WORLD TRADE ORGANISATION

IN PARTIAL FULFILLMENT OF THE REQUIREMENT UNDER

SEMESTER BASED CREDIT & GRADING SYSTEM FOR POST
GRADUATE SEMESTER I

PROGRAM UNDER FACULTY OF COMMERCE

MASTER OF COMMERCE (MORNING)
SYDENHAM COLLEGE OF COMMERCE & ECONOMICS
SUBMITTED BY:
PANKAJ DAFDA
ROLL NO.7
PROJECT GUIDE

DR.
(Professor)

SYDENHAM COLLEGE OF COMMERCE &

ECONOMICS
2015-2016

ACKNOWLEDGEMENT
INTRODUCTION

I would firstly like to thank the UNIVERSITY OF MUMBAI for

giving us the liberty of choosing such topic which will be
benefited to us in future. I would like to thanks the Principal of
Sydenham College Dr. ANNASAHEB KHEMNAR for giving me
the opportunity to study in this esteemed college and doing the
course of Banking and Finance. I would like to express my
sincere gratitude and thanks to DR ANJALI ALEKAR. who is
my project guide, as he has been the guiding light for this project
and has also provided me with the best of my knowledge, advice
and encouragement which helped me in successful completion
of my project.
My special thanks to my parents and classmates who have also
supported and encouraged me, the success of this project to the
large extent is also dedicated to them.
I would also like to thank all those who have helped me and
whom I have forgotten to mention in this space.

SIGNATURE OF STUDENT:

CERTIFICATE

This is to certify that MR.PANKAJ DAFDA of M.comI(morning) 1st. semester (2015-2016) has successfully
completed the project on CONTETIOUS ISSUE OF
WTO . under the guidance of DR.ANJALI ALEKAR

Project guide:

Internal examiner:

External examiner:

DATE:

PLACE:

DECLARATION

I Mr.PANKAJ DAFDA the student of M.com-I (morning)

1ST Semester (2015-16), hereby declare that I have
completed the project on CONTETIOUS ISSUE OF
WTO. The information submitted is true and original to
the best of my knowledge.

Signature of student

PANKAJ DAFDA
Roll No. 7

CONTENTS
1.
EXECUTIVE
SUMMARY....................................................................................
..........
2.
INTRODUCTION............................................................................
...................
GATT..........................................................................................................................
THE URAUGUAY ROUND....................................................................................
FROM GATT TO WTO............................................................................................

3.
OBJECTIVE...................................................................................
........................
4.
CONTETIOUS ISSUE OF
WTO....................................................................................
AGRICULTURE....................................................................................................
PHARMACEUTICALS.........................................................................................
THE SERVICE SECTOR.......................................................................................
TEXTILES AND CLOTHING.............................................................................
INFORMATION TECHNOLOGY..........................................................................
TRIPS...................................................................................................................

5.
INDIA AND THE
WTO.......................................................................................
INDIAS ROLE IN THE WTO...............................................................................
INDIAS WTO COMMITMENT.................................................................................

6.
COMPARISON OF INDIAS FOREIGN TRADE
BENEFITS.........................................
BEFORE BECOMING THE MEMBER OF WTO........................................................
AFTER BECOMING THE MEMBER OF WTO...........................................................

7.
EXIM
POLICY........................................................................................
............
IMPORT..............................................................................................................
EXPORT..................................................................................................................

8.
CONCLUSION...............................................................................
........................
9.
BIBLIOGRAPHY.............................................................................
........................

EXECUTIVE SUMMARY

The Project describes all about the World Trade

Organisation (WTO), its Introduction in the World Economy, the
Objectives laid for the Organisation, Functions that operates,
EXIM Trade Policies, and Scenarios occurred with India Before
the formation of WTO & the Benefits gained by India from the
organisation.
The topic discussed in this project has a long history with
India as one of the powerful member attached to it. Following the
Uruguay Round Agreement, the General Agreement on Tariff and
Trade (GATT) was converted from a provisional agreement into a
Formal Organisation known today as the World Trade
5

Organisation (WTO), with effect from January 1, 1995. There

were 128 member countries in 1995, which has increased to 144,
with India as one of the important member. The Secretariat of the
WTO is based in Geneva, Switzerland. According to the current
status WTO now accounts for about 97 per-cent of international
trade.

TRADE & INEQUALITIES

Where trade has contributed to increased inequality, its
impact has generally being minor to others factors, most notably
Technological Change.

TRADE & STRUCTURAL ADJUSTMENT

If Trade reforms are introduced, economic changes need to
be made. Import-competing firms appear to adjust by reducing
mark-offs, increasing efficiency & often by reducing firm

TRADE & POVERTY

One of the biggest challenges facing the world community is
to how to address poverty.

INTRODUCTION
2INTRODUCTION
INTRODUCTION
Simply put: The World Trade Organization (WTO) deals with the rules of
trade between nations at a global or near-global level. But there is more to it
than that.

