VARTIKA SHARMA

0765

3rd Year, I Semester

B.Com (Programme)
 What is the WTO?
The World Trade Organization (WTO) is the only global international organization
dealing with the rules of trade between nations. At its heart are the WTO
agreements, negotiated and signed by the bulk of the worlds trading nations and
ratified in their parliaments. The goal is to help producers of goods and services,
exporters, and importers conduct their business.

UNDERSTANDING THE WTO

Who they are?

There are a number of ways of looking at the World Trade Organization. It is an
organization for trade opening. It is a forum for governments to negotiate trade
agreements. It is a place for them to settle trade disputes. It operates a system of
trade rules. Essentially, the WTO is a place where member governments try to sort
out the trade problems they face with each other.

F
The WTO A
was born C
out of T
negotiation FI
s, and LE
everything
the WTO
does is the
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negot
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example, trade
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for
At its heart
trade
are the
negot
WTO
iation
agreements
s
,
Han
negotiated
dling
and signed
trade
by the bulk
dispu
of the
tes
worlds
Mon
trading
itorin
nations.
g
These
natio
documents
nal
provide the
trade
legal
ground
polici
rules for
es
internation
Tec
al
hnica
commerce.
l
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assist
essentially
ance
contracts,
and
binding
traini
governmen
ng for
ts to keep
devel
their trade
oping
policies
count
within
ries
agreed
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limits.
perat
Although
ion
negotiated
with
and signed
other
by
inter
governmen
natio
ts, the goal
nal
is to help
organ
producers
izatio
of goods
ns
and
services,
exporters,
and
importers
conduct
their
business,
while
allowing
governmen
ts to meet
social and
environmen
tal
objectives.

The
systems
overriding
purpose is
to help
trade flow
as freely as
possible
so long as
there are
no
undesirable
side effects
because
this is
important
for
economic
developme
nt and
well-being.
That partly
means
removing
obstacles.
It also
means
ensuring
that
individuals,
companies
and
governmen
ts know
what the
trade rules
are around
the world,
and giving
them the
confidence
that there
will be no
sudden
changes of
policy. In
other
words, the
rules have
to be
transparen
t and
predictable
.

Trade
relations
often
involve
conflicting
interests.
Agreements
, including
those
painstaking
ly
negotiated
in the WTO
system,
often need
interpretin
g. The most
harmonious
way to
settle
these
differences
is through
some
neutral
procedure
based on
an agreed
legal
foundation.
That is the
purpose
behind the
dispute
settlement
process
written
into the
WTO
agreements
.

What they do?

The WTO is run by its member governments. All major decisions are made by the
membership as a whole, either by ministers (who usually meet at least once every
two years) or by their ambassadors or delegates (who meet regularly in Geneva).

While the WTO is driven by its member states, it could not function without its
Secretariat to coordinate the activities. The Secretariat employs over 600 staff and
its experts lawyers, economists, statisticians and communications experts assist
WTO members on a daily basis to ensure, among other things, that negotiations
progress smoothly, and that the rules of international trade are correctly applied and
enforced.

Trade negotiations

The WTO agreements cover goods, services and intellectual property. They spell out
the principles of liberalization, and the permitted exceptions. They include
individual countries commitments to lower customs tariffs and other trade barriers,
and to open and keep open services markets. They set procedures for settling
disputes. These agreements are not static; they are renegotiated from time to time
and new agreements can be added to the package. Many are now being negotiated
under the Doha Development Agenda, launched by WTO trade ministers in Doha,
Qatar, in November 2001.

Implementation and monitoring

WTO agreements require governments to make their trade policies transparent by

notifying the WTO about laws in force and measures adopted. Various WTO councils
and committees seek to ensure that these requirements are being followed and that
WTO agreements are being properly implemented. All WTO members must undergo
periodic scrutiny of their trade policies and practices, each review containing reports
by the country concerned and the WTO Secretariat.

