INDEX

CHAPTER 1
WORLD TRADE ORGANISATION
Introduction
What is the WTO and why is it important?
Agricultural trade and the WTO
The WTO Committee on Agriculture
Dispute settlement and the WTO
WTO Agreement on Agriculture
CHAPTER 2
IMPORTANCE OF INDIAN AGRICULTURE
WTO ON AGRICULTURE
Impact on Indian Agriculture
CHAPTER 3
TRADE POLICY REFORMS
CHAPTER 4
THE AGREEMENT ON AGRICULTURE
Export Subsidies
Dispute Settlement
Agriculture export.
Other WTO Agreements Relevant to Agriculture
Agriculture in the GATT
CHAPTER 5
ATS AND AGRICULTURE
CHAPTER 6
TRIPs AND AGRICULTURE
CHAPTER 7
CASE STUDY
CHAPTER 8
IMPACT OF W.T.O ON INDIAN AGRICULTURAL SECTOR
CHAPTER 9
IMPLICATIONS OF AoA FOR INDIAN AGRICULTURE
CHAPTER 10
OBJECTIVES & HYPOTHESIS

CHAPTER 11
THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)
THE WORLD TRADE ORGANISATION (WTO)
INDIA AND WTO
CHAPTER 12
SUGGESTIONS
CONCLUSION
BIBLIOGRAPHY

CHAPTER 1
WORLD TRADE ORGANISATION
The World Trade Organisation (WTO) is vital to the Australian Governments
international efforts to push for substantial reductions in the trade distorting
subsidies, tariffs and tariff quotas and export subsidies and protection used by
other countries. A key objective of DAFF is to contribute to these efforts and
secure improved export opportunities for Australias primary producers.

INTRODUCTION
The advent of the World Trade Organization, a new International Economic Order for
world trade, has shifted the locus of economic decision-making from central political
and economic constructs to the New Integrated world. In India, agriculture is not a
trade but a way of life. Nearly two-thirds of the population depends on agriculture and
therefore there is no question of their freedom being restricted. Food security and food
self-sufficiency are not matters that can be negotiated. But the new trade regime has
encompassed the entire economic spectrum of all developed and developing nations.
The results of the various negotiations are referred to as diplomatically engineered
methodologies for creating frontiers of developmental thinking. This emerging
developmental and integrated landscape demands creation and implementation of
programs. Inclusion of agriculture trade in the GATT-WTO order stands out as a serious
issue for a developing nation like India. The new scenario is characterized by several
development initiatives in the agricultural sector and the changing role of the Indian
government in providing necessary support (product-specific as well as general) to
Indian farmers.

What is the WTO and why is it important?

The WTO was established in 1995 as a successor to the General Agreement on Tariffs
and Trade. 153 countries are members of the WTO (as at 1 February 2012), with
developing countries accounting for more than two-thirds of the membership. Around
30 countries are negotiating to join the WTO.
The WTO sets global rules for trade and provides a forum for trade negotiations and
resolving trade disputes between member countries. WTO members as a whole make
all major decisions, usually by consensus.
WTO rules cover trade in all goods and many services as well as a very broad range of
trade issues, from quarantine and technical trade barriers to taxation, subsidies and
intellectual property.

These rules help international trade flow as smoothly, predictably and freely as
possible. WTO rules can provide secure trading conditions and reduce some of the risks
associated with doing business overseas. Australia, like all other members, is required
to abide by the rules.

WORLD TRADE ORGANIZATION (WTO)

Until the end of 1994, there was no multilateral or international trade organization.
Between 1947 and 1994, eight rounds of negotiations took place under the aegis of the
General Agreement on Tariffs and Trade (GATT). The first seven rounds concentrated
on tariff reductions and commodity agreements. The last round, the Uruguay Round,
lasted over seven years from 1986-1994, and widened the ambit of discussions to cover
subjects like tariffs, non-tariff measures, rules and services, intellectual property rights,
dispute settlement, textiles and clothing, and agriculture. The Uruguay Round of trade
negotiations ended with an agreement founding the World Trade Organization. In April
1994, 104 members became signatories to the agreement with minor changes in the
original draft and the final Act came into force from January 1, 1995. At this stage, the
WTO membership grew to 135 countries.
The formation of WTO has posed certain challenges such as reduction of tariff barriers
and liberalization of traditional trade in goods and services, etc. The WTO is not a
simple extension of GATT. It completely replaces GATT and has quite a different
character. While GATT was applied on a provisional basis, WTO commitments are full
and permanent. Secondly, GATT applied to trade in merchandise goods whereas WTO
covers a whole range of trade-related issues. Finally, WTO is a permanent institution
with its own Secretariat and its dispute settlement system. The multilateral trade
negotiations at Uruguay covered 15 areas, which were subsequently regrouped into 7
areas.

Agricultural trade and the WTO

Agricultural trade is the most distorted sector in the world. It is characterised by very
high trade barriers, high levels of domestic support and export subsidies. For example,
in 2010 government support payments accounted for an average of 20 per cent of the
gross income of farmers in the European Union, 7 per cent for farmers in the United
States and 50 per cent for farmers in Japan and 45 per cent for farmers in the Republic
of Korea.
The WTO Agreement on Agriculture developed as part of the Uruguay Round of
multilateral trade negotiations (1986-1994) was a major milestone for the global
trading system. For the first time, international rules were established to address some
of the major distortions in agricultural trade. The Agreement on Agriculture eliminated

import quotas, bound all agricultural tariffs and imposed disciplines on domestic
support measures (such as production subsidies) and export subsidies.
While the Uruguay Round outcomes on agriculture were an important first step, more
far-reaching trade liberalisation is needed. In November 2001 WTO members
commenced the Doha Round of trade negotiations to continue the reform process and
build on the commitments made in the Uruguay Round.
A paper by ABARES outlines opportunities for Australian farmers under global
trade liberalisation (published in Australian Commodities)

The WTO Committee on Agriculture

The WTO Committee on Agriculture oversees the implementation of the Agreement on
Agriculture. It normally meets four times a year and is an important tool for Australia to
ensure other WTO members are complying with their obligations on subsidies and
market access.
In conjunction with the WTO Trade Policy Review Mechanism, the Committee on
Agriculture helps to promote transparency in the global trading system and allows
countries to scrutinise the trade policies and rural programs of their trading partners.
The WTO conducted its sixth Trade Policy Review of Australia in Geneva in April
2011. The review was positive with WTO Members congratulating Australia on being
one of the most open economies in the world and applauding the transparency of our
trade policy regime. During the review there was criticism of Australias strict
biosecurity measures.

Dispute settlement and the WTO

WTO rules apply equally to all members and are backed by an effective dispute
settlement process.
Where government support to industry is inconsistent with WTO obligations, or if a
member is not complying with the rules, Australia has the right to challenge such
actions through the WTO dispute system. Australia can also be subject to the same
dispute processes.
DAFF plays a key role, in conjunction with other Australian Government agencies, in
relevant disputes involving agricultural, food, fisheries or forest products.
More information about the dispute settlement system is available from the WTO
website. Information regarding Australias involvement in WTO disputes is
also available from the DFAT website.

