ASSIGNMENT ON WTO AND ITS IMPACT ON INDIA

SUBMITTED BY: PRATIK C. KAMDAR

TABLE OF CONTENT

NO. 1 2 3 4 5 6 7 8 9

TOPIC Meaning of WTO Short Overview Purpose Aim Impact on India Objective Advantage Disadvantage Conclusion

PAGE NO. 2 2 2 2 3 7 8 9 10

WHAT IS WORLD TRADE ORGANISATION: An international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible. Some, especially multinational corporations, believe that the WTO is great for business. Others believe the WTO will undermine the principles of democracy and simply make the rich much richer.

SIMPLY SHORT OVERVIEW OF WTO:

The World Trade Organization (WTO) was created January 1, 1995, and it has been a source of controversy ever since. The birth of the WTO was more of a continuation than a truly new creation. Its predecessor, the General Agreement on Tariffs and Trade (GATT), shared its lineage with Bretton Woods-inspired bodies like the International Monetary Fund (IMF) and the World Bank. The idea behind these organizations is that impartial politicians could create a more efficient global economy than the chaotic interaction of free market forces.

PURPOSE:

1. WTO is ensuring that global trade commences smoothly, freely and predictably. 2. Transparency in trade policy. 3. Work as an economic research and analysis centre.

AIM: To create economic peace and stability in the world through a multilateral system based on consenting member states that have ratified the rules of the WTO in their individual countries as well.

IMPACT ON INDIA:
The World Trade Organization came into being in 1995. One of the youngest of the international organizations, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War. So while the WTO is still young, the multilateral trading system that was originally set up under GATT (founded in 1948) is well over 50 years old. The system was developed through a series of trade negotiations, or rounds, held under GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. The last roundthe 1986-94 Uruguay Round -led to the WTOs creation. THE ORGANIZATION The WTOs overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by: Administering trade agreements Acting as a forum for trade negotiations Settling trade disputes Reviewing national trade policies Assisting developing countries in trade policy issues, through technical assistance and training programmes Cooperating with other international organizations

STRUCTURE The WTO has about 157 members, accounting for about 95% of world trade. Around 30 others are negotiating membership. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTOs predecessor, GATT. The WTOs agreements have been ratified in all members parliaments. The WTOs top level decision-making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council (normally ambassadors and heads of delegation in Geneva, but sometimes officials sent from members capitals) which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council. Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements.

BENEFITS OF WTO 1. The system helps promote peace 2. Disputes are handled constructively 3. Rules make life easier for all 4. Freer trade cuts the costs of living 5. It provides more choice of products and qualities 6. Trade raises incomes 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government MINISTERIAL CONFERENCES The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years. It brings together all members of the WTO, all of which are countries or customs unions. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. The inaugural ministerial conference was held in Singapore in 1996. Disagreements between largely developed and developing economies emerged during this conference over four issues initiated by this conference, which led to them being collectively referred to as the "Singapore issues". The second ministerial conference was held in Geneva in Switzerland. The third conference in Seattle, Washington ended in failure, with massive demonstrations and police and National Guard crowd control efforts drawing worldwide attention. The fourth ministerial conference was held in Doha in the Persian Gulf nation of Qatar. The Doha Development Round was launched at the conference. The conference also approved the joining of China, which became the 143rd member to join. The fifth ministerial conference was held in Cancn, Mexico, aiming at forging agreement on the Doha round. An alliance of 22 southern states, the G20 developing nations (led by India, China, Brazil, ASEAN led by the Philippines), resisted demands from the North for agreements on the so-called "Singapore issues" and called for an end to agricultural subsidies within the EU and the US. The talks broke down without progress. The sixth WTO ministerial conference was held in Hong Kong in December 2005. It was considered vital if the four-year-old Doha Development Round negotiations were to move forward sufficiently to conclude the round in 2006. In this meeting, countries agreed to phase out all their agricultural export subsidies by the end of 2013, and terminate any cotton export

subsidies by the end of 2006. Further concessions to developing countries included an agreement to introduce duty free, tariff free access for goods from the Least Developed Countries.

