track” authority for US President George W. Bush would help in taking forward the Doha round of world trade talks. This is the driver of world trade talks, unfortunately.

However, Washington needs to rethink on some of the steps that it had taken in recent times, particularly those relating to agricultural subsidies and the backtracking on the implementation agenda agreed upon as a package during Doha discussions.

Such steps result in uncertainties, which may slow the momentum of negotiations.

The two leading trading blocks (the US and the European Union) should assert that the quality of market openness is more important than opening of markets per se. It is true that for many agricultural products developed countries have reduced tariff barriers. But the crux of the matter is whether developing countries’ products are getting better market access or not.

The answer is somewhat in the negative, given the proliferation of non-tariff barriers, particularly with regard to health and consumer safety. For many countries, standards – and the uncertainties they create – are getting in the way of producers getting better market access and the right price for their produce.

As a social activist from a large developing country and being closely associated with the international consumer movement and trade, I can say that there is negligible information exchange between developed-country consumers and developing-country producers on issues of standards. One solution could be to institute a process of dialogue process between these groups so the information asymmetry (and resultant market uncertainties) could be reduced significantly.

Want a free run, behave responsibly

Published:  Financial Express, August 05, 2002 ,

 By Pradeep S Mehta

 

Once during the board meeting of the Life Insurance Corporation of India (LIC), a peculiar situation arose. Firstly, the board’s approval was sought for a donation to a cancer society. Secondly, money was sought to be earmarked for an ITC-sponsored sports event.

I pointed out the contradiction between the two sub-items, one helping cancer victims, and the other supporting a cancer-causing business. I argued in vain that it is socially irresponsible for the LIC to either sponsor or invest something in such industry, which is health hazardous. I was overruled by the board. They said that as far as the Government of India doesn’t prevent them from investing in such companies, they will continue to do so. The only concession I gained in this battle was a resolution that they would no longer co-sponsor any event, which is being sponsored by a tobacco or liquor company.

Indeed, people invest in tobacco or even liquor companies as shareholders and the company ensures a good return on their investments. But that is not the only thing which is the issue here. Businesses need to work in a socially responsible manner, which goes beyond shareholder satisfaction. It covers employees, consumers and community generally, and compliance with the laws. All things which are required for being a good corporate citizen.

The simplistic view that seemed to prevail even in the early 1990s that business leaders need to focus single-mindedly on shareholder value as determined by the share price, and that financial analysts are the best judges of business strategy, may have clouded better judgements. However, in today’s world the old business strategy of maximising profit, neglecting the social, economic and environmental impacts of its operations maybe a recipe for disaster.

There are at least two good reasons why business must live up to its broader role in society. The first is responsibility that comes with freedom. Increasing freedom from controls on business and the growing respect for market institutions in the later part of the century, accompanied by the decline in the role, resources, and even respect for governments, has given more power to business leaders. With this power comes the responsibility for making sure that right things are done in society.

From the time of Adam Smith to Mahatma Gandhi to the doyen of modern management, Peter Drucker, it has been argued that businesses cannot function in vacuum. Gandhi and Drucker stressed the social responsibility dimension by defining entrepreneurs, owners and managers as trustees for future generations. They need to look beyond the selfish needs of the individual organisations to ensure not only continuity of capital but also the establishment of socially useful and productive capital.

The second reason is that the backlash against globalisation by a rapidly globalising civil society can destabilise the highly profit-oriented operations of the corporations. This battle is against the growing influence of business, who wield disproportionate power over national and international institutions. Many of the top 100 corporations in the world have revenues, which are greater than most countries of the world. In the past when the countries were not so closely integrated, businesses viewed different markets in isolation. But today even one act of irresponsibility in one market will create ripple effects throughout the world as we are living in a globalised environment, with very fast information and communication processes.

Way back in the late thirties more than 100 people died from drinking Elixir Sulfanilamide, a form of sulfa medicine that was manufactured and sold in the United States. The company continued to do good business even after such a disaster. But in today’s world it would not be so easy to remain in business after such a scandal. Today Enron is a household name, of course, for a wrong reason. Andersen lost many of its important clients throughout the world after the Enron debacle.

Thus, though the corporate manager’s job is to maximise shareholder value, at the same time they should return something to the larger community, which they function in. And it makes good business sense also because it is not only the employees who want to be associated with corporates with a good public image, but also because the customers want competitive products, which are manufactured in a socially responsible manner.

Corporate social responsibility (CSR) is a constantly evolving concept, where the concepts of work and industries are constantly shifting to adapt to new paradigms. CSR still remains poorly defined. In the US, for example, it is considered by many as charity performed by businesses. At the same time, the current focus on the transparency, corporate governance and responsible behaviour has propelled CSR from a quiet corner of the corporate world to centrestage—and managers are struggling to catch up. The value-addition of CSR is quite evident. There have been many studies purporting to prove that it improves profits but they are not entirely convincing.