Dispute settlement

The WTOs procedure for resolving trade quarrels under the Dispute Settlement
Understanding is vital for enforcing the rules and therefore for ensuring that trade
flows smoothly. Countries bring disputes to the WTO if they think their rights under
the agreements are being infringed. Judgments by specially appointed independent
experts are based on interpretations of the agreements and individual countries
commitments.

Building trade capacity

WTO agreements contain special provision for developing countries, including longer
time periods to implement agreements and commitments, measures to increase their
trading opportunities, and support to help them build their trade capacity, to handle
disputes and to implement technical standards. The WTO organizes hundreds of
technical cooperation missions to developing countries annually. It also holds
numerous courses each year in Geneva for government officials. Aid for Trade aims to
help developing countries develop the skills and infrastructure needed to expand
their trade.

Outreach

The WTO maintains regular dialogue with non-governmental organizations,

parliamentarians, other international organizations, the media and the general
public on various aspects of the WTO and the ongoing Doha negotiations, with the
aim of enhancing cooperation and increasing awareness of WTO activities.

What they stand for?

The WTO agreements are lengthy and complex because they are legal texts covering
a wide range of activities. But a number of simple, fundamental principles run
throughout all of these documents. These principles are the foundation of the
multilateral trading system.
Non-discrimination

A country should not discriminate between its trading partners and it should not
discriminate between its own and foreign products, services or nationals.

More open

Lowering trade barriers is one of the most obvious ways of encouraging trade; these
barriers include customs duties (or tariffs) and measure such as import bans or
quotas that restrict quantities selectively.

Predictable and transparent

Foreign companies, investors and governments should be confident that trade

barriers should not be raised arbitrarily. With stability and predictability, investment
is encouraged, jobs are created and consumers can fully enjoy the benefits of
competition choice and lower prices.

More competitive

Discouraging unfair practices, such as export subsidies and dumping products at

below cost to gain market share; the issues are complex, and the rules try to
establish what is fair or unfair, and how governments can respond, in particular by
charging additional import duties calculated to compensate for damage caused by
unfair trade.

More beneficial for less developed countries

Giving them more time to adjust, greater flexibility and special privileges; over
three-quarters of WTO members are developing countries and countries in transition
to market economies. The WTO agreements give them transition periods to adjust to
the more unfamiliar and, perhaps, difficult WTO provisions.

Protect the environment

The WTOs agreements permit members to take measures to protect not only the
environment but also public health, animal health and plant health. However, these
measures must be applied in the same way to both national and foreign businesses.
In other words, members must not use environmental protection measures as a
means of disguising protectionist policies.

India and the WTO

India has been a WTO member since 1 January 1995 and a member of GATT since 8
July 1948.

Indias Role in World Trade Organization!

India has consistently taken the stand that the launch of any new round of talks
depends on a full convergence of views amongst the entire WTO membership on the
scope and framework for such negotiations. Our more urgent task is to resolve the
concerns of developing countries on implementation of the Uruguay Round
agreements. We are against calls for new commitments from the developing world for
achieving symmetry and equity in the existing agreements. It is in favor of non-trade
issues are permanently kept off the negotiating table.

Incorporating Livelihood Clause:

Ensuring food and livelihood security is critical, particularly for a large agrarian
economy like India. Indias proposal in ongoing negotiations includes suggestions like
allowing developing countries to maintain appropriate level of tariff bindings,
commensurate with their developmental needs and the prevailing distortions in
international markets.

We are also seeking a separate safeguard mechanism including provision for

imposition of quantitative restrictions under specified circumstances, particularly in
case of a surge in imports or decline in prices; exemptions for developing countries
from obligations to provide minimum market access; exemptions of all measures taken
by developing countries for poverty alleviation, rural development and rural
employment.
Our immediate priority is that the agreements reached earlier with the developing
countries should be implemented so as to correct inherent imbalances in some of the
Uruguay Round agreements. Sincere and meaningful implementation of commitments
undertaken by developed countries and operationalisation of all special and differential
treatment clauses for developing countries in the various agreements is made.