2-1

GATT

In 1947, 23 countries came into an agreement in Geneva on

multilateral Trade. This agreement was termed as The General
Agreement on Tariffs and Trade (GATT) which came into effect on
1st of Jan. 1948. These countries sought to expand multilateral
trade among them. India was one of the founder members of
GATT. Many countries signed this agreement in 1994 which
resulted no. of members of GATT to 124.
The agreement consists of two main themes:1) The agreement formulated some regulations which were
to be observed by the member countries.
2) The member countries were to comply with was the Most
Favoured Nation (MFN) clause.
GATT was not an organization but was a multilateral treaty, it
had no legal status. It provided a platform to its member nations
to negotiate and enlarge their trade.

2-1.1

OBJECTIVES OF GATT

The primary objective of GATT was to expand international

trade by liberalising trade to bring economic prosperity. GATT
mentions the fallowing important objectives.
1) Raising standard of living of the member countries.
2) Ensuring full employment through a steady growth of
effective demand and real income.
2 - INTRODUCTION

3) Developing optimum utilisation of resources of the world.

4) Expansion in production exchange of goods and services on
a global level.

2-1.2

PRINCIPLES
7

1)
2)
3)
4)
5)

2-2

Follow the Most Favoured Nation (MFN) clause.

Carry on trade in a non discriminatory way.
Grant protection to domestic industries.
Condemn the use of quantitative restrictions or quotas.
Liberalise tariff and non-tariff measures through
multilateral negotiations.

THE URUGUAY ROUND

Uruguay Round (UR) is the name by which the 8 th and the

latest round of Multilateral Trade Negotiations (MTNs) held under
the auspices of the GATT popularly known in Punta Del Este in
Uruguay launched in September 1986. The main issues in this
round discussed were of Agricultural Subsidies, Multi Fibre
Agreement (MFA), Trade in Services, Anti Dumping etc.
These discussions were resolved by the then Director
General of GATT, Arthur Dunkel. Who came up or Draft of the
Uruguay Round consisted of 28 agreements which spelt out the
results of Multilateral Trade Negotiations (MTN).
Some of the main agreements of the Uruguay Round were as
follows:1) Anti-Dumping Code: Dumping is to be condemned if it
causes or threatens material injuries to an established
domestic industry. A committee on anti-dumping practices
should look into such matters related to dumping.
2) Trade Related Investment Measures (TRIMs): Refers to
certain conditions or restrictions imposed by a Government
in respect of foreign investment in the country. TRIM is
widely employed by developing countries.

The agreement on TRIMs provides that no contracting party

shall apply any TRIM which is inconsistent with GATT articles.
An illustrative list identifies the fallowing TRIMS as inconsistent:WORLD TRADE ORGANISATION

i. Local content requirement.

ii. Trade balancing requirement
iii. Trade and foreign exchange balancing requirements.
iv. Domestic sales requirements.
3) Trade related aspects of Intellectual Property Rights
(TRIPs) - One of the most controversial outcomes of
Uruguay Round is the agreement on Trade Related aspects
of Intellectual Property Rights (TRIPs) including Trade in
counterfeit Goods. According to GATT Intellectual Property
Rights are the rights given to persons over the creations of
their minds. They usually give the creator an exclusive right
over the use of individuals creation for a certain period of
time.
4) Trade in services - Bank, Insurance, Transport and
Communication, etc. are trade related services. The draft
agreement proposed that all restrictions on such services
should be waived.
Conclusion:
Following the Uruguay Round (UR) Agreement GATT was
converted from a provisional agreement into a formal
international organisation known as World Trade Organisation
(WTO). The organisation began its function from 1st Jan. 1995. It
serves as a single institutional framework directed by a
Ministerial Conference once every two years and its regular
business is overseen by a general council. The WTO secretariat is
based in Geneva, Switzerland. The membership of the WTO
increased from 128 in July 1995 to 144 countries by Jan. 1 st

2002. The WTO members now accounts for over 97 percent of the
international trade.

2-3 FROM GATT TO WTO

After World War II over 50 countries came together to create
the International Trade Organisation (ITO) as specialise agency of
the UN to manage the business aspect of international economic
co-operation. The combined package of trade rules and tariff
concessions negotiated and agreed by 23 countries out of the 50
participating countries came to be known as the General
2 - INTRODUCTION

Agreement on Tariffs and Trade. It came into force in 1948; well

the WTO charter was still being negotiated. WTO came into effect
from 1 January, 1995.
The GATT was provisional for almost half a century but it
succeeded in promoting and securing liberalization of world
trade. Its membership increased from 23 countries in 1947 to
123 countries in 1994. The membership of WTO increased from
128 in July, 1995 to 144 countries as of 1 January, 2002. During
its existence from 1948 to 1994 the average tariffs on
manufacture good on developed countries declined from about
40% to a mere 4%. GATT focused on tariff reduction till 1973. It
was only during Tokyo and Uruguay Rounds that non-tariff
barriers were discussed under GATT. With increasing use of non
tariff barriers and the increasing significance of service sector in
the economy the need was felt to bring non-tariff barriers and
intellectual property under the preview of multilateral trade.
10

2-3.1

OBJECTIVES OF WTO

The WTO has the fallowing objectives:

1) To raise the standard of living in member countries by
ensuring full employment and by expanding production and
trade in goods and services.
2) To develop an integrated, viable and durable multilateral
trading system.
3) To promote sustainable development in member countries
by the optimal use of resources.
4) To help the developing countries to get a share in the growth
in the international trade.
5) To reduce tariffs and other trade barriers among member
countries and to eliminate discriminatory treatment in
international trade relations.
6) To insure linkages between trade policies, environmental
policies and sustainable development.

