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WTO AND ITS IMPACT ON INDIAN ECONOMY

Kanta*

ABSTRACT
The economic development of any country depends upon sustained growth of productive
capacity, supported by saving and investment, huge inflow of foreign direct investment, rising
foreign exchange reserve and flourishing capital market. These determinants occupy a very
important position in an economic development of a country like India as they add to growth
factor that benefits the exporting country immensely. The emergence of WTO in the year 1995 to
give a boost to international trade through increased global market competition. The WTO has
framed set of rule and principles, mutually designed and agreed upon to promote international
trade in general and reduction of tariff barriers and removal of import restriction in particular.
The WTO has stronger implementation power and wider acceptance for the implementation of
agreements as compared to GATT. Its principle agreements are: Trade related investment
measures and general agreements on trade in services it has brought new opportunities to
developing countries-greater access to developed country markets and technology transfer hold
out promises improved productivity & higher living standard. On the other hand it has also
thrown up new challenges like growing inequality across and within nation and volatility in
financial market.

*Department of Commerce, P.I.G. Govt. College for Women, Jind, Haryana

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INTRODUCTION
The World Trade Organization (WTO) is the global international organization dealing with rules
of trade between nations. At its heart are WTO agreements, negotiated and signed by bulk of
worlds trading nations and ratified in their parliaments. The goal is to help producers of goods
and services, exporters, and importers conduct their business.
The Result of WTO is assurance. Consumers and producers know that they can enjoy
secure supplies and greater choice of the finished products, components, raw materials
and services that they use. Producers and exporters know that foreign market will remain
open to them.
The Result is also more prosperous, peaceful and accountable economic world. Virtually
all decisions in the WTO are taken by consensus among all member countries are ratified
by members parliaments. Trade friction is channeled into WTOs dispute settlements
process where the focus is on interpreting agreements and commitments, and how to
ensure that countries trade policies confirm with them. That way, the risk of disputes
spilling over into political or military conflict is reduced.
By lowering trade barriers, the WTOs system also breaks down other barriers between people
and nations.
At the heart of the system known as the multilateral trading system- are the WTOS
agreements, negotiated and signed by a large majority of the worlds trading nations, and ratified
in their parliaments, these agreements are the legal ground rules for international commerce.
Essentially, they are contracts, guaranteeing member countries important trade rights. They also
bind government to keep their trade policies within agreed limits to everybodys benefits.
The agreements were negotiated and signed by government. But their purpose is to help
producers of goods and services. Exporters and importers conduct their business.
OBJECTIVES OF WTO
1)

Trade without Discrimination:Trade without discrimination through the application of Most Favoured Nation (MFN) Principle

As per MFN clause, a member nation of WTO must accord (give) the same preferential treatment to other
member nations which it gives to any other member nation.
2)

Raising The Standard Of Living:-

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Website: www.indusedu.org (ISSN 2249-9482, Volume 4, Issue 4, April 2014)
Raising the standard of living and incomes and ensuring full employment of the citizens of its
member nations.
3)

Optimum Use of World's Resources:Ensuring optimum use of world's resources and, thereby, expanding world production and trade

of goods as well as services.

4)

Settlement of Disputes:Settlement of disputes among members through consultation, conciliation, and as a last resort

through dispute settlement procedures

5)

Growth of Less Developed Countries (LDCs):It recognizes the need for positive efforts designed to ensure that developing countries especially

the LDCs, secure a better share of growth in international trade.

6)

Protection of Environment
Preserving and protecting the environment of the world so as to benefit all the nations of the

world.
7)

Enlargement of Production and Trade

WTO aims to enlarge production and trade of goods as well as services.

8)

Employment
WTO aims at generating full employment and increase in effective demand.

FUNCTIONS OF WTO
WTO has following functions
1)

Implementation of Reduction in Trade Barriers

WTO shall check the implementation of tariff cuts and reduction of non-tariff measures agreed
upon the member nations at the conclusion of Uruguay Round.

2)

Forum for Negotiation

WTO shall provide the forum of negotiations among its members concerning their multilateral
trade relations.

3)

Settlement of Disputes
WTO shall administer the understanding on rules and procedures governing the settlement of
disputes.

4)

Assistance to IMF and IBRD

WTO shall co-operate with IMF, IBRD and its affiliated agencies to achieve greater coherence in
global economic policy.

5)

Administration of Agreements

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WTO shall look after the administration of 29 agreements (signed at the conclusion of Uruguay
Round in 1994), plus a number of other agreements, entered into after Uruguay Round.
6)

Examination of Trade Policies

WTO shall regularly examine the foreign trade policies of member nations, to see that such
policies are in line with WTOs guidelines.

7)

Consultancy Services
WTO shall keep a watch on the developments in the world economy and it provides consultancy
services to its member nations.

8)

Collection of Foreign Trade Information

WTO shall collect information on import - export trade and on various trade measures and other
trade statistics of member nations.