We also strongly favor extension of higher levels of protection to the geographical

indications for products like Basmati rice, Darjeeling tea, and Alphonso mangoes at par
with that provided to wines and spirits under the Trade-related Aspects of Intellectual
Property Rights (TRIPS) agreement. In the TRIMS (Agreement on Trade-Related
Investment Measures) review we want flexibility for developing countries in adopting
appropriate domestic policy while permitting foreign investment.

Developed Countries Demand and Singapore Issues:

Developed countries are pushing for a comprehensive agenda like rules on investment,
environment, competition policy, trade facilitation, transparency in government
procurement, labour standards etc. They are pressing for incorporating non-trade
issues of environment and labour standards.

Using as an excuse that production of products in developing countries are not being
done under proper environment and labour standards they can ban the imports of their
products or impose other non-tariff restrictions. The developing countries are opposed
to these non-trade issues.

WTO and Indian Agriculture and Farmers:

Some critics of WTO have expressed the fears that Indian farmers are threatened by
the WTO. There is however no adverse impact. India has bound its tariff to the extent
of 100 per cent for primary agricultural products, 150 per cent for processed
agricultural products and 300 per cent for edible oils. A few agricultural products had
been bound historically at low levels but these bindings have been raised following the
Article XXVIII negotiations held in this regard.

It has also been possible to maintain without hindrance the domestic policy instruments
for promotion of agriculture or for targeted supply of food grains. Domestic policy
measures like the operation of minimum support price, public distribution system as
well as provision of input subsidies to agriculture have not in any way been constrained
by the WTO agreement.

Certain provisions in the Agreement on Agriculture (AoA) also give us flexibility to

provide support for research, pest and disease control, marketing and promotion
services, infrastructure development, payments for relief from natural disasters,
payments under the regional assistance programmes for disadvantaged regions and
payments under environmental programmes. Indian farmers now need to take
advantage of the opportunity provided by the AoA, by addressing productivity issues
and making their products more competitive globally.

WTO and Indian Industries:

Indian industry has had to face greater competition in the wake of globalisation. But it
has successfully completed, as can be inferred from the fact that there has been no
particular surge in imports. In fact, as per the provisional data for 2000-01 our non-oil
imports declined by 14 per cent while our exports rose by over 20 per cent in the same
period. A close watch is also being kept to ensure that Indian industry does not have to
face unfair competition from dumped or subsidised imports of other countries.

As for drug prices, safeguards are provided like compulsory licensing, price controls,
and parallel imports which should help address this concern. It must also be
recognised that the prices of medicines are influenced by several factors including the
level of competition, size of market, purchasing capacity etc.
The issue of affordable access to treatment for AIDS, which has gathered international
attention in recent months, is hopefully a pointer in the right direction. The TRIPS
agreement should not be allowed to hinder the efforts of developing countries to
provide affordable access to medicines.

The apex Indian organisations representing various industries are sincerely working
towards ensuring a gainful transition with least disadvantage into the global economy.
The government also has to strive to improve infrastructure and provide a facilitating
environment for inducing acceleration in trade.

Developed countries have been putting pressures on inclusion of non-trade issues

such as labour standards, environment protection, human rights, rules on investment,
competition policy in the WTO agreements.

This is because by asserting that particular developing countries are not observing and
implementing the rules in regard to the non-trade issues so that the developed
countries can ban the imports of some goods in their countries, as the USA has been
trying to do so from time to time. We are against any inclusion of non-trade issues that
are directed in the long run at enforcing protectionist measures, particularly against
developing countries.

Implications for India

It appears that India does not stand to gain much by shouting for
agriculture reforms in developed countries because the overall tariff is lower
in those countries. India will have to tart major reforms in agriculture sector
in India to make Agriculture globally competitive. Same way it is
questionable if India will be major beneficiary in dismantling of quotas,
which were available under MFA for market access in US and some EU
countries. 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.
Some of Singapore issues are also important like Government procure,
Trade and Investment, Trade facilitation and market access mechanism.

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. However, the large number of patents
going off in USA recently, gives the Indian Drug companies windfall
opportunities, if tapped intelligently. Some companies in India have
organized themselves for this.