2-3.2

FUNCTIONS OF WTO

The basic functions of WTO are as follows:

1) It facilitates the implementation,
operation of the trade agreements.

administration

and

WORLD TRADE ORGANISATION

2) It provides the forum for further negotiations among

member countries on matters covered by the agreement as
well as the new issues falling within its mandate.

11

3) It is responsible for the settlement of the differences and

dispute among its member countries.
4) It is responsible for carrying out periodic reviews of the
trade policies of its member countries.
5) It assists developing countries in trade policies issues
through technical assistance and training programme.
6) It encourages co-operation within international
organisations.

OBJECTIVE

1.
To know about the structure, function and objective of
WTO.
2.

GATT and how it changed to WTO

3.

Uruguay Round and its resolution

4.

How WTO had its impact of India

5.

India and WTO- Indias role in WTO, Indias commitment

6.

How India was benefited before and after joining WTO

12

7.

EXIM policy

13

IMPACT
OF WTO ISSUE
ON INDIA
CONTETIOUS
OF WTO
WTO is the institutional platform for the settlement of trade related issues through
discussions and negotiations. Unlike GATT, WTO is both agreement and intuition to
implement trade related rules and regulations The conversion of GATT into WTO with
necessary powers in 1997 was an historical mile stone in the history of global trade. It is
rightly said that GATT with teeth is WTO.. Ever since its inception, WTO could settle large
number of trade related issues. How ever still there are a number of contentious and
disputed issues before the WTO and creating roadblocks. Such issues have become
contentious due to disagreement between members on its interpretation and
implementation. Many WTO members especially developing nations feel that, their voice
and problems in global trade is not addressed properly. Further the WTO members are also
totally divided over some of the issues. Some such serious issuers are

1) Multi fiber agreement: MFA is a major contentious issues at the WTO. During the
Uruguay Round talks, WTO Members signed an Agreement on Textiles and Clothing
popularly known as Multi fiber agreement or ATC. The agreement mandates that WTO
members to implement the ATCs including Minimum Market Access condition over a period
of 10 years, starting from 1995. The Agreement on Textiles and Clothing requires the
progressive elimination of all quantitative restrictions in four stages and give market access to
textiles.
a) Although, MMA conditions have been adopted, many developed countries
still practice quotas, tariffs and NTBs on textiles and clothing of developing
nations.
b) Developing countries also complain that the many developed countries
still do not meet the minimum requirements of the ATC.

2) Agriculture Subsidies: Agriculture subsidies is another serious contentious issue

.Developed still continue to provide subsidies including red box subsidies, disturbing the
level playing field of trade. More recently, the World Bank has estimated that 140 million
people could be lifted out of poverty by 2015, if WTO members agree to end subsidies and
other NTB barriers to agricultural trade.
Although Rich countries have agreed in principle to phase out farm subsidies
and Minimum market access conditions , nothing much has been done on this
direction.
With respect to subsides to cotton many countries in West Africa, Latin
America, and Asia complain that subsidies stimulate excess production,
depress world prices, and destroy the value of cotton as a cash crop.
14

3) Labour Standards : This is the most controversial issue before WTO. There is a
growing tendency to link labour standards with global trade. Labour standards are misused
as strong trade barrier.
The Labor standards are those standard to be applied to the way workers are treated. It
covers a wide range of issues, such as Right to Minimum wages ,child labor, forced labor,
and the right to organize trade unions.
WTO does not have any agreements on core labor standards, but follow ILO ( International
Labor organization) standards. The WTO members are deeply divided over launching
negotiations on the above issues.
a) Poor and Developing countries argue , that standards of ILO are distorted
and misused by developed nation as a strong trade barrier.
b) At the same time, MMC and developed nations are against the works right
such as labour union and labour welfare measures , as such measures will
cause hurdle to their investment abroad.
C) Poor countries feels that Some forms of child labor are essential to the
survival of poor families as they depend upon the income generated by every
family member.
d) Trade restrictions cannot be imposed on a product purely because of the
way it has been produced.
e) No country cannot reach out beyond its own territory to impose its
standards on another
f) Many developing countries are not ready of making a legal commitment to
labor standards.

4) Trade and Environment : Like labour standard, WTO does not have any specific
agreement on environment. However the concern for the environment is built into the frame
work of WTO agreements. The WTOs environmental mandate has become the subject of
intense debate due to disagreement about the impact of international trade rules on the
environment.
a) Developing nations very often link trade and environmental issues to
support their trade barriers . They use environmental protection as defense to
support their Non tariff barrier against the imports from developing nations.
b)Developing countries often find it difficult to implement regulations devised
by developed countries because the standards are too strict.