Craig Smith, associate professor of marketing and ethics at London Business School, has identified 80 studies. Of these, 42 demonstrated a positive impact, 19 found no link, 15 produced mixed results and only four showed a negative impact. There are companies that have managed to turn a commitment to CSR into financial success. UK-based Co-operative Bank’s policy of ethical investment has helped to turn it from loss making outfit to profit making one and to bring a nearly fivefold increase in customer deposits in 10 years. An independent cost-benefit analysis in year 2001 estimated that the bank’s environmental and ethical policies accounted for between 15 per cent and 18 per cent of its pre-tax profits.

An industry accumulates significant wealth by creating and responding to market demand while ignoring the social or environmental consequences of their business practices. Once the impact of bad corporate behaviour becomes severe and obvious enough, the backlash promotes a change in practice.

This is a cycle, which could be radically compressed, putting the cost of litigation and image-rebuilding back into the bottomline, if the owners of corporations used CSR mechanism and acted in their own self-interest to motivate management to take a long-term view and respect the world around them.

In India businesses detest regulation. Whenever government talks of any regulatory initiatives, they find the ghost of licence-permit raj in it. They want more freedom. The opposition to the proposed competition law is a case in point. But can they guarantee that they are not indulging in anti-competitive practices_

Are many of them not colluding in every which way and exploiting consumers_ The recent opposition to the enactment of a law to recover non-performing assets is a joke. They must not forget that SEBI was created after the stock market scam engineered by Harshad Mehta. Thus if they really want freedom so that they can productively use their resources in pursuance of their main goal of creation of wealth, and also contribute to the society, they must behave in a responsible manner so that they are subject to minimum regulation and no over-zealous application of regulatory measures.

 

 

Courting FDIs with a game plan

 

Published:  Business Line, July 02, 2002 ,

 By Tapas Das

An industrialisation strategy based on a universally liberal policy to allow foreign investment across all sectors may not be successful in the long run. Developing countries would do well to adopt a more differentiated and strategic approach.

Concomitantly, it would be a mistake for developing countries to voluntarily give up all room for manoeuvring by adopting a “universally liberal policy across all sectors”.

Multinational corporations (MNCs) do not have superior bargaining power in all countries in all industries.

Their bargaining power ranges from being almost absolute (for example, Nike looking for an investment site for shoe production) to being close to zero (an automobile MNCs trying to curry favour with the Chinese Government for the people’s car project) depending on the industry and the country.

Moreover, many developing countries do have some “bargaining chips” in relation to some industries – especially where transportation costs (to supply the market) are relatively high and proximity to consumers is important for marketing. China, India, Brazil and the rapidly growing East Asian economies are good examples.

There could be other important factors influencing developing countries’ bargaining power. For example, the East European bloc, Vietnam and China, have a relatively well-educated and trained labour force. Others still have locational advantages – for example, Mexico vis-à-vis the US, and Central and Southern European countries vis-à-vis the richer Western European nations.

This substantiates the case for a strategic industrial policy because it means that governments should design their policy towards MNCs according to the needs of particular sectors.

This is because each sector serves a different function in the overall economic development of a country.

It would be unwise to have either uniformly restrictive or uniformly liberal policies towards MNCs across all industries. This means that the same industry may relatively be more open or less open to FDI, depending on the various changes in internal and external conditions that affect it.

However, adopting liberal FDI policies across sectors and industries would mean giving up a country’s potential bargaining power even before exercising it.

There is, however, no gainsaying the fact that potential bargaining power does not directly translate into the right amount and composition of incoming FDI. It depends on the general economic conditions and administrative capability of government to actually exercise such power.

Recent theoretical developments and empirical studies suggest that long-term productivity enhancement may be better achieved by an industrialisation strategy that emphasises building local managerial and technological capabilities and uses MNCs in a selective, strategic manner.

The policies employed in Taiwan and Korea show that while MNCs can and should be used, their role needs to be defined in relation to the overall industrialisation strategy and the specific needs of the industries concerned.

Similarly, Singapore, which relied heavily on MNCs, deliberately directed FDI towards government-directed priority sectors ab initio.

It is not only governments that compete among themselves to attract FDI, MNCs also compete with one another to enter attractive host countries to take advantage of higher returns on investment, productive assets, locational advantages and market size.

Criticisms of FDI with respect to ‘surplus extraction through transfer pricing’, ‘excessive royalty payments’, inappropriateness of production technology or product mix’ have sometimes been out of proportion. Again the beliefs of neo-liberal commentators that MNCs can move elsewhere if their freedom of action is restrained have hardly any truth in them.

It is true that some industries (garments, shoes, toys) where ‘sunk’ costs are low and MNCs can be footloose.