Agriculture sector is central to the socio-economic life of the country and is a source of
livelihood to two-thirds of countrys population. It also provides food and fiber for one
billion population of the country and is prime source raw material for its agro based
industries.
Liberalization of world trade in agriculture with advent of WTO has thrown up
challenges as also opened up new vistas for growth and diversification of agriculture
and exports. Rapid changes in production technologies such as bio-technology,
information technology and remote sensing technologies have also created
opportunities for our goal of food and nutritional security and prosperity for the farming
community.
The Honble Prime Minister constituted a Task Force on Agriculture (TFA) on
12th September, 2000 having the following composition with the Chairman given the
status of a Cabinet Minister:
i)
ii)

Shri Sharad Joshi, Chairman, Shetkari Sangathan

Chairman

Shri P.P. Prabhu, Former Secretary, Commerce,

Government of India

Member

iii) Shri Abhijit Sen, Economist, Former Chairman,

Commission for Agriculture Costs and Prices

Member

iv) Shri R.C.A. Jain, Additional Secretary

Department of Agri. & Coopn., Government of India

Member-Secy

The Task Force was assigned the following Terms of Reference:

a)
To assess the impact of WTO commitments on Indian agriculture and to suggest
steps to safeguard the interests of the sector, while exploiting the opportunities
presented by this treaty;
b) To make recommendations to integrate the use of information technology and
other emerging technologies in the agricultural sector;
c) To make recommendations for effective risk management in agriculture including in
production systems, insurance, price mechanisms, future trading etc.
The Task Force on Agriculture have given advertisement in national english
newspapers and regional language newspapers through the Department of
Advertisement and Visual Publicity in 53 newspapers to seek views/comments of
interested associations/Farmers organisations/public etc. on the terms of reference of
the Task Force on Agriculture.

An interactive website has also been created for the Task Force for seeking
suggestions from public and other interested organisations/persons.
The Task Force considered inputs received from different sources in nine meetings
during September 2000- April 2001. During these meetings the Task Force had the
benefit of interacting with the representatives from Ministries/Departments of
Agriculture, Commerce, Banking, Insurance as also from Soyabean Processors, Coffee
Exchange, Solvent Extract Association, Forward Market Commission, Stakeholders of
Plantation Sectors, Rubber Board, Coir Board, Spices Board, APEDA, MPEDA and
several experts and academicians.
Shri Madan Diwan, Coordinator, World Agriculture Forum, participated in the
meetings of the Task Force at the invitation of the Chairman, pending notification
concerning his nomination as a Member.
The technology issues as also risk management issues in the areas of production,
price, market are closely inter-linked in the process of modernising Indian agriculture
and unleashing the productive forces and creative energies of the sector making it
globally competitive. Considering the urgency of some of the issues of the
contemporary importance, the Task Force decided to turn in its First Report on the
agriculture trade reforms agenda. The full scope of the reforms agenda covering all the
technology, risk management, investment, pricing, trading and institutional framework
will be addressed in the final report to be submit by the Task Force by June 2001.

WTO AGREEMENT ON AGRICULTURE

For the first time, agriculture was brought under the world trading system in the
Uruguay Round of negotiations, which concluded in Marrakesh in April 1994. The
Agreement on Agriculture (AoA) was one of the many agreements that were negotiated
during the Uruguay Round. Most assessments of the agreement hail it as a historic shift
in the way it establishes new multilateral rules governing market access, domestic
support and export subsidies for agriculture. In terms of future trade liberalization, its
most important provisions may be those requiring the elimination of Quantitative Trade
Restrictions and their conversion to sound tariffs. These sound tariffs, even though
extremely high, can provide a starting point for future negotiations of tariff reduction.
The AoA has three basic clauses:

A. Market Access commitment requires conversion of all non-tariff barriers into

equivalent tariff barriers. Ordinary tariffs including those resulting from tariffication of
non-tariff barriers are to be reduced by an average of 36% with minimum rate of
reduction of 15% for each tariff item over a 6-year period. Developing countries are
required to reduce tariffs by 24% in 10 years. Developing countries that were
maintaining Quantitative Restrictions due to Balance of Payments problems were
allowed to offer ceiling bindings instead of tariffication. It was also been stipulated that
minimum access equal to 3% of domestic consumption in 1986-88 should be
established by the year 1995 rising to 5% at the end of the implementation period.
B. Domestic Support to agriculture was also to be reduced considerably in countries
where the aggregate measure of support exceeded the level specified in the member
schedule. The limit for developed and developing countries was fixed at 5% and 10%
of the total value of agricultural output respectively. There are three categories of
support measures that are not subject to reduction under the agreement, they are:
i. Green Box Measures: Policies that have minimum impact on the patterns of
production and flow of trade.
ii. Blue Box Measures: These measures include direct payment to the farmers for
production limiting programme and are relevant only from the point of view of the
developed countries.
iii. Amber Box Measures: These are the most important measures from the point of
view of producers in developing countries.
The AoA demands commitment to reduce support to be achieved by first quantifying,
and then progressively reducing domestic support, i.e. the Aggregate Measure of
Support (AMS).
C. Export Subsidies are also to be reduced. The Agreement contains provisions
regarding members commitment to reduce export subsidies. Developed countries are
required to reduce their export subsidy expenditure by 36 per cent and volume by 21
per cent in six years, in equal installments from 1986-1990 levels. For developing
countries the corresponding cuts are 24 per cent and 14 per cent in equal annual
installments spread over ten years. The least developed countries are not subject to any
reduction commitments.

CHAPTER 2
IMPORTANCE OF INDIAN AGRICULTURE
Agriculture forms the backbone of the Indian economy. This sector contributes to the
Indian economy in a variety of ways:

It provides direct employment to 65% of working people in the country and

contributes about 29% of GDP of the country. In advanced nations like the US,
agriculture accounts for a mere 2% of GDP, and employs 4% of the total labour
force. The position is similar in other advanced countries. For example,
agriculture contributed 2% of GDP in France with 6% share in labour force; in
Germany the contribution of agriculture to GDP was 1% with 3% share in
labour force. The corresponding figures for UK were 2% and 3% (World Bank
2000).
Agriculture also provides the foodgrains to feed the large population of the
country.
Indian agriculture is an important source of supply of raw materials to industries
in the country.
Agriculture contributes a sizeable share in Indias exports.
Besides, it provides fodder for the large cattle population.
Being the largest source of employment and income to millions of people, it
provides a vast market for our industrial products.

The country has made significant improvements in agricultural production, but the
achievements have been mainly confined to a few areas. The major challenges for our
agriculture system would always be increasing production and productivity to ensure
food security for the rising population. Meeting this challenge means also ensuring food
security and a better standard of living for the rural people. Indias performance in
agriculture affects overall rural development and the extent of rural poverty. Therefore,
the performance of the economy is crucially dependent upon that of agriculture.