5) Singapore issues : In addition to the above, few more pending issues were raised in
Singapore meet of WTO. They are called Singapore issues The Singapore issue covers
a) Electronic Commerce: This area of trade involves goods and services crossing borders. ,
electronically through the internet. It is very difficult to bring transparency in E- trading.
15

WTO members are silent on the issue and have agreed to continue their
current practice of not imposing customs duties on electronic
commerce.
b)Transparency in Government Purchases: The WTO has an Agreement on Government
Procurement. The agreement covers issues of transparency and non-discrimination.
However the agreement is pluri lateral. Only few members have signed the
agreement so far. Many members feel that it is an attack on the sovereignty of
nation
At present, members are allowed to exempt govt procurement from WTO
market access rules. This state monopoly in trade becomes a de-facto trade
barrier.

c) Competition Policy: WTO agreement on Competition policy is a powerful tool to prevent

monopolistic abuse of trade.
However member countries argue for full freedom and flexibility to choose a
competition law which suits them. Such freedom is essential to protect the
national interest in the context of globalization and liberalization

6) Need to deal with Quantitative restrictions : How to deal with NTBs such as
voluntary export restraints, social dumping, anti-dumping and countervailing duties etc is
another contentious issue.
a) In spite of WTO agreements many counties still follow such unethical
practices in trade.

7) Need to deal with Regional trade agreements: Another major challenge which
lie ahead for WTO is how to cope up with challenges of regional trade blocks and their
activities that may come in the way of multilateral trade.
Trade blocs in effect, have become a stumbling bloc rather than building bloc
as claimed by supporters of Regional trade blocs. Global trading scenario is
distorted by presence of large number of trade blocs

8) Measures to be taken for trade Facilitations: : After Doha round of WTO ,

developing countries continued to voice concerns that new multilateral obligations on trade
facilitation is non practical and difficult to implement.
Although the trade facilitation or promotion measures of national
government seems to be harmless, the establishment of multilateral rules in
this area may go against the interests of developing countries.

Thus, WTO is plagued with large number of contentious issues. There is an urgent
need to address the issues and iron out differences. The success and survival of WTO depends
upon how fast we can find solutions to the contentious issues.

16

4-1

AGRICULTURE

Globalization manifesting in progressive integration of

economies and societies has assumed increasing significance in
the lives of common people all over the world. In the field of the
trade the World Trade Organization (WTO) is the principal
international institution responsible for laying down rules for the
smooth conduct of trade in goods and services among nations in
this globalized world. This is achieved by developing a set of rules
of multilateral trading system which aims to remove, inter alia,
trade barriers (tariff and non tariff) as well as reduce and
eventually remove domestic support and system of export
subsidies that distort international trade between nations. These
problems of trade distortion are most conspicuous in agriculture
sector.
Agriculture is of special significance for developing countries
particularly the extreme poor (i.e. those living on one dollar or
less per day). It has been estimated that three quarters of them
about 900 million people live and work in rural areas, most of
them as small farmers. Table 1 shows that where as agriculture
contributes 3% to the GDP and employs only 4% of the
4 IMPACT OF WTO ON INDIA

population in developed countries the corresponding figures for

developing countries are 26% and 70% respectively.

17

Table 1: Key differences between agriculture systems in

developed and developing countries

Parameters

Developed

Developing

Countries

Countries
(including least

Nature

of Commercial/Expor

developed)
Subsistence

Agriculture System t Oriented

Share of GDP
3%
Contribution
to 8.3%

26%
27%

foreign exchange
Population engaged 4%

27%

in agriculture
Source:

Green, D and Priyadarshi, S. (2001) Proposal for

development Box in the WTO Agreement on
Agriculture, CAFOD and South Centre, Kaukab, R;
(2002) Presentation at Agriculture and WTO Seminar,
Ministry of Commerce, Government of Pakistan,
Islamabad, August, 2002, Action Aid Food Rights The
WTO Agreement on Agriculture, 2003.

The agriculture was included in the multilateral trading

system after the eighth (Uruguay) round of talks under GATT on
demand of developing countries who had a comparative
advantage in this sector and its benefits were being denied to
them. This trade round stretched from 1986-1994 and concluded
in establishment of WTO and inclusion among others of
agriculture in the discipline of WTO. This was achieved by
18

developing countries only after paying a heavy price in the form

concessions on many fronts especially intellectual property rights
and services.
WTO policies impact agriculture principally through the
following agreements:

1. Agreement on Agriculture (AOA)

2. Agreement on Application of Sanitary and Phytosanitary
Standards (SPS):
(Dealing with Health and disease related issues)
3. Agreement on Technical Barriers to Trade (TBT):
(Dealing with Regulations, standards, testing and
certification procedures, packaging, marking and labeling
requirements, etc)
4. Agreement on Trade Related Aspects of Intellectual
Property Rights (TRIPs):
(Dealing with Patents and copyrights, plant breeders
rights etc).
Activists cry foul that Indian agriculture, already reeling
under severe drought and fall in cash crop prices, will die once
the import curbs are removed and free flow of food items are
allowed into India.
"There is going to be 'madness' in the agriculture sector.
Farmers will be hit hard by the WTO regime. What happens to
our vegetable oils, rice, rubber, coconuts and fruits, if similar
items can be imported cheaply from other countries," asks K

19

Sundaran, a social activist espousing farmers causes in South

India.
He says currently there is a massive distortion in the
international trade in agriculture. Industrialised countries have
been giving huge domestic subsidies to their agricultural sector
that there is excessive production, import restrictions and
dumping of agri-products in international markets.
But despite the concerns of farmers, many believe the WTO rules
will not adversely affect the Indian agriculture as it is made out.
Developed nations have committed to the WTO that they would
reduce subsidies and tariff. So then better overseas markets will
be available for Indian agricultural products.

4-2

PHARMACEUTICALS

20

India has one of the most efficient pharmaceutical

industries in the world.

Pharmaceutical firms grew mainly thanks to the absence of

patent protection of medical drugs in the country. For instance,
Indian companies are now producing their own AIDS drugs,
which are available cheaply, compared to the original products
from foreign countries.
But the imposition of the new WTO rules will begin to
threaten India's achievements in the pharmaceutical field. The
Indian Patents Act, introduced in 1970, boosted Indian pharma
companies. The Act allowed them to develop and patent
alternative processes for products discovered and patented
elsewhere.
According to the Indian Drug Manufacturers' Association,
self-sufficiency in Indian pharmaceutical sector is more than 70
per cent.
"Worldwide, India is a country of very low prices for highquality medicines," points out the IDMA president Nishchal H
Israni.
But now the rules of the game in the pharmaceutical
industry will change as India has committed to toe the WTO line
on

product

patents.

Product

patent

rules

and

Exclusive

Marketing Rights (EMR) under the WTO could affect a paradigm

shift in India's pharma majors.

21

As per the EMR provision, a product for which original

patent was granted prior to 1995, is not fit for an EMR in the
country.

This

has

forced

nine

leading

domestic

pharma

companies to form the Indian Pharmaceutical Alliance that has

demanded a more transparent WTO regime for EMR grants.
How will the WTO rules affect 500,000 employees working
in roughly 20,000 pharma firms in the country?
Well, many expect a spate of mergers, acquisitions and
alliances in the domestic pharmaceutical industry in the coming
years, as the impact of WTO regulations kick in, Indian pharma
players are learning to collaborate and consolidate to grow.
If the industry is to be believed, the Matrix-Strides merger is
only the beginning of the shakeout that the pharma sector is set
to witness over the next few years.

WORLD TRADE ORGANISATION

4-3

THE SERVICE SECTOR

As per the WTO rules, two obligations apply to all services.

They are the Most Favoured Nation (MFN) treatment and
transparency by way of publication of all laws and regulations.
Which in other words means that areas like banking, insurance,
investment banking, health, and many other professional services
that are opened up will be bound by the WTO commitments?
India will have to open up its services sector to other WTO
member countries. The result: many overseas service providers

22

will enter into the services sectors in the country, thereby

reducing the chances of domestic enterprises.

But experts believe India need not be frightened of the WTO

rules on services because the country at present has a distinct
competitive advantage in many areas that include health,
engineering

construction,

computer

software

and

other

professional services.

23

4-4

TEXTILES AND CLOTHING

The WTO agreement on textiles and clothing states that the

Multi-Fibre Agreement (MFA) will eventually be eliminated. MFA
at present groups the major importer countries -- the United
States, Austria, Canada, the European Community, Finland and
Norway -- who apply restrictions by way of quota.
Exporting countries like India are a part to the MFA. The
phasing out of MFA will boost textile exports from India. It will

also increase investment in textiles and joint ventures. But the

risk is that as India opens up its market from next month, import
of textiles and clothing will considerably increase from countries
like China, the Unites States, Taiwan and Indonesia.
This will force many textile manufacturers to modernise
their mills and improve quality.

4-5

INFORMATION TECHNOLOGY
24

Under the Information Technology Agreement signed under

the WTO, Indian hardware and software companies can become
major players in the value-added arena.
Availability of high-skilled of IT personnel and low cost of
labour and operation will allow India to compete in the
international market.

