WTO AND INDIA PRESENTED BY -: ASHWANI MOYAL HARPREET SINGH HRIDESH SHARMA NAVJOT SINGH.

WTO AND INDIA

PRESENTED BY -:ASHWANI MOYALHARPREET SINGHHRIDESH SHARMANAVJOT SINGH

GENERAL AGREEMENT ON TARRIFS AND TRADE

GATT born in 1948 as result of international desire to liberalise

trade.

BRETTON WOODS CONFERENCE (1944) recommended

IMF, WORLD BANK ,ITO.

IMF , WORLD BANK were established in1946.

ITO charter was never ratified ,so GATT formed as interim

measure.

GATT transformed to WTO with effect from January 1995.

GATT OBJECTIVES

Raising standard of living.

Ensuring full employment and a large and steadily growing

volume of real income and effective demand.

Developing full use of the resources.

Expansion of production and international trade.

RULES GOVERNING INTERNATIONAL TRADE

Any proposed change in tariff or commercial policy of a

member country should not be undertaken without

consultation of other parties to the agreement.

Countries that adhere to GATT should work towards reduction

of tarrifs and other barriers to international trade ,which

should be negotiated within the framework of GATT.

PRINCIPLES OF GATT

Non-discrimination(principle of most favoured nation).

Prohibition of Quantitative Restrictions.

Consultation(Resolve disagreements).

WORLD TRADE ORGANIZATION

World Trade Organization (WTO) is an organization that intends to

supervise and liberalize international trade.

WTO officially commenced on January 1, 1995 replacing the General

Agreement on Tariffs and Trade (GATT), which commenced in 1948.

Only international organization dealing with the rules of trade between

nations whose goal is to help producers of goods and services,exporters

and importers conduct their business fairly.

The objective of WTO , the successor of GATT is to provide a framework

of principles and rules for globalization of business to achieve all round

economic prosperity.

WORLD TRADE ORGANIZATION

The WTO has 153 members,representing more than 97% of

total world trade and 30 observers, most seeking membership.

The WTO's headquarters is at the Centre William Rappard,

Geneva, Switzerland.

FUNCTIONS OF WTO

Administering the WTO trade agreements.

Providing forum for negotiations among its members.

Administering the mechanism for settling trade disputes between member

countries.

Providing technical assistance and training for developing countries.

Cooperating with other international organizations like the IMF and IBRD

and its affiliated agencies with a view to achieving greater coherence in

global economic policy making.

WTO PRINCIPLES

WTO agreements have three main objectives:-

To help trade flow as freely as possible.

To achieve further liberalization gradually through negotiation.

To set up an impartial means of settling disputes.

Non discrimination(“most favoured nation” and “national” treatment).

Extra provisions for less developed countries.

THE WTO AGREEMENTS

GOODS – Annexes dealing with agriculture , textiles ,

product standards,subsidies and actions against anti-dumping.

SERVICES(GATS) – Applies to banks,insurance

firms ,telecommunications companies ,tour operators ,hotel

chains and transport companies.

INTELLECTUAL TRAINING- Rules for trade and

investment in ideas and creativity.Rules about

copyrights,patents,trademarks,geographical names etc.

THE WTO AGREEMENTS DISPUTE SETTLEMENTS - To resolve trade quarrels under Dispute

Settlement Understanding to ensure trade flows smoothly.

POLICY REVIEW – To improve transparency,greater understanding of

policies which countries are adopting and to assess their impact.

DEVELOPMENT AND TRADE – Sub-committee on least development

countries,looks at developed countries special needs,implementation of

agreements,technical cooperation,encouraging trade.

TECHNICAL ASSISTANCE AND TRAINING – 100 technical

cooperation missions,reference centers,trade policy courses.

THE URUGUAY ROUND

The Uruguay Round(1986-1994)was the 8th round of multilateral trade negotiations (MTN) .

Main objectives of the Uruguay Round were:a. to reduce agricultural subsidies.

b. to put restrictions on foreign investment.

c. to begin the process of opening trade in services like banking and insurance.

d. They also wanted to draft a code to deal with copyright violationand other forms of intellectual property rights.

Inclusion of new areas:-a. Trade in services.

b. Trade related aspects of intellectual property(TRIPS).

c. Trade related invested measures(TRIM).

INDIA’S COMMITMENT

As India was maintaining Quantitative Restrictions due to balance of payments

reasons(which is a GATT consistent measure), it did not have to undertake any

commitments in regard to market access.

India does not provide any product specific support other than market price

support.

In India, exporters of agricultural commodities do not get any direct subsidy.

a) exemption of export profit from income tax under section 80-HHC of the Income Tax.

b) subsidies on cost of freight on export shipments of certain products like fruits,

vegetables and floricultural products.

WHAT INDIA WANTS

To protect its food and livelihood security concerns and to

protect all domestic policy measures taken for poverty

alleviation, rural development and rural employment.

