Political India: Engaging America

From The Hindu

Activists who raised the issues of unethical groundwater use and pollution by Coca-Cola plants in India during the soft drinks giant's annual shareholders' meeting in Atlanta this week have expressed disappointment with the response of Coca-Cola CEO Muhtar Kent, accusing him of misleading investors about the problems the company had run into with regulators.

Speaking to The Hindu, Amit Srivastava of the India Resource Centre — which campaigns for the rights of communities in the affected areas — said that he had brought up the recommendations made on March 22 by an High Power Committee (HPC) set up by the Kerala government, according to which Coca-Cola should be held liable for $48 million (Rs.216.26 crore) in “damages to the community and the environment around its bottling plant in Plachimada”.

On the discussion at the shareholders' meeting, Coca-Cola representative Lisa Manley told The Hindu that Mr. Srivastava was a lone voice speaking out on the matter. She said: “Mr. Srivastava did ask a question about the Kerala committee's report… this topic was otherwise not an issue of focus during the meeting.”

Yet, it is a fact that the Coca-Cola bottling plant in Plachimada has been shut since March 2004 on government orders. According to the HPC, the Kerala Agricultural University found that fodder, milk, meat and egg samples collected from the Plachimada area contained copper, cadmium, lead and chromium at levels considered toxic by World Health Organisation standards.

The HPC adds that the deterioration in the quality and quantity of groundwater and the consequent public health problems, displacement and migration of labour and destruction of the agricultural economy were the main problems in Plachimada identified as caused and contributed by the Coca-Cola plant.

The company has also been involved in a controversy in Kala Dera in Rajasthan, where groundwater resources had been declared as “over-exploited” by the government in 1998. Yet, Coca-Cola built a new plant there in 2000, leading to severe water shortages in at least 40 villages in the vicinity of the plant, according to reports.

However, Ms Manley said Coca-Cola did not have all these details as it had not been given a copy of the Kerala committee's report and “at this point, it is simply a recommendation from a committee. The government has not yet acted on the committee's recommendations”.

She said Coca-Cola disagreed with the recommendations, “and we will defend ourselves against any actions that may result. As always, we will continue to work with the proper authorities to resolve this matter”.

Ms Manley also said that numerous investigations by the government of Kerala had shown that the Coca-Cola system was not the cause of local watershed issues and it was Coca Cola's view that any government committee or panel reviewing claims should “first determine through an established process of law whether any damage was caused to the residents of Palakkad [the district where Plachimada is located], and second, if such damage was caused, who was responsible.”

“It is unfortunate that the committee in Kerala was appointed on the unproven assumption that damage was caused, and that it was caused by Hindustan Coca-Cola Beverages,” she added.

Mr. Srivastava, however, took exception to Mr. Kent's response to the effect that Coca-Cola “could open the Plachimada plant any time”. This was untrue, Mr. Srivastava said, adding that he challenged them to “try and reopen the plant tomorrow — we can guarantee that they cannot open the plant again”.

Misleading

He emphasised that the IRC had been campaigning to get the company's shareholders to realise that “the Coca-Cola management, including board of directors, is misleading shareholders about the financial and criminal liabilities that Coca-Cola is incurring in India”.

Mr. Srivastava said Coca-Cola had passed on the issue to its public relations department, rather than seeing it as an operational issue. But this was not a PR issue, certainly not for the communities in Plachimada and Kala Dera, he said.

Ms Manley contested this point, telling The Hindu that managing water responsibly was the highest priority in Coca-Cola's approach to environmental policy and corporate social responsibility in India. She said: “Our goal in India is to be a ‘net zero' user of groundwater, which means we are working to create a potential recharge of the amount of groundwater equivalent to that used in our operations in India.”

Ms Manley added that such recharge was happening through support for rainwater harvesting, drip irrigation and other initiatives such as helping restore traditional water storage systems that local communities use. “By the end of 2009, we had achieved a recharge rate of 93 per cent of the groundwater that we use throughout India and we aim to achieve a net zero balance at the end of 2010,” she said.

However, government figures that Mr. Srivastava quoted cast doubt on this as they suggest that “in the nine years prior to Coca-Cola's bottling operations in Kala Dera, groundwater levels fell just 3 meters and in the nine years since Coca-Cola has been operating in Kala Dera, the groundwater levels have dropped 22.36 metres.”