4-6
TRIPS (TRADE
PROPERTY RIGHTS)

RELATED

INTELLECTUAL

TRIPS Article 27.3(b), which requires all WTO countries to

provide some kind of intellectual property rights (IPR) on plant
varieties, was up for review in 1999. TRIPS are a clearly antideveloping country treaty. Its provisions seriously threaten self
reliance in agriculture and the livelihoods of farmers. TRIPS do
not contain any elements of equity or benefit sharing. It does not
allow countries to claim a share of benefits companies who
breed new varieties using farmers varieties as the base since
there is no provision requiring disclosure of the country of origin
from where base materials have been taken. The Trade Related
Aspects of Intellectual Rights (TRIPS) agreement set minimum
standards for protection of IPRs, a standard that is closer to the
level of protection provided in the developed world

INDIA AND THE WTO

25

5-1

INDIAS ROLE IN THE WTO

India is a founding member of the GATT (1947), it actively

participated in the Uruguay Round Negotiations, and is a
founding member of the WTO. India strongly favours the
multilateral approach to trade relations and grants MFN
treatment to all its trading partners, including some who are not
members of WTO. Within the WTO, India is committed to
ensuring that the sectors in which the developing countries enjoy
a comparative advantage are adequately opened up to
international trade. It also has to see that the different WTO
Agreements
are
translated
into
specific
enforceable
dispensations, in order that developing countries are facilitated in
their developmental efforts. India feels that the multilateral
system would itself gain if it adequately reflected these concerns
of the developing countries, so as to create the necessary impetus
to enable developing country members to catch up with their
developed country counterparts.

5-2

INDIAS WTO COMMITMENT

Under the Uruguay Round India has bound 67% of all its
tariff lines, whereas prior to that only 6% of tariff lines were
bound. The bindings range from 0 to 300% for agricultural
products from 0 to 40% for other products. Under the Uruguay
Round manufactured products were bound at 25% on
intermediate goods and 40% on finished goods.

5-2.1

Balance of payments
26

Under the exceptional provision of Article XVIII: B of GATT,

India has some residual quantitative restrictions on imports
WORLD TRADE ORGANISATION

maintained for balance-of-payments purpose. These aggregate to

2,714 tariff lines at the eight-digit level of the Indian Trade
Classification. In May 1997, India presented to the WTO a plan
for the elimination of these restrictions in imports, including
those on consumer goods. This plan was considered at the
consultations with India of the WTO Committee on Balance-ofPayments Restrictions in June-July 1997. At the request of the
United States, a panel was constituted on 18 November 1997 to
examine the US allegation that the continued maintenance of
quantitative restrictions on imports by India is inconsistent with
India's obligations under the WTO Agreement.

5-2.2

AGRICULTURE

The only commitment India has undertaken under the

Agreement is to bind its agricultural tariffs. This commitment
has been fulfilled by India binding its tariffs for primary
agricultural products at 100%, processed food products at 150%
and edible oils at 300%.India's prevailing agricultural tariffs are
well within the bound rates. Under the Uruguay Round,
whenever we have bound tariffs on agricultural commodities at
zero or very low-levels, renegotiation of tariff bindings have been
sought under Article XXVIII of GATT.
The Agreement on Agriculture was designed to improve
world trade, raise prices of agricultural products and ensure
higher standards of living for farmers.

5-2.3

TEXTILES

As per the obligations under the Agreement on Textile and

Clothing (ATC) to integrate this sector into GATT 1994 in stages,
the Indian Government moved cotton and wool yarn, polyester
staple fibre and 20 other industrial fabrics on to the list of freely
27

importable goods in 1995. India is concerned about the fact that

repeated anti-dumping investigation by certain trading partners
on the same product lines, without giving full effect to the special
dispensation provisions of Article 15 of the Anti-dumping
Agreement has resulted in trade harassment for its exporters of
textiles.
5 INDIA AND WTO

5-2.4

INTELLECTUAL PROPERTY

India is availing itself of the transition periods due to her

under Article 65 of the TRIPS Agreement to meet her obligations
under the seven areas covered by the Agreement.
India's achievements in this field have been in the passing of
TRIPS plus legislation in the field of Copyright Law. The 1994
amendments to the Act of 1957 provides protection to all original
literary, dramatic, musical and artistic works, cinematographic
films and sound recordings. The most recent changes bring
sectors such as satellite broadcasting, computer software and
digital technology under Indian copyright protection.

5-2.5

TRADES RELATED INVESTMENT

MEASURES
Substantial modifications have already been made to the
foreign investment regime, increasing the number of sector where
foreign investment can take place and also increasing the foreign
equity limit on these investments. India has already notified the
trade-related investment measures maintained by it in terms of
Articles 2 and 5 of the TRIMs Agreement and the illustrative list
annexed to the TRIMs Agreement.

5-2.6

ANTI-DUMPING

28

Anti-dumping and countervailing duties are imposed under

the Customs Tariff Act 1975 and the Rules made there under.
The Act and Rules are on the lines of the respective GATT
Agreement on anti-dumping and countervailing duties. The time
limits and the procedures prescribed under the Indian
laws/GATT Agreement is strictly followed by the designated
authority. With the increasing number of cases, the Government
of India proposes to set up a Directorate General of Anti-dumping
and Allied Duties for expeditious disposal of anti-dumping and
countervailing duty cases.