WTO ON AGRICULTURE
(i)

Impact on Indian Agriculture

One of the expectations from the Agreement on Agriculture was that with the
reduction in domestic support and export subsidies in the developed countries the
international prices would increase leading to substantial gains to the producers in
developing countries. The experience of the implementation of AoA however reveals
that the world prices of food products have been steadily declining threatening the
livelihood of producers in many developing countries.
India does not provide any product specific support other than market price
support. Our total Product Specific AMS continues to be negative, and that too by a
huge magnitude. The Non-Product specific AMS is also well within the de minimis
level i.e. 4.85% in the base year 1986-88. As such, we have not undertaken any
reduction commitment in our schedule filed in WTO with regard to domestic support.
The non product specific subsidies being extended by India to its farmers
include subsidies for research, extension, pests and disease control, as also for inputs
like electricity, water, fertilizers, seeds etc. Most of these subsidies are permissible
under Annex-2 or Article 6.2 of AoA.
India does not provide any export subsidy except the permissible internal and
international transport subsidies and handling and processing charges to reduce
marketing costs of exports of agricultural produce.
India is one of the six countries who has been maintaining quantitative
restrictions (QRs) under the specific enabling provisions of GATT1947. India has,
been dismantling QRs since early 1990s and the last of the QRs on remaining715 items
including 147 agricultural products have been removed on 1st April, 2001. While the
removal of QRs has not changed the overall rate of growth of imports or even their
composition.
The current bound levels committed by India in respect of primary
agricultural products, processed foods and edible oils are 100%, 150% and 300%
respectively with some exceptions (soyabean oil at 45%, rape seed at 75%) in respect of
which concessions were committed by India in earlier rounds of GATT negotiations are
generally considered to be adequate to provide effective protection to domestic
production.
In December 1999, India was able to negotiate under GATT Art.XXVIII
duties bound at 0 or very low levels in respect of 15 commodities including SMP, rice,
maize, wheat, sorghum to levels ranging from 50 to 80%.

The surge in import of edible oil led to the revision of applied rates within
the bound levels to protect the domestic producers on as many as four occasions during
the last one year.
Up to August 2000, the average applied rate on agricultural commodities in
India has been 29% that is well below the bound rates. It is therefore, possible for India
to revise the applied duties within the bound rates to ensure that surge in imports of
agricultural produce does not adversely affect domestic production.
During the Uruguay round India has not undertaken any obligation for
providing minimum market access opportunities to our trading partners.

CHAPTER 3
TRADE POLICY REFORMS

The heart of the agriculture reforms lies in the market place. The biggest
beneficiaries of the market reforms should be the major stakeholders in the
agriculture business, the farmers. The reforms will also lead to all round
improvement of efficiencies in all the links of the value added chain from
production to processing to distribution and retailing. Substantial investment in
infrastructure for markets, storage, post harvest handling, processing, transport,
cold chains and redefining the role of Agricultural Produce Market Committee in
a more competitive environment will ensure maximum share in the final price to
the farmer for his produce. We could let the market work with a view to
capitalise on the opportunities for exports.
The following are the most important goals for agricultural marketing.

Increasing the degree of integration of existing agricultural markets.

Minimising instability in prices, both received by producers and paid by

consumers.

Reducing the spread between prices received by farmers and the prices

paid by consumers.
Another objective of any marketing reform is to remove as far as possible all
barriers, whether natural or policy induced, which introduce inefficiencies and

monopoly rents in the functioning of markets and to create institutions which

permit as large a market participation as possible.
The Essential Commodities Act 1954 which is an enabling legislation permitting
States to issue orders restricting private storage and movement of foodstuff, was
enacted to prevent artificial scarcity when shortages were endemic. With the
exception of some remote regions and possibly certain border areas, there is now no
justification to retain these provisions except for use only in emergencies such as
natural disasters or other contingencies, which disrupt normal functioning of civil
society. However, State governments are still reluctant to repeal these provisions
although there are very few operative orders restricting movement and storage and
even those which exist (for example levy orders on rice mills) are now almost
vestigial. While repeal of unnecessary laws which impede private trade continues to
be important, the more immediate priority is to remove price and tax distortions and
give fiscal support for rural infrastructure and to institutions which can provide
marketing strength to Indian farmers and protect them from price and income
uncertainty.
Better integration across rural markets is necessary for price signals from
abroad to be fully effective in generating comparative advantages. A danger posed by
weak integration across rural markets is that the price depressing effects of potential
imports can be quicker and affect more regions and farmers than the income enhancing
effects of higher exports, which can remain confined to a few regions. To obtain the real
benefits of trade, the direct impact of exports needs to be converted to the much larger
potential impact that can follow if the higher income creates demand for agricultural
produce of other regions within the country.
Developing market integration, by providing reliable transportation and storage at
reduced cost and through quick dissemination of market information, is, therefore, vital
to realise the potential benefits from trade. However, a two-track approach might be
necessary to start with. Since quality considerations and reliable time schedules are
important for export trade, the type of infrastructure necessary specifically for this
(quality control laboratories, cold chains, bulk and container movement etc.) is best
developed selectively in regions of greatest potential where there is already private
sector initiative and investment. Government support for this should be focussed, and
mainly take the form of facilitation and simplification of procedures with financial
support restricted to minimum subsidy on set-up costs. This should, however, be
accompanied by a much larger public sector effort throughout the hinterland to

strengthen and better network existing institutions using more affordable technology,
with the priority on coverage and local participation.
An immediate priority deriving from removal of quota restrictions and large world
price fluctuations is that import tariff policy be used proactively to counter fluctuations
in international prices. This is WTO-compatible so long as tariffs are varied within the
existing bound rates which for most agricultural items are sufficiently high. However, it
is important that the goal of this is clearly perceived to be price stabilisation and not
permanently high tariff protection. For this, average tariff rates should be calibrated on
the basis of average world prices and domestic costs of production, and actual tariffs
varied around this average strictly on the basis of transparent formulae linked to the
deviation of actual world prices from their long-run trends. For this purpose, a Statutory
Agricultural Tariff Commission may be set up with full autonomy and authority to
make recommendations, which by convention would be accepted by the Government.
Simultaneously, export quotas should be removed and there should be a system of
export tariffs on agricultural goods which should come into operation when the world
price rise above a certain point and be varied with world price movements on the basis
of transparent formulae.
The existing system of open-ended purchase at pre-announced Minimum Support
Prices (MSP) should also continue since weak market integration means that local gluts
can continue to occur even if border prices are stabilised. In fact, MSP operations
should be strengthened in regions and for crops where it is currently weak.
Also, since MSP operations are in the nature of a guarantee provided by the Central
government to farmers, State governments should be barred from imposing taxes, levies
or cess on MSP purchases.
The PDS based on physical supply at fair price shops should continue for the same
reason as the MSP, i.e. to prevent local spikes which can occur with weak market
integration even if national prices are stabilised.
An upper limit needs to be set to the taxes and statutory levies that can be imposed
by states on agricultural produce. Tax and fees on raw agricultural commodities should
be rationalised. In principle, raw agricultural commodities should attract zero
tax(including purchase tax, mandi tax commission of agents, and so on, which in
Punjab today accounts for about 11 per cent on wheat). Allowing big grain companies
to buy directly from farmers without going through commission agents can do this, and
abolishing purchase/sales tax.
The Acts governing existing regulated markets, and the Agricultural Produce
Marketing Committees which manage these, should be amended to require that markets
which do not provide certain minimum services will cease to be covered by the Act
and, wherever such Acts prohibit trade outside regulated markets, there should be
substantial relaxation of the procedures for establishment of new regulated markets.