To create opportunities for expansion of agricultural exports

by securing meaningful market access in developed countries.

TRADE IN SERVICES

The General Agreement on Trade in Services(GATS) came into existence as a result of the

Uruguay Round of negotiations.

GATS covers four modes of international delivery of services:-

a) Cross border supply(transborder data flows,transportation of services.)

b) Commercial presence(provision of services abroad through FDI or representative offices)

c) Consumption abroad(tourism).

d) Movement of personnel(entry & foreign stay of foreign consultants).

Travel and Tourism related services are activities in which most developing countries made

commitments.

Heavily protected services include banking,Insurance,transportation,television,radio,film

etc.

TRADE RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS(TRIPS)

IPR includes patents,trademarks,copyrights,geographic

indications,trade secrets,industrial designs,layout design of integrated

circuits.

Objectives:

a) Encourage and Reward Creative Work.

b) Encourage Innovation.

c) To Promote Fair Competition.

d) To Help Consumer Protection.

e) To Facilitate Transfer of Technology.

TRADE RELATED INVESTMENT MEASURES(TRIMS)

TRIMS refer to certain conditions or restrictions imposed by a government in respect of foreign investment in country.

WTO inconsistent TRIMS:- Local Content requirement(certain amount of local input

be used in products) Trade Balancing Requirements(imports shall not exceed a

certain proportion of exports). Trade and Foreign exchange balancing requirements. Domestic sales requirement(co. shall sell certain

proportion of its output locally).

INDIA’S NOTIFIED TRIMS

Local content (mixing) requirements in the

production of News Print

Local content requirement in the production of

Rifampicin and Penicillin – G

Dividend balancing requirement in the case of

investment in 22 categories consumer goods.

THE DOHA ROUND

Launched at the fourth ministerial conference in Doha, Qatar in November 2001.

Objectives:

a. Lower trade barriers around the world.

b. Committing all countries to negotiations opening agricultural and

manufacturing markets, as well as trade-in-services (GATS)

negotiations and expanded intellectual property regulation (TRIPS).

c. Make trade rules fairer for developing countries

BENEFITS TO INDIA

Increase in India’s textile & clothing exports due to

the phasing out of MFA (in 2005).

The reduction in agricultural subsidies & barriers to

export of agriculture products, agricultural exports

from India also increased.

Market access to a number of developing countries

without trade discrimination increased.

DISADVANTAGES FOR INDIA

TRIPs agreement went against the Indian Patents Act (1970)

Introduction of product patents in India lead to hike in drug prices by the MNCs. Hence the poor

were left with no generic option

Extension of intellectual property right to agriculture has negative effects on India and Indian

research institutions

Application of TRIMs agreement undermines any plan or strategy of self reliant growth based on

local technology.

Service sectors in India are backward compared to the service sectors in developed countries.

Hence inclusion of trade in services is detrimental to the interest of India.

The MFN clause proved to be detrimental to India’s interest & provided grounds for Chinese

invasion in Indian market through dumping.

WTO AND INDIA

INDIAN PATENT LAW

1. Grant and Revocation of Patents.

2. Items Not Patentable.

3. Product Patent.

4. Patent Period.

5. Rights and Obligations of Patentee.

6. Working of the Patent.

7. Compulsory Licensing.

8. Parallel Import.

9. Exceptions.

WTO AND INDIA

Agricultural Subsidies.

Subsidies into three categories in a traffic light schema:

• prohibited ‘red light’ subsidies

• actionable or ‘yellow’ light subsidies

• non-actionable ‘green light’ subsidies.

Two types of subsidies are prohibited: export subsidies and domestic-content subsidies; in

short, subsidies contingent upon the export of a good or service, or that requires the subsidized

producers to use domestic inputs.

India’s global trade gain.

India and Compliance Issues.

Removal of Quantitative Restrictions.

A number of steps were taken by the Government of India to handle

sudden and significant increase in import of select items:

Number of tariff lines were identified which were sensitive to imports

A control room was set-up to watch sudden increase in import of

commodities, for appropriate action;

Imposition of WTO-consistence Non-Tariff Measures (NTMs), like

standards, were stream-lined

Tariffs of sensitive items are not significantly reduced below committed

bound levels, mentioned in schedules of the WTO.

Re-negotiating Bound Tariffs of Agriculture Commodities

India had agreed to keep its import duty on some agriculture items at 0 per cent,

as India was a food deficit country when the pact was signed.

Some of these agriculture items were rice, split wheat, skimmed milk powder,

sorghum, Jawar (or Millet), maize, etc.

India's import of number of agriculture items increased sharply in QR-removed

and zero-tariff regime.

India's import of skimmed milk powder increased from 2000-3000 tonnes

between April to October 1998, to around 18,000 tonnes during the same

period in 1999.