WORLD TRADE ORGANISATION

5-2.7

SERVICE SECTOR

The services sector accounts for about 40% of India's GDP,

25% of employment and 30% of export earnings. Recognizing the
importance of the services sector in achieving higher economic
growth, the government is giving added emphasis to improving
services such as telecommunications, shipping, roads, ports and
air transport. The foreign direct investment regime has been
liberalized to attract foreign investment in the services
sector.India actively participated in the Uruguay Round services
negotiations and made commitments in 33 activities as compared
to an average of 23 for developing countries. India also
participated
in
the
spill-over
negotiations.
In
basic
telecommunication services, India has undertaken commitments
in the areas of voice telephone service for local and long-distance
(within the service area), cellular mobile services and other
services such as circuit switched data transmission sources,
facsimile services, private leased circuit services as per details
given in the schedule of commitments.
While developed countries have surplus capital to invest,
most of the developing countries have surplus of skilled, semiskilled and unskilled workers. We have a large pool of well29

qualified professionals capable of providing services abroad. As

developed countries have a comparative advantage in exporting
capital intensive services, similarly developing countries have a
comparative advantage in exporting labour intensive services
involving movement of persons.
In Article IV of GATS, there is a clear obligation to increase
the participation of developing countries in trade in services. The
Agreement also recognizes the basic asymmetry in the level of
development of the services sector in developed and developing
countries and a commitment that the developed countries will
take concrete measures aimed at strengthening the domestic
service sector of developing countries and providing effective
market access in sectors and modes of supply of export interest
to developing countries.
5 INDIA AND WTO

5-2.8

INFORMATION TECHNOLOGY

India participated in the negotiations on the Agreement

from the early stages and after examination of the implications of
the proposed agreement and extensive discussions with trading
partners joined as a participant on 1 April 1997. India is
committed to phasing out the import tariffs on the products
covered by the ITA as scheduled.

5-2.9

REGIONAL TRADE AGREEMENTS

India attaches significance to her participation in regional

agreements within the framework of multilateral rules. India has
been instrumental in setting up the South Asian Association for
Regional Cooperation (SAARC), whose major achievement in 1995
was the conclusion of the negotiations on trade preferences
within the framework of the SAARC Preferential Trading
Arrangement (SAPTA). SAPTA became operational on 7 December
1995 and includes preferential tariff concessions on 226 items
30

and product groups. A second round of SAPTA trade negotiations

was launched in January 1996 to broaden tariff concessions.
India granted concessions on 902 tariff lines, effective 1 March
1997.

31

6
6-1

COMPARISON OF INDIAS
FOREIGN TRADE BENEFITS

BEFORE BECOMING THE MEMBER OF WTO

Its agreed that India was one of the founder member of WTO;
it faced problems in Foreign Trade grounds. The problems that
India faced before the formation of WTO were the following:
(1)Absence of Anti dumping
(2)No Subsidy Facilities
(3)Absence of TRIMs & TRIPs
(4)Lac of Market Scenario & Strategies

6-2

AFTER BECOMING THE MEMBER OF WTO

(1)Anti-Dumping - Dumping is condemned if it causes or

threatens material injury to an established industry. A
product is considered as dumped when its export price
becomes less as compared to the normal price in the
exporting country plus a reasonable amount for
administrative, selling and any other costs and for profits.
Anti dumping measures can be employed only if
dumped imports are shown to cause serious damage to the
domestic industry in the import industry. The measures are
not allowed if the margin of dumping is de minimise.
(2)Subsidies - The draft agreement defined certain specific
subsidies which would be subjects to various disciplines.
Certain other types of subsidies would fall under prohibited
category.

32

(3)Technical barriers to trade - Technical regulation and

standards along with testing and certification procedures
should not create unnecessary obstacles to trade.
6 COMPARISON OF INDIAS FOREIGN TRADE BENEFITS

(4)Right of market-The main issue is to reduce tariff and other

trade restriction in case of commodities like agricultural
goods, textiles etc.
(5)TRIMs (Trade related investment measures) - Widely
employed by developing countries. Refers to certain
conditions imposed by government in respect of foreign
investment. The agreement of TRIM provides the following
inconsistent TRIMs.
a) Local content requirement
b) Trade balancing requirement
c) Trade and foreign exchange balancing requirement.
d) Domestic sales requirements.
(6) TRIPs (Trade Related Aspects of Intellectual Property
Rights-It is defined as information with commercial value.
Intellectual Property Rights have been characterised as a
composite of ideas, inventions and creative expression.

33

EXIM POLICY

71

IMPORT

7-1.1

Indian Import Policy

Import is the antonym of export. In the terms of economics,

import is any commodity brought into one country from another
country in a legal way. The economic needs of the country,
effective use of foreign currency are the basic factors which
influence India's import policy. There are mainly 3 basic
objectives of the import policy of India:
To make the goods easily available.
To simplify importing license.
To promote efficient import substitution.