DOHA DEVELOPMENT ROUND The Doha Development Round started in 2001 and continues till today. The WTO launched the current round of negotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatar in November 2001. This was to be an ambitious effort to make globalization more inclusive and help the world's poor, particularly by slashing barriers and subsidies in farming. The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries. The negotiations have been highly contentious. Disagreements still continue over several key areas including agriculture subsidies, which emerged as critical in July 2006. According to a European Union statement, "The 2008 Ministerial meeting broke down over a disagreement between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers on the precise terms of a 'special safeguard measure' to protect farmers from surges in imports." The position of the European Commission is that "The successful conclusion of the Doha negotiations would confirm the central role of multilateral liberalisation and rule-making. It would confirm the WTO as a powerful shield against protectionist backsliding." An impasse remains and as of June 2012, agreement has not been reached, despite intense negotiations at several ministerial conferences and at other sessions.

WTO AND INDIA WTO is receiving the deepest indulgence of everyone, as it is affecting the major sectors of Indian economy and agriculture in particular now, and more intensively in the coming years. A major concern growing with the increasing impact of WTO is, as to how the small and marginal farmers who dominate the Indian agriculture, depend heavily on agriculture for their livelihood, have small marketable surplus and operate under heavy constraints to be competitive in a subsidized agriculture production and trade regime, could benefit from WTO. The concern more often swings to the other side that the spreading tentacle of WTO with reduced tariff regime and increased access to Indian market for the products from subsidized agriculture could severally damage the agriculture based livelihood of majority of Indian farmers. The challenge to policy makers is how to protect Indian agriculture from the impending WTO threat, enhance the competitiveness of Indian farming and make farming a viable and self sustaining enterprise to improve and ensure livelihood security of the farmers.

A strategy to address this challenge shall necessarily involve re-orientation and injection of market linked dynamism in Indian agricultural R&D, strengthening of supportive institutions to serve the resource poor farmers, and steering fast the change with appropriate policies and trained human ware. The deliberations of the workshop suggested the following policy initiatives and action points: India needs to devise appropriate domestic policies (extensive domestic market reforms, heavy investment in building and maintaining infrastructure, etc.) to improve efficiency and competitiveness of domestic produce. It should continue to play leadership role in negotiating agreements with sound analytical basis and support of other developing countries with similar interest. A dedicated group of about 100 experts, on full time basis, should work on the WTO issues to provide analytical basis for negotiations and to help in planning appropriate strategies to strengthen Indian agriculture to face increasing trade liberalization and globalization. Export of high value products, horticulture products, processed products, marine products and rice should be promoted. India has to counter the challenges in the export of traditional items from the developing countries. In this regard, prioritization, enhancing production and processing efficiency, marketing and transport infrastructure, maintaining quality, stable supply etc. need immediate attention.

The following words of Karl Marx are definitely an apt advice to developed countries in WTO who are following contravening policies w.r.t. Domestic and International markets, The country that is more developed industrially only shows, to the less developed, the image of its own future.

OBJECTIVES: The primary objective of GATT was to expand international trade by liberalizing trade so as to bring about all round economic prosperity. The Preamble to the GATT mentioned the following as its important objectives. 1. Raising standard of living. 2. Ensuring full employment and a large and steadily growing. 3. Developing full use of the resources of the world. 4. Expansion of production and international trade. GATT embodied certain conventions and general principles governing international trade among countries that adhere to the agreement. The rules or conventions of GATT required that: 1. Any proposed change in the tariff, or other type of commercial policy of a member country should not be undertaken without consultation of other parties to the agreement. 2. The countries that adhere to GATT should work towards the reduction of tariffs and other barriers to international trade, which should be negotiated within the framework of GATT .For the realisation of its objectives, GATT adopted the following principles:

1. NON-DISCRIMINATION: The principle of non-discrimination requires that no member country shall discriminate between the members of GATT in the conduct of international trade. To ensure nondiscrimination the members of GATT agree to apply the principle of most favored nation (MFN) to all import and export duties. This means that each nation shall be treated as well as the most favored nation. As far as quantitative restrictions are permitted, they too, are to be administered without favor. However, certain exceptions to this principle are allowed. For instance, GATT does not prohibit economic integration such as free trade areas or customs union, provided the purpose of such integration is to facilitate trade between the constituent territories and not to raise barriers to the trade of other parties.The GATT also permits the members to adopt measures to counter dumping and export subsidies. However, the application of such measures shall be limited to the offending countries.

