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8 February 2016 Editorial

 

8  FEBRUARY 2016

Nuclear ambiguities

India's nuclear politics was in the limelight again last week, and not for the best of reasons. More than five years after it signed the Convention on Supplementary Compensation (CSC), India ratified the insurance pooling agreement, which pertains to civil liability in the event of a nuclear accident in any of the acceding countries. Prima facie, this was a good move, bringing to an end a game of will-they-or-won't-they, which had cast India in poor light internationally and which sat uncomfortably beside three hard-fought nuclear landmarks - the India-U.S. Civil Nuclear Agreement (CNA) and the Nuclear Suppliers Group (NSG) waiver, both passed in 2008, and India's Civil Liability for Nuclear Damage Act (CLNDA), which became law in 2010. However, India's CSC ratification does not clear the air so far as an important stumbling block to bilateral nuclear commerce is concerned: is CLNDA truly in conformity with the CSC, as Indian officials have repeatedly claimed, or does it cast a shadow of doubt on supplier liability, which is a matter of critical importance to U.S. nuclear corporations? The ambiguity stems from two clauses of CLNDA, Sections 17(b) and 46. Under Section 17(b), liability for a nuclear accident can be channelled from the operator, which is the Nuclear Power Corporation of India, to suppliers of nuclear material, specifically if the accident is due to an act of the supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services. Section 46 permits victims of a nuclear incident to sue the operator or the supplier for damages applying tort law, even though such proceedings would be beyond the scope of CLNDA and its liability cap, and thus exposing suppliers to unlimited liability. Both clauses are likely to raise suppliers' cost of insurance cover, possibly beyond what is feasible commercially and within the confines of competitive energy pricing.


India's CSC ratification is a reminder of the steep fall from the heady days of the announcement of the CNA a decade ago to the weak and unconvincing efforts by the Narendra Modi administration, following U.S. President Barack Obama's visit to India, to persuade corporations such as General Electric-Hitachi and Westinghouse that they would not be liable in the event of an accident. India's reliance on contractual rules and parliamentary debates to explain away supplier concerns has been greeted with scepticism by representatives of U.S. nuclear corporations - first on the grounds that no rule can supersede constitutional statute, and second, as there are other, on-record views in Parliament that contradict those cited by the MEA. While the liability morass has stymied U.S. investment in Indian reactors, Russia, France and Japan have moved forward with their respective bilateral agreements for nuclear commerce. This suggests that the recognition of India as a responsible nuclear power by the international community - the U.S. and the other NSG states - has allowed for windows of opportunity for nuclear commerce in India, even in the post-Fukushima world.


Harbinger of change in global trade

The formal signing of the Trans-Pacific Partnership (TPP) by the 12 member-countries of the mega-regional free trade agreement is a milestone for international trade and, by extension, the global economy. With worldwide trade having slowed sharply since the 2008 financial crisis and now faced with headwinds from China's slowdown, the deal, yet to be ratified, could provide a much-needed fillip to growth. As the World Bank noted in a study in January on the macro-economic implications of the TPP, the pact could, by 2030, help boost the overall GDP of member-countries by 1.1 per cent. And given that the grouping includes two of the world's three largest economies - the U.S. and Japan - and overall accounts for more than one-third of the world's economic output, the spillover benefits would be significant. Moreover, given the diversity of the member-countries - from the mineral-rich, trade-intensive Latin American economies of Peru and Chile, to the NAFTA triumvirate of Canada, the U.S. and Mexico, ASEAN members Malaysia, Singapore, Brunei and Vietnam, trans-Tasman neighbours Australia and New Zealand, and Japan - the TPP also demonstrates a willingness to look beyond domestic political considerations and hammer out a far-reaching agreement that could act as a template for future multilateral trade deals. Yet, the pact is far from a done deal as it still needs to win legislative backing in the member-states. That may be far more difficult than the seven-year-long negotiations, with both the Democratic presidential candidates and two leading Republican contenders in the U.S., Donald Trump and Ted Cruz, opposed to it. Mr. Trump and Democrat Bernie Sanders are the most vocal critics, arguing that the TPP will cost American jobs.


For India, the agreement provides an opportunity to reflect on its approach to multilateral trade talks, while underscoring the need to build a strong multi-disciplinary cadre of specialist free-trade analysts and negotiators. Though the World Bank projects a limited ‘trade diversion' impact on non-members, including aggregate GDP losses of about 0.1 per cent by 2030, India could suffer market share losses in certain categories of exports as a result of preference erosion. With the South Asian Free Trade Agreement (SAFTA) having made little to no difference to India's terms of trade in the neighbourhood, and the country having ceded substantial ground at the latest Nairobi meeting of the World Trade Organisation, it is high time the government proactively girded for the challenges ahead. Like China, where an editorial in the state-run Global Times exhorted the Asian giant's leadership to focus on strengthening its own economy than worry about the TPP, India too needs to aim at setting its house in order. From ensuring the creation of a domestic common market through adoption of the long-delayed Goods and Services Tax, to building its own multilateral bloc of emerging and developing economies that can act as a bulwark against TPP-like groupings, India has its task cut out.


 

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