The system of negotiable warehouse receipts should be simplified and expanded and a
scheme of certification of warehouses needs to be devised so that not only the quantity
but also quality of the produce can be certified and banks should treat this as acceptable
collateral for loans. Credit margin requirements for stocks of agricultural commodities
should be reduced. Farmers should be extended credit against hypothecation of their
stocks. The warehouse receipt system should be made negotiable instrument by
introducing enabling legislative amendments soon.
A powerful tool to improve market integration is electronic access to price and
other market information. For this, it is necessary that all regulated markets be
networked and that eventually online facilities exist in each market to obtain real-time
quotations in other markets. In order to provide even wider access to this data, it should
be available in summary form on the internet and internet access extended as widely as
possible in the form of e-kiosks. These could be served through existing telephone lines
and STD booths, or better still, ride on high speed (V-Sat or similar) networks being
developed by a number of agencies such as the post office, railways and commercial
banks which have large rural presence.
With improved access to reliable market information it may be expected that the
functioning of other risk management institutions such as future markets can improve.
But, although this can improve price discovery and help trade to hedge risks, not much
should be expected from this in terms of reduction in either spot price variability or
income risk to farmers on the basis of international evidence. The latter would continue
to depend on spot markets for sale and on existing financial institutions for
consumption smoothing, supplemented by whatever the government can offer in terms
of crop insurance and employment schemes to cope with natural adversity.
A basic principle in bringing marketing strength and security to Indian farmers
quickly and most cost effectively should therefore be to involve, strengthen and draw
synergy from all existing institutions which exist at the village level. An important
place in this exists for panchayati raj and co-operative institutions in organising local
infrastructure, finance, information and even direct storage, transportation and
marketing.
Most importantly. It should be clearly understood that all efforts at improving
market structures at higher levels are unlikely to fructify fully unless the immediate
village infrastructure and its physical connectivity is improved. Also, risk management
efforts will remain vacuous unless this involves a definite framework for providing
income generation schemes at times of adversity. A beginning on this requires to be
made immediately by accelerating the Prime Ministers Gram Sarak Yojna, dovetailing
this with the Employment Assurance Scheme and the Public Distribution System to
utilise excess food stocks without insisting on targeting to the poor, at least in drought
affected regions and most backward blocks.

Futures markets should be introduced in all agricultural commodities. The

measures suggested above will help introduction of futures market. This would help in
containing wide fluctuations in commodity prices as also cut down their costs of
marketing by hedging their risk.
Policies for the oilseeds processing sector should review to permit economies of
scale and for similar reason the policy relating to farm implement manufacture need to
be revamped.

The WTO has opened a new horizon of opportunities for increased access for which
domestic production system has to gear itself for deriving maximum benefits. Since
our commitments of domestic support are well within the limits, there is ample scope
for increasing the support for enhancing our comparative advantage. Concurrently,
incidence of surge in imports of edible oils and sugar in the recent years highlight the
urgent need to put in place an effective system of international trade monitoring and
response.
The policy framework has outlined in the National Agriculture Policy for
triggering a sustainable growth. Due thrust need to be given to revitalise the sector to
enable it to face the challenges of economic liberalization and globalization. The
regional and sub-regional level programmes need to be charted out to attain this
objective in a specific time frame.
Indian agriculture continues to need protection and support through creation
of infrastructure, watershed development, increased availability of subsidized inputs
and greater thrust on research, extension and risk management. Simultaneously, the
alternatives to on going product specific support through minimum price support
mechanism, may have to be evolved so that the advantage of provisions in the
Annexure-2 of AoA can be availed off.
The competitiveness of the Indian agriculture have to be enhanced to realise
new market access opportunities. The development of product specific regions linked
to export channels, tapping the potential of organic farming and development of value
addition chain and post harvest infrastructure in tune with global needs will go a long
way in establishing India in the international trade scenario. Concurrently, the domestic
market reforms also have to be speeded up to unshackle Indian agriculture from
restrictions of movement, storage, sale, purchase and exports.
In this process, the issue of quality of produce and its standardization as per
international standards needs high priority. Besides the production, the quality issues
should also cover the subsequent value addition chain. The quality consciousness has
to percolate to the grass root levels.

Indias initial negotiating proposals seek to protect the interest of Indian

agriculture especially on its concerns for food and livelihood security, demanding more
flexibility for protection from surge in imports and for acquiring greater market
access. These negotiating proposals with matching efforts of protection, support and
market-friendly domestic policy regime will take Indian farming to higher levels of
growth and prosperity.
Agriculture has traditionally benefited from special arrangements which
sheltered it from the full impact of GATT disciplines. Even today, in the WTO
agricultural policies are covered by a separate agreement that, to a degree,
still shelters it from generally applicable rules.
A variety of political, social, economic and cultural arguments are used to
justify this special treatment. The main justification is the need to guarantee,
over time, stable food supplies in a world of fluctuating harvests and potential
famines.
The scope of the traditional agricultural exception was to some extent limited
by the Uruguay Round agreements; WTO Members agreed upon a set of
principles and disciplines that were designed to help liberalize international
trade in agricultural products.
The Uruguay Round achieved two things in relation to agriculture. It introduced
specific disciplines on market access, domestic support and export subsidies.
At the same time it took away the fig leaf behind which agriculture had been
hiding from the full force of general GATT disciplines.
The Agreement on Agriculture seeks to reduce restrictions on trade in
agricultural products by introducing disciplines to:
increase market access;
reduce domestic support measures;
reduce subsidized exports.
This Module examines each of the three disciplines in turn and the other
provisions of the Agreement on Agriculture.
Other WTO agreements also discipline trade in agricultural products. Those
with the biggest impact on trade in agricultural products are: the GATT 1994;
the Agreement on Safeguards or the Safeguards Agreement; the Agreement
on Import Licensing Procedures or the Import Licensing Agreement; the
Agreement on the Application of Sanitary and Phytosanitary Measures or
the SPS Agreement; the Agreement on Technical Barriers to Trade or the
TBT Agreement and, the Agreement on Trade Related Aspects of Intellectual
Property Rights or the TRIPs Agreement.

These agreements, along with the Agreement on Subsidies and Countervailing

Measures or the SCM Agreement and the Agreement on Implementation of
the GATT 1994 or the Antidumping Agreement are also briefly
Examined.

CHAPTER 4
THE AGREEMENT ON AGRICULTURE
On completion of this section, the reader should be able to describe
the main disciplines that were introduced by the Agreement on
Agriculture on trade in agricultural products and, in particular, the
provisions of the Agreement on Agriculture on market access, domestic
support and export subsidies.