2. P R OH IB IT IO N O F QUA NT ITAT IVE R ES TR IC T IONS : GATT rules seek to prohibit quantitative restrictions as far as possible and limit restrictions on trade to the less rigid tariffs. However, certain exceptions to this prohibition are granted to countries con-fronted with balance of payments, difficulties and to developing countries. Further, import restrictions were allowed to apply to agricultural and fishery products if domestic production of these articles was subject to equally restrictive production or marketing controls.
3.

C ONS U LTAT IO N : By providing a forum for continuing consultation, it sought to resolve disagreements

through consultation. So far eight Rounds of trade negotiations were held under the auspices of the GATT. Each Round took several years. The Uruguay Round, the latest one, took more than seven years to conclude, as against the originally contemplated more than four years. This shows the complexity of the issues involved in the trade negotiations.

BENEFIT TO INDIA The GATT secretariat estimated that largest increase in the level of merchandise trade in goods (in general, it would be US $ 745 billion .by the end of 2005) will be in the areas of clothing (60 per cent), agriculture, forestry and fishery products (20 per cent) and processed food and beverages (19 per cent). India's competitive advantage lies in these fields. Hence, it is logical to believe that India will obtain large gains in these sectors. Indias textile and clothing exports will increase due to the phasing out of Multi-fiber An'angement (MFA) by 2005. 1. The reduction in agricultural subsidies and barriers to export of agricultural products, agricultural exports from India will increase. 2. The multilateral rules and disciplines relating to anti-dumping, subsidies and countervailing measures, safeguards and disputes settlement machinery will ensure greater security and predictability of international trade. This would be favorable environment for India's international business.

3. India along with other developing countries has the market access to a number of advanced countries due to the imposition of the clauses concerning to trade without discrimination.

DISADVANTAGE TO INDIA

Despite the benefits of WTO to India, many economists and sociologists argue that, India would be in a disadvantageous position by becoming a member of WTO. Their argument include: 1. Trade Related Intellectual Property Rights (TRIPs) : Protection of intellectual property rights (patents, copyrights, trademarks etc.) has been made stringent. It is argued that the TRIPs agreement goes against the Indian Patents Act, 1970. Only process patents can be granted in food, chemicals and medicines under the Indian Patents Act. TRIPs agreement provides for granting product patents also. Under TRIPs patents can be granted to methods of agriculture and horticulture, bio-technological process including living organism like plants and animals. The duration of patents under TRIPs is 20 years. 2. Introduction of product patents in India will lead to hike in drug prices by the MNCs who have the product patent. This will hit the poor people who will not have the generic option open. 3. The extension of intellectual property right to agriculture has negative effects on India. Presently, plant breeding and seed production are largely, in the public domain. Indian scientists have undertaken plant breeding and multiplication is in the hands of National and State Seed Corporations. Government, through this machinery, provides seed to Indian farmers at very low prices. Indian scientists, in future will find it extremely difficult to breed new varieties and Indian research institutions will be unable to compete financially with MNCs and will be denied access to patented genetic material. MNCs will get the control over our genetic resources and as such the control over food production would be jeopardized. 4. Patenting has also been extended to a large area of micro-organisms. 5. Application of TRIMs agreement undermines any plan or strategy of self-reliant growth based

on local technology and resources. 6. Services: Service sector like insurance, banking, telecommunications, transportation is backward in India compared to that of developed countries. Therefore, inclusion of trade in services is detrimental to the interest of India. Liberalization of service sector would be under tremendous pressure.

Conclusion : Thus WTO has been playing a very important role in India's foreign trade. And India will be much more benefited if the present DOHA round gets completed. And this is affected by the economical condition, and also country dependency is play a major roll for the all the country. And also affected by the all the govt. which have perception on their mind. But overall this is protected and secure organization for the different type of businesses and government.