But there are others (power, chemicals, pharmaceuticals) with high sunk costs and sub-contracting networks, from which MNCs would not be able to pull out of at the slightest adverse change in host country policies.

Whether adopting a more liberal FDI policy, without adopting the policies that substantially improve the economic prospects, will lead to an increase in FDI flows in a country is highly questionable. So long as host country policies do not involve asset appropriation and other measures that threaten basic capitalist property relations, FDI policies seem to be much less important than factors such as growth prospects of the domestic market or political stability of a country in determining MNC investment decisions. A government may adopt two strategies in relation to MNC participation. One is to have a liberal FDI policy initially to develop an industry.

However, when it is established that the industry has developed sufficient technological capability and local firms have been able to stand on their own feet, it could impose tougher restrictions on MNCs. Another strategy could be to relax rules in relation to MNC participation in an industry when there is a major technological change, which often put developing country in a difficult situation to face the highly competitive international market with their present technological capability.

 

 

City blood banks need modern gear

 

Published:  The Times of India, May 08, 2002 ,

 By Soumi Ghosh

CUTS Centre for Sustainable Production & Consumption- Calcutta

 

Blood transfusion saves millions of lives every year, provided a safe supply can be guaranteed. Unfortunately, the safety of our blood banks and blood camps leave a lot to be desired.

Recently, Human Immunodeficiency Virus (HIV) was found in the blood of eight thalassemic children when they were tested at the School of Tropical Medicine, in Kolkata.

The Central Blood Bank in Manicktala has found HIV in blood of another five thalassemic children. Seven more children with the same affliction were infected by Hepatitis C. In all these cases, the doctors believe that the children got infected during blood transfusion, as many thalassemic children have to take blood almost twice a month.

Blood transfusion has become one of the most feared forms of disease contamination. Doctors blame the screening and testing procedures used by blood banks for the menace. HIV kits used by a majority of blood banks are not sensitive enough to detect the presence of HIV.

According to doctors, blood banks should immediately start using the P24 antigen test, as it can detect infection in collected blood samples up to a period of one week after contraction of the disease. However, it may not be economically feasible for government blood banks.

The Institute of Blood Transfusion and Immunohaematology IBTI) formerly known as Central Blood Bank is in no position to introduce P24 test that costs Rs 7,000 and polymer chain reaction (PCR) test, the best way to detect all types of infection comes at a staggering Rs 22,000 per sample.

According to the draft National Blood Policy, testing for HIV should be restricted to laboratories that have ELISA facilities. It also discourages rapid testing kit and the centres using those must send ten percent of the samples to a referral centre for revalidation of the results.

But the most dependable institution in Calcutta, the School of Tropical Medicine does not have the ELISA reader instrument. Neither does it have any sophisticated machinery as a substitute.

The institute still has to depend on old foreign machines that were brought in the sixties. In no other state are such outdated instruments used.

The Blood Transfusion Service in the country is highly decentralised and lacks vital resources like trained manpower, adequate infrastructure and financial base. Fragmented management is plaguing the blood banking system in the country.

Another reason that makes blood unsafe is oversupply. Social service organisations tend to organise camps only during important occasions and festivals. During these times, supply increases beyond holding capacity, but blood cells cannot be stored beyond 35 days. Due to improper storage, there are high chances of blood becoming contaminated. The government should take steps to ensure licensing of all blood banks and gradual phasing out of the professional donor system. A Supreme Court order exists to this effect.

To ensure quality and safety of blood and blood products, well-equipped centres with adequate infrastructure and trained manpower are required. The government should start thinking seriously about modernisation of blood banks at the earliest.

The media too can play a role in making people more aware of the precautions that need to be taken before donating and receiving blood.

In general, it is safe to donate blood, but before donating, the donor should make sure that the needle and other clinical material used should be new and sterile. Before receiving blood, one should check for HIV, Hepatitis B, Hepatitis C,VDRL and malaria. Awareness should be spread among people so that they should always purchase blood from a licensed organisation and insist on screened blood packs.

Check out your chocolates    

 

Published:  The Times of India, April 03, 2002 ,

 By Soumi Ghosh

CUTS Centre for Sustainable Production & Consumption- Calcutta

Chocolates are perhaps the most romantic gift you would want to give, but pause before handing it to someone you love. A bright inexpensive brand in all probability flouts all Food norms.

In liberalised India, imported chocolates have flooded the market. Foreign brands now find pride of place in large shops and roadside stalls. But inferior brands from Nepal and Dubai have entered the metros. Most of these cheaper brands do not conform to required standards.

All food product manufacturers, both Indian and foreign, must get Central Committee for Food Standards (CCFS) approval, specifying the type of food product and its contents. But according to Dr S Babu Rao, assistant director at Food and Toxicology Department, National Institute of Nutrition, food products are being dumped into the market without approval from CCFS. He warned that Indian consumers who buy imported products, without CCFS approval, could be exposed to health hazards. 