Export Subsidies
Agricultural Export Subsidies
Export subsidies are special incentives provided by governments to encourage
increased foreign sales.
These subsidies, which are contingent on export performance, may take the
form of:
Cash payments;
Disposal of government stocks at below-market prices;
Subsidies financed by producers or processors as a result of
government actions such as assessments;
Marketing subsidies;
Transportation and freight subsidies; and
Subsidies for commodities contingent on their incorporation in
exported products.
The GATT 1994 Article XVI on subsidies allowed the GATT contracting
parties to subsidize the export of primary agricultural products if they did not
result in the exporting country having more than an equitable share of world
trade.
The WTO Agreement on Subsidies and Countervailing Measures
or the SCM Agreement now prohibits all subsidies on exports of agricultural
products except as provided for in the Agreement on Agriculture.
The Agreement on Agriculture does not contain any definition of the term
subsidy.
To determine whether an export support measure does in fact constitute a
subsidy subject to the disciplines of the Agreement on Agriculture, the

Appellate Body, in its report in the Canada - Dairy case,

referred to the definition of a subsidy contained in Part I of the SCM Agreement.
Appellate Body Report, Canada Measures Affecting the Importation of Dairy
Products (Canada
Dairy), WT/DS103/AB/R and Corr.1, WT/DS/113/AB/R and Corr.1, adopted 27
October 1999,

Dispute Settlement
Under the Agreement on Subsidies and Countervailing Measures a subsidy
exists if:
There is a financial contribution by a government or any public
body within the territory of a Member;
There is any form of income or price support in the sense of Article
XVI of the GATT 1994;
A benefit is thereby conferred.
In the Canada - Dairy report, the Appellate Body confirmed that to determine
whether a subsidy exists within the meaning of the Agreement on Agriculture,
it must be shown that all the constituent components of a subsidy as defined
by the SCM Agreement exist of the SCM Agreement, arises where the grantor makes a
financial contribution which confers a benefit on the recipient, as compared with
what would have been otherwise available to the recipient in the marketplace.49
The same approach can be found in the US - FSC Panel Report of the SCM Agreement,
which defines the term subsidy for the purposes of the SCM Agreement, represents
highly relevant context for the interpretation of the word subsidy within the meaning
of the Agreement on Agriculture, as it is the only article in the WTO Agreement that
provides a definition of that term. This is not of course to say that the definition of
subsidy in the SCM Agreement, which applies [f]or the purpose of this
[i.e., the SCM] Agreement, is directly applicable to the Agreement on
Agriculture.
However, care should be taken in relation to that part of the definition of
subsidies which refers to a financial contribution by a government. Firstly a
financial contribution does not necessarily mean a payment of monies. It covers
a wide variety of benefits. Secondly a subsidy can exist even where the benefit
is granted not directly by the government but by virtue of government action.

In the Canada - Dairy dispute the Appellate Body in its third report found
that milk farmers were subsidizing milk exports by selling milk at a low price
as their main costs were covered by the domestic milk support system which
was imposed by virtue of a government action.
It falls now to consider the role of the Canadian government in financing
payments made on the sale of CEM [the unsubsidised, freely sold, milk for
of the SCM Agreement. Appellate Body Report, Canada Dairy Panel Report, United
States Tax Treatment for Foreign Sales Corporations (US FSC),
WT/DS108/R, adopted 20 March 2000, as modified by the Appellate Body Report,
WT/DS108/AB/R.

Agriculture export.
We have agreed with the Panel that a significant percentage of
producers are likely to finance sales of CEM at below the costs of production
as a result of the participation in the domestic market. Canadian government
action controls virtually every aspect of domestic milk supply and
management. In particular, government agencies fix the price of domestic
milk that renders it highly remunerative to producers. Government action
also controls the supply of domestic milk through quota, thereby protecting
the administered price. The imposition by government of financial penalties
that divert CEM into the domestic market is another element of the government
control over the supply of milk. Further, the degree of government control
over the domestic market is emphasised by the fact that government pools,
allocates and distributes revenues to producers from all domestic sales. Finally
governmental action also protects the domestic market from import competition
through tariffs.
In our view, the effect of these different governmental actions is to secure a
highly remunerative price for sales of domestic milk by producers. In turn, it
is due to this price that a significant proportion of producers covers
their fixed costs in the domestic market and, as a result, has the resources
profitably to sell export milk at prices that are below the costs of production.
Accordingly, we agree with the Panel that government action in the domestic
market plays a critical part in the financing of payments made by a
significant percentage of producers on the sale of CEM. As such, we agree
with the Panel that payments made through the supply of CEM at below the
COP [cost of production] standard are financed by virtue of government
action. We also agree with the Panel that Canada failed to establish the
contrary, pursuant to the Agreement on Agriculture. The Agreement on Agriculture
prohibits WTO Members from granting export subsidies that do not conform with the
Agreement on Agriculture and the commitments in their Schedules.

OTHER WTO AGREEMENTS RELEVANT TO

AGRICULTURE
On completion of this section, the reader will be able:
To identify other WTO Agreements relevant to Agriculture;
To analyse the importance of their provisions for trade in agricultural
products.

Agriculture in the GATT

Agricultural products are goods for the purposes of the GATT 1994. There
is therefore no a priori exclusion of agriculture from the GATT 1994.
Other than the country schedules established within the GATT 1994. The basic
principles of the GATT 1994 of most relevance to agriculture are:
The General Most-Favoured-Nation Treatment;
The General Elimination of Quantitative Restrictions;
The Non-discriminatory Administration of Quantitative Restrictions and General.
Exceptions
This section, examines the GATT 1994 provisions relevant to trade in
agricultural commodities of the GATT 1994 on the Most-Favoured Nation Treatment
The Contracting Parties of the GATT 1947 were bound to accord to the
products of other contracting parties treatment no less favourable than that
accorded to products of any other country.
WTO Members have entered into similar commitments, under the GATT 1994
(Article I) for trade in goods. It consists of the commitment by a WTO Member
to accord immediately and unconditionally to any other WTO Member all
the advantages it would accord to any other country.
The Most-Favoured-Nation clause applies to:
Any advantage, favour, privilege or immunity accorded by a
WTO Member to a product originating in or destined for any other
country;
Products, whether or not subject to a tariff binding during trade
negotiations;
Imports and exports, and in connexion with imports or exports
and international transfers of funds (current payments).
Objectives

CHAPTER 5
ATS and Agriculture
Introduction
Somewhat surprisingly, the General Agreement on Trade in Services can also
apply to the trade in agricultural goods. This is the conclusion on the basis of
the findings of the Appellate Body in the EC Bananas III case.
In EC Bananas III the European Communities argued that the GATS did
not apply to the EC import licensing procedures because they were not
measures affecting trade in services within the meaning of the
GATS.
The Panel found that there is no legal basis for an a priori exclusion
of measures within the EC banana import licensing regime from the scope of
the GATS.
Korea Measures Affecting Imports of Fresh, Chilled and Frozen Beef (Korea
Various Measures
on Beef), WT/DS161/R and WT/DS169/R adopted 31 July 2000, WT/DS161/AB/R
and WT/DS169/
AB/R, adopted 11 December 2000.
EC Regime for the Importation, Sale, and Distribution of Bananas (EC Bananas
III) WT/DS27/R/ECU, WT/DS27/R/MEX, WT/DS27/R/USA, adopted 22 May 1997,
WT/DS27/AB/R, adopted
9 September 1997.
Appellate Body Report, European Communities Regime for the Importation, Sale,
and Distribution of Bananas (EC Bananas III), WT/DS27/AB/R, adopted 25
September 1997.
Panel Report, European Communities Regime for the Importation, Sale, and
Distribution of Bananas Complaint by Ecuador (EC Bananas III (Ecuador)),
WT/DS27/ECU, adopted 25 September 1997, as modified by the Appellate Body
Report.