7-1.2

Current Scenario of Imports in India

There are few goods which cannot be imported namely

tallow fat, animal rennet, wild animals, unprocessed ivory etc.
Most of the restrictions are on the ground of security, health,
environment protection etc. Imports are allowed free of duty for
export production. Input output norms have been specified for
more than 4200 items. The norms tell about the amount of duty
34

free import of inputs allowed for specified products. There are no

restrictions on imports of capital goods. Import of second hand
capital goods whose minimum residual life is of five years is
permitted. Export Promotion Capital Goods (EPCG) scheme
provides exporters to import capital goods at a concessionary
custom rates. In the past 30 years Indian imports have risen
quite dramatically. At present imports accounts for 17% of the
GDP. Capital goods have been continued to be imported and in
the last three years, their share has fallen from 25% to 22%.
7 EXIM POLICY

7-1.3

Major Indian Imports

There are facilities available for the service industries to

enjoy the facility of zero import duty under EPCG scheme. Some
of the major imports of India are edible oil, newsprint, petroleum
and crude products, crude rubber, fabrics, electronic goods etc.

7-1.4

Problems due to Large Import of

Products
The recent trend of imports is of some concern. The regular
imports of oil reflect upon the fact that India is not able to
produce the quantity of oil required in India. Moreover the
increase in the imports of products also highlights the fact that
the Indian domestic industries need to be developed. It also
creates pressure on the economy as the money ultimately has to
be bearded by the people.
WORLD TRADE ORGANISATION

7-2

EXPORT

Export means the transferring of any good from one country

to another country in a legal way for the purpose of trade. Export

35

goods are provided to the foreign consumers by the domestic

producers.

7-2.1

Indian Exports: A History

The history of Indian exports id very old. During prehistoric

times India exported spices to the other parts of the world. India
was also famous for its textiles which were a chief item for export
in the 16th century. Textiles and cotton were exported to the Arab
countries from Gujarat. During the Mughal era India exported
various precious stones such as ivory, pearls, tortoise stones etc.
But during the British era, Indian exports declined as the East
India Company foreign trade of India.

7-2.2

Indian Exports: Current Scenario

Every year India earns billion of dollars by exporting various

goods and items. The Indian government has outlined certain
export policies. The export policies tell about the products to be
exported and the countries to whom exports are to be done. The
government of India works with the Federation of Indian Export
Organization, the leading export promotion organization of India.
Exports are the major focus of India's trade policy and most of
7 EXIM POLICY

the items can be freely exported from India. A few items are
subject to export control to prevent their shortage. The profits
from exports are exempted from income tax. Indian exports
contribute nearly 12.4% in the GDP.

36

7-2.3

Leading Export Items of India

In the past ten years, exports have grown at a rate of nearly

22%. Some commodities have enjoyed faster export growth than
others. Some of India's main export items are cotton, textiles, jute
goods, tea, coffee, cocoa products, rice, wheat, pickles, mango
pulp, juices, jams, preserved vegetables etc. India exports its
goods to some of leading countries of the world such as UK,
Belgium, USA, China, Russia etc.

7-2.4

Restriction on the Exports of Items

However there are some restrictions on the export of goods.

Under sub section (d) of section 111 and sub section (d) of
section 113, any good exported or attempted to be exported,
contrary to any prohibition imposed by or under the customs act
or any other law is liable for confiscation.
WORLD TRADE ORGANISATION

7-2.5

Problems of the Indian Export Sector

But there are few problems which need to be solved before

India makes a mark for itself in the export sector. The Indian
goods have to be of superior quality. The packaging and branding
37

such be such that countries are interested to export from India.

At the same time India must look for potential market to sell their
goods. The government should frame policies which gives boost to
the exports.

38

CONCLUSION

The developed countries want that the underdeveloped

countries observe some restrictions relating to labour
employment and ecological balance. Their argument is that the
underdeveloped countries use child labours or their social
security measures are very poor. Further, these countries do not
take measures to control pollution or to maintain ecological
balance. As a result, cost of production in such countries is low.
So, the developed countries should be allowed to impose tariffs or
imports from underdeveloped countries until the developing
countries improve the condition of labour and do not employ
child labour. Thus, the developed countries tried to impose many
restrictions on the production process of the underdeveloped
countries. Thus, if the developing countries try to protect their
interest as a group, they may stand to gain from the WTO system.
If we consider both sides of a coin then we can conclude
that if the developed countries liberalise their import of
agricultural goods, Indias export of agricultural goods will
increase. India has a comparative cost advantage in the
production of agricultural commodities. Hence Indias of such
commodity is expected to increase.
On the other side according to the agreement of Trade
Related Investment Measures (TRIMs), there should not be any
discrimination between foreign and domestic investments. As a
result, it will very difficult to control the restrictive activities of
the following investors. This agreement will also favour the
investors of the developed countries.

BIBLIOGRAPHY
39

(1)

Business Economics & Business Environment Jaydeb

Sarkhel.

(2)

International Business - Francis Cherunilam

(3)

International Marketing Rakesh Mohan Joshi

(4)

www.wikipedia.org

(5)

www.exprasspharma.com

(6)

www.wto.org

(7)

Annual Report 2007

(8)

Department of Commerce, Government of India

(9)

Trade Policy Reviews 2002

40