Coca-Cola's shareholders have also been important in the debate. While the shareholder group had been more responsive in the past and had passed a few resolutions, Mr. Srivastava admitted that they did not get a very positive response this time. He said the shareholders were myopic in their views and more concerned with the company's sales, which had been on the decline in the U.S and in Europe for some time now.

Arguing that even in this regard there has been an injustice towards Indian consumers, Mr. Srivastava said the reason for declining sales in the West was that consumers “are wising up to the negative impact of these high-sugar drinks”.

Rising sales

However, sales in countries such as India are rising and the company itself is focusing much more on its operations outside the U.S. According to recent reports, overall sales volume rose by three per cent in the first quarter of 2010 “and was largely driven by an 11 per cent increase in its Eurasian and African arm, as well as a 29 per cent boost at its Indian business”. The sales rise came primarily from across Asia, boasting double-digit growths in India, Vietnam and the Philippines as new consumers developed a taste for the company's drinks, a report explained.

But was Coca-Cola any better for the health of Indians? Mr. Srivastava asked, noting that India had a growing proportion of diabetics and obese in its population and this “reeks of a double standard”.

In an earlier statement, Mr. Srivastava also noted: “It is difficult to fathom why Coca-Cola located some of its plants in water stressed areas in India. It was either sheer incompetence on the part of the company or sheer arrogance. Experience tells us it is a lot of both.”

Labels: Coca Cola, groundwater exploitation, Kerala Agricultural University, Palakkad, Plachimada activists, pollution

Quid pro quo in services sector negotiations is needed. But so are rules on hiring and firing.

Jagdish Bhagwati, University Professor at Columbia University and Senior Fellow in International Economics at the Council on Foreign Relations, is regarded as one of the foremost international trade economists of his generation. He has been Economic Policy Adviser to Arthur Dunkel, Director General of GATT (1991-93), Special Adviser to the UN on Globalization, and External Adviser to the WTO. In this interview to The Hindu in Chennai, Professor Bhagwati outlined some of the key challenges that remain for India in the climate change discussions in Copenhagen in December 2009 and in the upcoming negotiations on the Doha Round. Edited excerpts

On climate change: how much progress do the recent discussions, including agreeing a cap on global temperature rises, represent for countries like India and China? In some cases domestic constituencies may be hard to convince on the actions required to meet targets.

If you look back at Kyoto, we have two problems. One is that there is a carbon sink up there and the bulk of it, something like 80 per cent, has come from the West, predominantly from the United States and the European Union (EU). So you have that as one fact. The other fact is the current flow obligation. Call the carbon sink the stock problem. Then we have the flow problem because we are currently discharging CO2 into the air. That is where China in particular, in gross emissions, is almost exceeding the U.S. now and we are the third or the fourth.

There the compromise was arrived at when people said, “You have been doing a lot [of polluting] in the past, you have damaged the environment, do not blame us, we should have no obligations now” – that was taken at face value. Tim Wirth, who represented the U.S., and Madeleine Albright, agreed that the way to fix this disparity between flow and stock obligations is to say “You do not have to pay anything now.” That was stalled in the Senate. Senator Byrd and Senator Hagel led the fight in the bipartisan [debate]. But the resolution was passed 95-0; they said: “We should not let off India and China; it will affect the competitiveness of our industries.”

I came up with the idea that we should address the stock problem separately from the flow problem. We should expect India and China to assume flow obligations but part of that solution has to be that the stock obligation is fulfilled by the West. Then I found that the Americans themselves have what they call a “Superfund,” under which strict liability is assigned for past damage – they have a tort liability.

But this addresses the stock side; what do you propose for the flow side?

If we say that the West has to give us money for us to adopt new technologies, why should they want to do that? They are all saying “No” right now. But if you say “You have got to pay for past damages if you want us to accept current obligations;” that is fair and equitable. Then that money, once the superfund is established, can be used for exactly the kind of things India is asking for — for mitigation, for accommodation, and for financing the creation of public goods and so on.