CHAPTER 6
TRIPs and Agriculture
The TRIPs Agreement includes three elements relating to agriculture:
Geographical indications;
Patent protection of agricultural chemical products;
Plant variety protection.
Market access for agricultural products is closely linked to the issues of product
differentiation and food specificity.
Product differentiation is an important feature of market competition. It benefits
consumers because they are offered more choice and more information on
product quality. It also benefits producers, who are able to develop quality
products and are free from unfair or misleading competition in markets that
import their products.
Food specificity can be determined by reference to geographical indications.
Historically, products from particular places were more marketable than similar
products from other places because of a particular quality trait. The quality
difference was a result of either natural geographical advantages, such as climate
and geology, or processing techniques peculiar to the specific place. With
time, these geographical place names became associated with particular
products or types of product.
The WTO Agreement on Trade Related Aspects of Intellectual Property Rights
(the TRIPs Agreement)provides for the protection of geographical indications.
Geographical indications are defined in of the TRIPs Agreement
As Agriculture indications which identify a good as originating in the territory of a
Member, or a region or locality in that territory, where a given quality,
reputation or other characteristic of the good is essentially attributable to its
geographical origin.
Under the TRIPs Agreement, for a geographical indication to be protected as
such, it needs only to be an indication, not necessarily the name of a
geographical place on earth. This indication has to identify goods as
originating in the territory of a particular WTO Member, whether the name of
the country itself, a region or a locality of that territory.

Under the TRIPs Agreement, all geographical indications concerning all goods
must be protected against misuse such as to mislead the public or constitute
an act of unfair competition. For wines and spirits the level of protection is
higher and is not conditional on whether the public is misled or if their use
constitutes unfair competition of the TRIPs Agreement establishes a minimum standard
of protection for all geographical indications states that WTO Members shall provide
the legal means for interested parties to prevent:
a) The use of any means in the designation or presentation of a good,that
indicates or suggests that the good originates in a geographical area,
other than the true place of origin in a manner which misleads the public
as to the geographical origin of the good;117
b) Any use which constitute an act of unfair competition within the meaning
of Article 10bis of the Paris Convention (1967).
The TRIPs Agreement does not specify the legal means to protect geographical
indications. Each WTO Members is free to chose the most appropriate method.
The additional protection for wines and spirits encompasses three main
elements:
Providing the legal means for interested parties to prevent the use
of a geographical indication identifying wine and spirits not
originating in the place indicated by the geographical indication;
Refusing or invalidating the registration of a trademark for wines
or spirits which contains or consists of a geographical indication.
However, the requirement to exercise due restraint should be taken into account. See
also section Peace Clause of this Module.
TRIPs Protection of geographical indications.
TRIPs Additional protection for geographical indications for wines and spirits.
For example, the use of symbols such as the Eiffel Tower or the Statue of Liberty to
infer an association of origin would fall within this prohibition. Dispute Settlement
identifying wines or spirits, respectively at the request of an
interested party;
Calling WTO Members for negotiations aimed at increasing
protection for individual geographical indications for wines and
spirits.The use of a geographical indication identifying a wine or
spirit not originating in the place indicated by the geographical indication is
prohibited, even where the true origin of the wine or spirit is indicated or the
geographical indication is used in a translation or accompanied by expressions

such as kind, type, style, imitation or the like. It is not necessary to

show that the public might be misled or that the use constitutes an act of
unfair competition. In the case of wines and spirits, protection becomes
objective and automatic. Thus, these provisions give geographical indications
for wines and spirits stronger protection than that provided for all products.
According the TRIPs Agreement, geographical indications for wines have an extraadditional protection. This extra-additional protection has two components:
T he need to accord protection for each geographical indication for
wines in the case of homonymous indications; and
The establishment of a multilateral system of notification and
registration of geographical indications for wines eligible for
protection in the jurisdictions of those WTO Members participating
in the system.

CHAPTER 7
CASE STUDY
Before 1 January 1995, most dairy products were subject to a range of
restrictions on their entry into Joyland. These restrictions ranged from tariff
rate quotas (TRQs), to voluntary restraint agreements, to a number of safeguard
measures, to high tariffs or to particularly burdensome inspection procedures.
The new WTO Agreement on Agriculture required that all non-tariff barriers,
in particular quotas and voluntary restraints, in existence in 1994 be changed
into their tariff equivalent by 1 January 1995. Joyland did this during the last
weeks of 1994. Included in the new Joyland tariffs was a tariff rate quota on
the importation of milk. This TRQ allows importation of 5,000 tons of foreign
milk at a 20 per cent ad valorem rate, with a prohibitive over-the-quota rate of
duty of 250 per cent. The Ministry of Agriculture of Joyland, whose officials
adopted this TRQ, has stated that this was reached by tariffying a previously
enforced quota set on foreign milk in 1991 by the Government of JoyLand
following a successful safeguard action. This safeguard measure was set for a
period of five years, subject to possible renewal, but due to the considerable
increase in Milklands prices a renewal would have been most improbable.
The Government of Milkland is worried and considers that Joyland has acted
illegally. Milkland is considering its legal recourses. On the other hand, Joyland
argues that its TRQ is WTO-consistent and that, in any event, it is specifically
mentioned in its Schedule of Concessions.

CHAPTER 8
IMPACT OF W.T.O ON INDIAN AGRICULTURAL SECTOR
Trade is an engine of economic development. The establishment of W.T.O is an
important landmark in the history of international trade. When developing countries
were liberalizing their economies, they felt the need for better export opportunities. The
W.T.O provides opportunities for countries to grow and realize their export potentials,
with appropriate domestic policies in place. The issue of globalization in the Indian
context has occurred in the patterns of trade and capital flow in recent years;
unfortunately, so far we have not made much use of it. At one time a countrys trade
pattern was determined by its natural resources and the productivity of its land. Leaving
aside political and institutional factors, a countrys level of income was also largely
determined by the global demand for its natural resources and its relative efficiency in
exploiting them. The importance of land as a source of comparative advantage,
however, changed dramatically after the industrial revolution. Today, it is almost
insignificant. After the industrial revolution, the availability of capital became the
most dominant source of comparative advantage.
India will be able to expand its exports of agricultural products in which it has
tremendous comparative advantage. The provisions of W.T.O offered ample
opportunities to India to expand its export market. Contrary to this, the price situation
changed dramatically after 1996, which was the first year after implementation of
Urguay Round Agreement and formation of W.T.O. International price of agricultural
commodities have since then plummeted, because of which domestic price turned
higher than international price, which made India an attractive market for import of
most agricultural commodities. This situation resulted in a wide spread decline in
agricultural export and had also pressure on domestic prices. The impact of W.T.O on
agriculture was severely felt by India as cheap imports have frequently hit the Indian
market, causing shock waves among the agriculture producers. The changes in
agricultural exports reveal that during pre W.T.O period the increase was significantly
remarkable than post W.T.O period and the rising export trend could not be sustained in
the post W.T.O period whereas imports rose steadily. The agricultural products from
India can be made competitive in international market and the prices of agricultural
goods in the domestic market can be improved by taking serious steps of reform.
Globalize or Perish is now the buzzword synonymous to Do or Die which conveys
that there is no alternative to globalization and everybody should learn to live with it.
India, being a signatory to the agreement that led to W.T.O, can no way step backwards.
This is not the time to curse the darkness but to work for making India emerge as a
global market leader.