CONT…….

During 1999/2000, India has successfully renegotiated the binding rates under

the WTO framework on select agriculture products (with zero bound tariffs)

with its principal trading partners.

the renegotiated agreement would enable the country to change the import

duty on 17 items such as sorghum, jawar6, maize, rice, split wheat, skimmed

milk powder, etc.

The deal was a part of a trade-off with agriculture exporting countries under

which India has given more access on other items by decline/restructure in

tariff bindings like groundnut oil.

Safeguard Measures and Anti-Dumping Duties

The WTO agreement allows for imposition of trade restrictions for a temporary period under

certain circumstances. These restrictions can be in the form of additional custom duties, which

can be classified in the form of safeguard duties or anti-dumping duty, etc.

Safeguard duties can be imposed under article XIX of GATT 1994 on a particular product if

there is a significant increase in its imports, which can cause or threaten to cause domestic

products on directly competitive products.

Highest number of anti-dumping cases(against INDIA) for a product are engineering products

(including steel products), which account for 32 per cent of the total cases, followed by

textiles and articles (19 per cent) thereof, drugs and pharmaceuticals (18 per cent),

rubber/plastics and articles thereof (13 per cent), and consumer industrial goods (12 per cent).

CONT…..

In the anti-subsidy cases again engineering products (including steel

products) account for 38 per cent of the total cases, followed by

rubber/plastic articles (25 per cent) and textiles/articles and drugs (13 per

cent each).

Removal of MFA for Textiles and Apparel Industry

A major portion of textile and clothing exports from India and other

developing countries to the developed countries was subject to quotas.

On January 1, 1995, MFA was replaced by the WTO agreement on

textiles and clothing (ATC), which set out the process for ultimate

removal of these quotas by December 31, 2004.

In terms of India's global export by commodity groups, textiles and

clothing constitute around 20 per cent.

China is top exporter of textile and clothing in world market.

Problems faced by India in WTO & its Implementation

 Predominance of developed nations in negotiations extracting more

benefits from developing and least developed countries

Resource and skill limitations of smaller countries to understand

and negotiate under rules of various agreements under WTO

Incompatibility of developed and developing countries resource

sizes thereby causing distortions in implementing various decisions

Non-tariff barriers being created by developed nations.

CONT……

Poor implementation of Doha Development Agenda

Agriculture seems to be bone of contention for all types of

countries where France, Japan and some countries are just not

willing to budge downwards in matter of domestic support and

export assistance to farmers and exporters of agriculture produce.

Dismantling of MFA (Multi Fiber Agreement) and its likely

impact on countries like India

Implications for India

It appears that India does not stand to gain much by shouting for agriculture

reforms .India will have to undertake major reforms in agriculture sector in India to

make Agriculture globally competitive.

It is likely that China, Germany, North African countries, Mexico and such others

may reap benefit in textiles and Clothing areas unless India embarks upon major

reforms in modernization and up gradation of textile sector including apparels.

In Pharma-sector there is need for major investments in R &D and mergers and

restructuring of companies to make them world class to take advantage. India has

already amended patent Act and both product and Process are now patented in

India.

What India should do?

• The most important things for India to address are speed up internal

reforms in building up world-class infrastructure like roads, ports and

electricity supply.

• India's ranking in recent Global Competitiveness report is not very

encouraging due to infrastructure problems, poor governance, poor legal

system and poor market access provided by India.

• Our tariffs are still high compared to Developed countries and there will be

pressure to reduce them further and faster.

• India has solid strength, at least for mid term (5-7 years) in services sector

primarily in IT sector.

• India would do well to reorganize its Protective Agricultural policy in name of

rural poverty and Food security and try to capitalize on globalization of

agriculture markets.

India must improve legal and administrative infrastructure, improve trade facilitation

through cutting down bureaucracy and delays and further ease its financial markets.

India has to downsize non-plan expenditure in Subsidies and Government salaries and

perquisites like pensions and administrative expenditures.

Corruption will also have to be checked by bringing in fast remedial public grievance

system, legal system and  information dissemination by using e-governance.

The petroleum sector has to be boosted to tap crude oil and gas resources within

Indian boundaries and entering into multinational contracts to source oil reserves.

CONT…

It wont be a bad idea if Indian textile and garment Industry go

multinational setting their foot in western Europe, North Africa, Mexico

and other such strategically located areas for large US and European

markets.

The performance of India in attracting major FDI has also been poor

and certainly needs boost up, if India has to develop globally competitive

infrastructure and facilities in its sectors of interest for world trade.

CONCLUSION

India, as a developing economy, has been benefitted

being a founding member of the World trade

Organization. The country at large has seen many

significant changes which have taken place after the

formation of WTO. There are some issues which are

yet to be sorted out with the WTO and but by and large

things are falling in shape for the Indian Economy.

THANKYOU