I have also tried hard to get the Indian side to accept this. I have sent my paper to the Prime Minister. Sometimes they say “But we have already asked for funds.” But that is not the issue. If you simply ask for funds, that sounds like asking for aid. This is not aid – it is really a matter of what the West owes if they want us also to do something. That is fair and equitable. So I think that is an area where you can really make progress on this issue. We will also have to decide what the current flow obligations we take on are. On the stock side, I think it should really be a way to get at this problem.

The U.S. has taken the approach of the Waxman-Markey Bill which was just passed in the Congress House. They are going to use cap and trade, which is the quantitative equivalent of a carbon tax. If India, for example, does not have a similar carbon tax, then they will put in a tax adjustment, meaning essentially it is a tariff against the Indians, thereby making them pay for it. At one level it is a matter of intimidation. I do not think it will work when we are objecting to it.

Supposing we lose [this debate] — do we then surrender? We cannot go against the WTO but the only thing we have to and should say is, “We can also take WTO action against you, if you start playing this game.” For one thing, we can say our petroleum tax is much higher than that of the U.S. and we can call it a carbon tax as it does relate to carbon also. So we can say “We will put a tax on your exports to us.” We can do that. We can play the same game within the carbon game or we can shift the two nuclear reactor sites under the G8 to the French or the Russians. We are now big enough, in my opinion, to contemplate such options.

Recent reports have indicated that 83 new measures that go against free trade principles have been enacted across countries. Are you not worried that these will be difficult to roll back?

Most of the actions reported are safeguard actions and anti-dumping actions. Those are actions where you are exercising your rights. One wishes they were not doing so, but you cannot really object to them as such exit strategies are built into WTO rules, at least on a temporary basis. Especially when things get rough – and right now they are – the ability to toe the line is being strained in many democratic countries. So that part does not really bother me that much. But if you go beyond that and look at protectionist interventions where you are violating your obligations, by doing things that you agreed not to do, that is something that is still not on a scale that you need to worry about.

In terms of effects on trade, are they any different from actions that violate WTO rules?

The effect would be identical. But the effect in terms of the prospective impact may not. When you undermine rules, people feel they can do a variety of things and they are not constrained. Therefore the expectations you set up are important. This is the problem about settling the Doha trade negotiations. Therefore the rules such as we have built in will get undermined. That is what people are worried about – the effect on the system. It is hard to quantify that because that is actually a matter of how the situation will unfold.

Do you not think protectionist “Buy American”-type clauses associated with the bailout funds will stall the Doha process further?

If you look at all these actions, it is a matter of what value of trade they cover. Look at anti-dumping actions. You find, typically in the literature, the argument that India is the worst user of anti-dumping actions, not the U.S. or the EU. But when you actually look at the value of trade you discover that it is minuscule compared to what [the U.S. and the EU] are doing. So you have to put it into some perspective like that. I do not think in the value of the trade covered, it amounts to anything very substantial.

[Regarding policies] like “Buy American”, they are going to realise as soon as they are out of trouble that this is not really what they want to do because there has been so much criticism. Even Obama, because of all these criticisms coming particularly from people who are worried about export markets, like Caterpillar and GE and so on, put in a rider or qualifier saying it has to be consistent with our WTO obligations.

What would be the elements of the open world economy? You mentioned trade and investment and the movement of natural persons.

What we are talking about is temporary immigration. We should be able to export services, but embodied in people. That is what we call the movement of natural persons. We are talking about service transactions. So the second leg is GATS, the General Agreement on Trade and Services.

These are some of the issues that can be put into the Doha Round but so far we have no real concessions on these issues. It is something which could be taken up by the Indian administration. But against that you have to give something in the services sector. What would we give? In areas like banking and insurance we are sufficiently developed and resilient to be able to offer something. It is difficult to offer, in my view, any entry subject to a given level of protection simply because we do not have a safeguard clause in the services sector.

This is what we could do – have a service sector quid pro quo, where both countries would be better off. But I think we need rules also on hiring and firing because that is where everybody is going now. Even in India there is great pressure. Is not that what the recent trouble in the airline industry is about?

Longer version of article

Labels: Buy American, China, climate change, CO2, Columbia, Congress, emissions, G8, GATS, India, Jagdish Bhagwati, multilateralism, pollution, superfund, WTO