The global agriculture trade regime under the World Trade Organization
(WTO), that came into force 10 years ago in 1995, has led to an increase in
the import of farm products into India rather than boosting exports.
Barring the first three years after the enforcement of the agreement,
agriculture imports continued to grow faster than exports. Between 1998 and
2000-01, the average annual import of farm products rose by about 64 per
cent, while exports declined by 7 per cent. Though the last two years have
seen some buoyancy in farm exports, imports have also continued to grow.
The impact of the WTO on India's agriculture has been studied by Dr Ramesh
Chand, acting director of the Delhi-based National Centre for Agricultural
Economics and Policy Research (NCAP). He has found that the first three
years, after the implementation of the WTO agreement, witnessed a major
spurt in agriculture exports.
The study estimates that the annual import of agriculture goods rose from
$1,190 million in the three years preceding the WTO to $1,996 million in the
first triennium after the WTO. In the same period, exports increased from
$3,725 million to $6,530 million. But, this favourable trend in the initial
years of the WTO did not last long and the next three years witnessed a
whopping rise in imports and a slight decline in exports.
The study attributes the slow-down on agro-exports and sharp rise in imports
to the decline in global prices of almost all major agriculture commodities
after 1997.
This crash was due partly to the cyclical nature of international prices and
partly due to increased global competition in agro-export because of
liberalising trade. The situation was aggravated by an increase in the
already high farm subsidies in the developed countries.
The Indian non-Basmati rice and wheat could not face global competition. The
export of oilmeal, the second biggest export item after marine products,
also suffered a set back due to a decline in global prices.
The export earnings from traditional export commodities like tea, coffee,
spice and tobacco suffered mainly due to a sharp fall in international
prices, as the quantum of exports in most cases did not drop.
Exports of marine products, livestock and horticulture items maintained the
tempo of growth that was build up in the pre-WTO period. This implies that
the post-WTO situation was favourable for the export of high-value food
products.

In case of imports, liberalisation of trade in the initial years after the

WTO did not result in any perceptible spurt because global prices were high.
But subsequently, when global prices began to fall, India's imports started
rising. The level of imports nearly doubled in the three years between
1996-97 and 1999-2000. This downturn in global prices continued even in the
subsequent years.
The international prices of cereals in the years 2000 and 2001 were almost
half of what they were in the beginning of the WTO-era.
The composition of items in the import basket indicates that edible oils
accounted for the bulk of the increase in total agro-imports. The other
items clocking significant increase in imports include pulses, spices,
cotton, wood and wood products.
The study has also revealed that the spurt in the imports vegetable oils,
and wood and its products has depressed their domestic prices, adversely
impacting indigenous production.

CHAPTER 9
IMPLICATIONS OF AoA FOR INDIAN AGRICULTURE

The repercussions of the WTO Agreement and the removal of Quantitative

Restrictions on imports are quite alarming. The fall in the prices of agricultural goods
and dumping of cheap agriculture commodities from other countries is causing harm
to the welfare of Indian farmers. Developed countries have imposed heavy tariffs to
minimize imports, whereas in India tariffs are low. Due to this, various commodities
are being dumped in India. The US is dumping five primary farm commodities in
global markets in clear violation of WTO Agriculture rules. It is exporting corn,
soybean, wheat, rice and cotton at prices far below their production cost in an effort to
wipe out global competition.
The continuation of high domestic support to agriculture in developed countries is a
cause of concern as they encourage overproduction in these countries leading to low
levels of international prices of agricultural products. At the same time the rich
industrialized countries continue to subsidize farmers by giving them direct payments
which are exempt from any reductions requirement and which essentially are cash
handouts contingent on making adjustments in production. These payments are
neither affordable nor helpful in a developing country. The result is that the
industrialized countries continue to dominate world trade in agriculture while
preventing India and other developing countries from achieving self-sufficiency in
food production.
The AoAs requirement to reduce domestic support will prevent the Indian
government from providing the necessary support to farmers to compensate for
shortage or overabundance caused by climatic fluctuations in market prices or any
other factors. In fact subsidies are essential for Indian agriculture as 65 per cent of
people are directly or indirectly dependent upon agriculture. It is no longer the
question of mere economics because the social and political implications of
developments in agriculture cannot be ignored.
The domestic support provision also affects Indias food security. The Agreement
exempts governmental expenditures relating to public stockholding for food security
purposes from reduction requirement if the operation of such a programme is
transparent and follows officially published objective criteria. This automatically
subjects these programmes to external scrutiny. A developing country may acquire
and release foodstuffs at administered prices; however, the difference between the
international market price and the administered price will be included in the
calculation of AMS. Therefore, the public stockholding system will be subject to
reduction requirements if the AMS exceeds the de minimis level.
The export commitment requirements, in turn, prevent India from providing subsidies
to industry that are necessary for it to expand its share of world export markets. This
limitation will also adversely affect the future of Indian agriculture.
The reduction in custom duties and non-tariff barriers as well as guaranteed minimum
market share for imports will force Indian farmers to compete against large

Transnational Corporations which have excessive financial power resulting from their
oligopolistic control over world food markets. Indian farmers cannot compete on
equal terms against the enormous financial and technological clout of the
transnational giants of the rich countries, particularly when custom duties and other
import barriers are reduced, and these companies are guaranteed a share of Indian
market. Compliance with market access requirements will devastate domestic food
production and India will become dependent on foreign foodgrains.
To conclude, it is feared that the Agreement is not favorable to India due to the
following reasons:
i. The country will be compelled to import at least 3% of the domestic demand for
agricultural products.
ii. The government will be forced to reduce subsidies to farmers.
iii. The Public Distribution System and Public Procurement System will have to be
abandoned.

CHAPTER 10
Objective & Hypothesis
Objective:

1) To study the benefits of WTO & GATT on Indian Foreign

Trade.
2) Analysis of three sectors namely Agriculture, Textile &
Service.

Hypothesis(H0):
Indian foreign trade unaffected by WTO Policies
Indian foreign trade:
Indian economic policy after independence was
influenced by the colonial experience, which was seen by
Indian leaders as exploitative, and by those leaders
exposure to democratic socialism as well as the progress
achieved by the economy of the Soviet Union.
Domestic policy tended towards protectionism, with a
strong emphasis on import substitution, industrialization,
state intervention, a large public sector, business regulation,
and central planning, while trade and foreign investment
policies were relatively liberal.
Indias economy was mostly dependent on its large
internal market with external trade accounting for just 20%
of the countrys GDP. Until the liberalization of 1991, India
was largely and intentionally isolated from the world
markets, to protect its economy and to achieve selfreliance. Foreign trade was subject to import tariffs, export
taxes and quantitative restrictions.