As a principle trade is good". If you look at the development of civilisation trade

helped increase commerce which helped people get rich which they then used to invest
to both maximise pleasure and increase commerce. The WTO sets the rules for global
trade and it comes into force when ALL countries agree to it. For a country like India it
opens new markets for its products based on agreed rules. It also opens our market for
foreign goods which allows our consumers to access the best products besides
developing our economy by further giving business to the non manufacturing sectors
like the retail trade, warehousing, advertising etc. so these are the positives.

The negatives are when you are bullied/pressured to accept certain condition for trade
that allow foreign producers to sell vastly superior products in a developing country
thereby killing local manufacturers of these imported products. So most countries wait
till they develop local strengths before allowing imports so that local manufacturers can
compete with global manufacturers on an equal footing. Agriculture is one such sector
where many countries have not mechanised sufficiently to compete with highly
mechanised agriculture economies of the US, Canada, Australia etc thereby putting
large sections of India's farmers under economic pressure if we allow imports.

WTO is a successor of GATT there was a need for a new mechanism since GATT was
very old agreement since then the features of international trade has changed a lot.
Example- earlier there was only trade in goods now there is trade in services trade in
IPR etc.
So finally in Uruguay round of GATT WTO was agreed upon with a comprehensive
redressal mechanism. The principles (they are not compulsory) of WTO and GATT are
similar i.e. TRADE WITHOUT DISCRIMINATION it has two components regarding it.

IMPACT ON INDIAN ECONOMY

 1. With regard to agriculture agreement- under agreement developed
nation were given 6 years to reduce their subsidies i.e. by the Doha ministreal of
2001,by this time some countries reduced amber box subsidies but increased
green box subsidy like E.U (presently there are evidence that this may also distort
trade).
Some countries didn't reduced amber box subsidies rather increased them like
U.S by linking amber box subsidy to NAMA (non- agricultural market access).
Further in Bali ministreal U.S asked India to further reduce its public stock
holding (MSP related issue) but India countered it by relating it to Food security.
Also the formula for calculating subsidies need review where:
Subsidy = MSP - Market price(1986-1988)
Market prices were too low three decades ago and is exaggerating the present
MSP subsidy by India. Infact despite this formula India's subsidy is below de-
minimising level.

2. With regard to TRIPS - earlier there was process patent i.e. by changing
process same medicine could be produced but after TRIPS product patent i.e. no
replication in any form.
This created problem for LDCs (Least Developed Countries) since now India could not
develop medicine at lower cost. Though after Doha ministreal compulsory licensing
(CL) was allowed for domestic use and export as well in case of public health concern.
But still when India used CL in 2012 for cancer drug Nexavar it was highly criticised so
ground reality vary from what rules says.

3. Regarding GATS Agreement- India is very good in mode 1 and mode 4 but
mostly national treatment is given to mode 3 by other member where India is not that
expert.

In Nairobi ministreal Developed countries proposed to go beyond Doha round this

could have serious repercussion since with this promised earlier regarding reduction in
subsidy by developed nations will also go away.

The problem with India is lack of specialised bureaucracy with regard to WTO. India
must learn from Japan which from being a losing party at WTO disputes
has transformed into a winning party by designating a complete set of
bureaucracy to WTO only.

Now some of the negative impacts -

 The WTO is dominated by leading industrialized countries and by the
corporation of these countries. The developing countries have a less say in this
organization.
The developing countries have fewer human and technical resources and
therefore often enter negotiations less prepared than their developed
counterparts.

The tariff peaks and escalations hamper developing countries' exports and
their attempts in export diversification.

Through the various agreements signed under the WTO, the developing
nations have actually foreclosed a wide range of development options.

The domestic economy supporters often face neglect because of global

competitive better goods.

The agendas of the WTO are often designed in the favour of the developed
nations, sidelineling the interests of developing and the least developed
countries.

The rules which have uniformly applied on WTO members have brought
about inequalities because of the varied economic conditions of the countries.

The developing countries have discovered that finding resources in the

dispute settlement system is costly and requires a legal expertise which they
may not have.

The same things also apply on India as it is also one of the developing countries in the
WTO.