Last year, imported chocolates worth Rs 50,000 were seized from a shop at Canning Street in Kolkata, as attempts were made to extend the expiry date and most of them were in melting condition. Earlier, adulterated Indian chocolates were seized from the Raja Katra area of Burrabazar. The attractive packaging of foreign chocolates easily attracts children and unfortunately, ignorant parents are ready to pamper to these instincts.

The Consumer Unity & Trust Society conducted a survey along roadside shops in Park Street, Little Russel Street and Vardhan Market. A large number of products in the market were violating Rule 32 of PFA. 

The survey revealed that chocolates like Nikolo, Cosmos, Go Fresh, Meentos, Jin Tan, Snicker, Lolibon, Ammer, Bounty, Strawberry Jelly Candy Drops do not measure up to the norms.

They do not display names and addresses of Indian importers, which is a serious violation of Rule 32 of PFA. In many cases, the manufacturing and ‘best before’ date are written in foreign language.

There were violations in ingredients used in synthetic colour; in most cases and most chocolates were found in melted condition. In these circumstances, consumers should be aware of the serious implications on their health if they consume food, which violate safety norms. In fact, individual consumers can take the initiative to prosecute importers and manufacturers if laws are violated.

Clinics can’t deny emergency service

Published:  The Times of India, February 26, 2002 ,

 By Soumi Ghosh

CUTS Centre for Sustainable Production & Consumption- Calcutta

 

In our overcrowded cities, accidents have almost taken the form of epidemic. In such circumstances, the role of medical institutions become imoprtant.

Prithviraj Biswas, student of National Institute of Design (NID) had a tragic hit-and-run accident last year in Ahmedabad. He was taken to V.S. Hospital, which is a government hospital, but the staff there refused to treat him.

His classmates strongly believe that Biswas could have been saved if the doctors at VS Hospital had attended to his injuries instead of refusing to treat him and referring him to Civil Hospital at other end of the city, where he was declared death on arrival.

Unfortunately, this type of incident is only too common in Kolkata. During 2001, 439 people died in 427 road accidents in this city. Statistics collated by a city newspaper reveals that most of the time, recorded accident cases have resulted in the death of victims. This implies that immediate medical attention could not be provided to them.

To understand the present situation, the Consumer Unity Trust Society visited some of the big hospitals in south Kolkata. There was a ‘No Emergency’ signboard at the entrance gate of Sri Aurobindo Seva Kendra, although it runs a full-fledged hospital. AMRI and Ram Krishna Mission Seva Pratisthan accept emergency cases only if beds are available.

Can a hospital/nursing home refuse medical care to emergency cases_ No. As per law, hospitals, nursing homes, clinics of doctors, who declare or profess in writing that they provide 24-hour services are legally bound to attend all cases. Failure to have the requisite equipment in working order, and non-availability of competent staff within reasonable time would be inferred as medical negligence.

In many cases, it has been observed that doctors wait for the arrival of the police before attending to an accident victim, especially with head and burn injuries. The Supreme Court directives are very clear in the case of accidents.

• There are no provisions in the Indian Penal Code, Criminal Procedure Court, Motor Vehicles Act, etc., which prevents doctors from promptly attending seriously injured persons and accident cases before the arrival of the police.

• Treatment cannot be stalled for the arrival of the police or completing legal formalities. All Government hospitals, Medical Institutions should be asked to provide immediate medical aid to all the cases- medico-legal or not.

• The Court further observed that Article 21 of the Constitution imposes an obligation on the State to safeguard the right to life of every person. The Government Hospitals run by the State and the medical officers employed therein are duty bound to extend medical assistance for preserving human life.

Failure on the part of a Government hospital to provide timely medical treatment to a person in need of such treatment results in violation of his right to life guaranteed under Article 21.

Although medical institutions have their responsibility, the public and authorities should also be more aware about their duties.

The Apex Court had recently made wearing seat belts mandatory for front seat occupants of cars and directed the chief secretaries of the states and Union territories to implement the order. But how many car passengers in Kolkata can be seen wearing seat belts_

Most accidents result from rash driving and dangerous overtaking. Accidents also occur due to carelessness of pedestrians. Instead of debating on responsibility, efforts should be made to implement steps to reduce accidents. A number of safety norms like hefty fines for overloaded vehicles, compulsory wearing of seat belts by front seat occupants of cars and use of helmets already exists. Efforts should be made to strictly implement these norms.

Therefore, besides implementing the measures to reduce road accidents, simultaneous measure should be taken to make consumers aware of their rights in emergency cases. TV channels as a part of their social responsibility could show attractive campaigns at prime time to inform consumer on the above.

Once these measures are implemented seriously, many untimely deaths could be avoided.

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Coalitions in trade have their own algebra