 Indias exports were stagnant for the first 15 years after

independence, due to the predominance of tea, jute and
cotton manufactures, demand for which was generally
inelastic. Imports in the same period consisted
predominantly of machinery, equipment and raw materials,
due to nascent industrialization.
Since liberalization, the value of Indias international
trade has increased sharply. Indias major trading partners
are the European Union, China, the United State sand the
United Arab Emirates.
In 200910, major export commodities included
engineering goods, petroleum products, chemicals and
pharmaceuticals, gems and jewellery, textiles and garments,
agricultural products, iron ore and other minerals. Major
import commodities included crude oil and related
products, machinery, electronic goods, gold and silver.
Its September 2010 exports were reported to have
increased 23% year-on-year to US $18.02bn, while its
imports were up 26.1% at $27.14bn. At
US$13.06bnAugusts trade gap was the highest in 23
months but the economy is well on the road to cross $200
billion mark in exports for the financial year 201011.

CHAPTER 11
The General Agreement on Tariffs and Trade
(GATT)

The General Agreement on Tariffs and Trade (typically

abbreviated GATT) was negotiated during the UN
Conference on Trade and Employment and was the
outcome of the failure of negotiating governments to create
the International Trade Organization (ITO).GATT was
formed in 1948 and lasted until 1993, when it was replaced
by the World Trade Organization in 1995.
GATT and WTO trade rounds Name Start Duration
Countries Subjects covered Achievements Signing of
GATT, 45,000Geneva April 1947 7 months 23 Tariffs tariff
concessions affecting $10 billion of trade Countries
exchanged some Annecy April 1949 5 months 13 Tariffs
5,000 tariff concessions Countries exchanged some
September 8,700 tariff concessions, Torquay 8 months 38 Tariffs
1950 cutting the 1948 tariff levels by 25%Geneva $2.5 billion in
tariff January 1956 5 months 26 Tariffs, admission of Japan II
reductions September Tariff concessions worthDillon 11 months
26 Tariffs 1960 $4.9 billion of world trade
Tariff concessions Kennedy May 1964 37 months 62 Tariffs,
Anti-dumping worth $40 billion of world trade Tariffs, non-tariff
Tariff reductions worth Tokyo September 1973 74 months 102
measures, "framework" more than $300 billion agreements
dollars achieved The round led to the creation of WTO, and
extended the range of trade negotiations, Tariffs, non-tariff
leading to major measures, rules, reductions in tariffs services,
intellectual (about 40%) and Uruguay September 1986 87
months 123 property, dispute agricultural subsidies, settlement,
textiles, an agreement to allow agriculture, creation of full access
WTO, etc for textiles and clothing from developing countries, and
an extension of intellectual property rights. Tariffs, non-tariff
measures, agriculture, labor standards, environment, The round

is not yet Doha November 2001 ? 141 competition, concluded.

investment, transparency, patents etc

The World Trade Organization (WTO):

The World Trade Organization (WTO) is an organization that
intends to supervise and liberalize international trade. The

organization officially commenced on January1, 1995 under the

Marrakech Agreement, replacing the General Agreement on
Tariffs and Trade (GATT), which commenced in 1948.
The organization deals with regulation of trade between
participating countries; it provides a framework for negotiating
and formalizing trade agreements, and a dispute resolution
process aimed at enforcing participants adherence to WTO
agreements which are signed by representatives of member
governments and ratified by their parliaments.
The WTO has 153 members representing more than 97% of
total world trade and30 observers, most seeking membership.
The WTO is governed by a ministerial conference, meeting every
two years; a general council, which implements the conferences
policy decisions and is responsible for day-to-day administration;
and a director-general, who is appointed by the ministerial
conference. The WTO headquarters is at the Centre William
Rappard, Geneva, Switzerland.

INDIA AND WTO:

 India is one of the founding members of WTO along with 134

other countries .Indias participation in an increasingly rule based
system in governance of International trade, would ultimately
lead to better prosperity for the nation.
Various trade disputes of India with other nations have been
settled through WTO.
India has also played an important part in the effective
formulation of major trade policies. By being a member of WTO
several countries are now trading with India, thus giving a boost
to production, employment, standard of living and an opportunity
to maximize the use of the world resources.
According to the WTO Secretariat Report, along with the policy
statement by the Government of India, India is expected to
snatch most of the business deals that are presently catering the
developed nations which includes major service based industries
like telecom, financial services, infrastructure services such as
transport and power.
The increase in availability and reduction in tariffs has prompted
many developed nations to go for business with India especially
in IT and ITeS industry. If the trend continues then by 2025, India
is expected to cater to the software and services demands of
major giants of the business world.

CHAPTER 12

SUGGESTIONS
The farmers have felt the heat of WTO and the challenges posed by international
competitors in the last three years. Cases of suicides by farmers have been reported
from many States. Agricultural prices are drastically falling. Farmers have been kept
out of market by the pricing policies pursued by the government in terms of the
minimum support prices of food grains and the issue prices in Public Distribution
System. Apart from seeking better deals from WTO so as to support domestic measures
adopted for poverty alleviation and rural employment, policy measures need to be taken
to strengthen the agricultural sector to safeguard the interests of the farming
community.Listed below are some suggestions to meet the challenges facing Indian
agriculture
a. There is a need to formulate a consistent policy for exports of agricultural products
and processed products in which the country has a comparative advantage.
b. Anti-dumping safeguard measures must be evoked in time to control imports of
agricultural products, if so warrants.
c. Agriculture Research and Extension should be revamped so as to meet the
challenges.
d. Crop rotation system should be promoted to increase the fertility of the soil and
improve the cash flow of the farming community.
e. More investment in latest technology and rural infrastructure especially in irrigation
system so as to utilize fully the already available irrigation potential.
f. Provide better incentives to farmers to increase the farm productivity and quality
standards.
g. Ensure adequate credit support and crop insurance to the farmers.
h. To reduce the cost of production by cultivation of hybrids and adopting integrated
pest management strategies.
i. Emphasis should be laid on imparting training to the farmers on increasing
productivity and reducing cost.
j. Areas having potential for production of different agricultural commodities should be
earmarked and their production and marketing should be encouraged there.
k. Special incentives should be given for encouraging export-oriented production with a
view to improving market access for Indian agricultural products in world markets.

CONCLUSION

Under the existing circumstances, the liberalization of world trade in agriculture will
benefit developed countries more than developing countries. Given the conditions of
high tariffs in the developed world and low or nil tariffs in developing countries, the
removal of Quantitative Restrictions on agricultural commodities will tilt the balance of
global trade in favour of the developed nations with detrimental effects on the
producers in Third World countries. India must be alert to the implications of the WTO
and its policies, and decide its own national priorities while taking policy decisions in
the future. It is our duty not only to protect our national interest but also to promote it
so as to take advantage of the situation. The situation is inescapable but there is scope
to manipulate it in the national interest.

BIBLIOGRAPHY
Gatt Secretariat (1994) The Results of the Uruguay Round of Multilateral Trade
Negotiations, The Legal Texts,
Geneva: Gatt Secretariat.

(2005c) World Trade Report 2005, Geneva: wto.