THE WTO AGREEMENTS

How can you ensure that trade is as fair as possible and is free as is practical? By negotiating
rules and abiding by them:The WTOs rules- the agreements- are the result of negotiations between the members.
Thecurrent set were the outcome of 1986-1994 Uruguay Round negotiations which include a
major revision of the original general agreement on traffic and trade(GATT).
GATT is now the WTOS principal rule back for trade in goods.TheUruguay round also created
a new rule for dealing with trade in services relevant aspects of intellectual property. Dispute
settlements and trade policy reviews. The complete set runs to some 30000 pages consisting of
about 30 agreements and separate commitments (called schedules) made by individuals members
in specific areas such as lower costume duty and services market-opening.The past 50 years have
seen an exceptional growth in world trade. Merchandise exports grew on average by 6%
annually. Total trade in 2000 was 22-times the level of 1950. GATT and the WTO have helped
to create a strong and prosperous trading system contributing to unprecedented growth.
In the same year, 40 governments successfully concluded negotiations for tariff-free tradein
information technology products, and 70 members concluded a financial services dealcovering
more than 95% of trade in banking, insurance, securities and financialinformation.
In 2000, new talks started on agriculture and services. These have now been incorporatedinto a
broader work programmer, the Doha Development Agenda (DDA), launched at thefourth WTO
Ministerial Conference in Doha, Qatar, in November 2001. The agenda adds negotiations and

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Website: www.indusedu.org (ISSN 2249-9482, Volume 4, Issue 4, April 2014)

other work on non-agricultural tariffs, trade and environment, WTO rules such as anti-dumping
and subsidies, investment, competition policy, trade facilitation, transparency in government
procurement, intellectual property, and a range of issues raised by developing countries as
difficulties they face in implementing the present WTO agreements.The system was developed
through a series of trade negotiations, or rounds, held underGATT. The first rounds dealt mainly
with tariff reductions but later negotiations included other areas such as anti-dumping and nontariff measures. The last round the 1986-94Uruguay Round led to the WTOs creation.The
negotiations did not end there. Some continued after the end of the Uruguay Round.In February
1997 an agreement was reached on telecommunications services, with 69Governments agreeing
to wide-ranging liberalization measures that went beyond thoseAgreed in the Uruguay
Round.Through these agreements, WTO agreements operate a nondiscriminatory trading system
that spells out their rights and their allegations,each country receives guarantee that its export
will be treated fairly and consistently in other countries market. Each promises to do the same for
imports into its on market. The system also gives developing countries some flexibility in
implementing their commitments.
GOODS
It all began with trade in goods from 1947 to 1994 was forum for negotiation lower costumes
duty rates other trade barriers, text of general agreement spelt of import rules , particularly
nondiscrimination.Since 1995, the updated GATT has become WTOs Umbrella agreement for
trade in good. It has connects it dealing with specific sectors such as date tradings, subsidies
and action taken against dumping.
SERVICES
Banks,insurance,firm, telecommunication companies, looking to do business abroad can now
enjoy the same principals of freer and fairer trade that originally only applied to trade in goods.
INTELLCTUAL PROPERTY
The WTOs intellectual property agreements amount to rule for trade and investments in idea
and creativity. The rule state how copyrights, patents, trademarks, geographical names used to
identify products, industrialdesigns, integrated circuit layout designs and undisclosed
information such as trade secrets-intellectual property- should be protects when trade is
involved.

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International Journal of Research in Engineering & Social Sciences

IMPACT FACTOR: 4.16
Website: www.indusedu.org (ISSN 2249-9482, Volume 4, Issue 4, April 2014)

DISPUTE SETTELEMENT
The WTOs procedure for resolving trade quarrels under the dispute settlement understanding is
vital for enforcing the rules and therefor ensuring that trade follows smoothly. Countries bring
disputes to WTO is they think their rights. Under the agreements are being infringed. Judgment
by specially- appointed independent exports are based on interpretations of the agreements and
individuals countries commitments.The system encourages countries to settle their differences
through consultation. Failing that, they can follow a carefully mapped out, stage-by-stage
procedure that includes the possibility of a ruling by a panel of experts, and the chance to appeal
the ruling on legal grounds. Confidence in the system is borne out by the number of cases
brought to the WTO more than 300 cases in ten years compared to the 300 disputes dealt with
during the entire life of GATT (1947-94).
POLICY REVIEW
The Trade Policy review mechanisms purpose is to improve transparency to create a greater
understanding of policies that countries are adopting, and to assess their impact. Many members
also see the reviews as constructive feedback in their policies.
TECHNICAL ASSISTANCE AND TRAINING
The WTO organizes hundreds of technical cooperation missions to developing countries
annually. It holds on average three trade policy courses each year in Geneva for government
officials. Regional seminars are held regularly in all regions of the world with a special emphasis
on African countries. Training courses are also organized in Geneva for officials from countries
in transition from central planning to market economies. The WTO has set up reference centers
in over 100 trade ministries and regional organizations in capitals of developing and leastdeveloped countries. These centers provide computers and internet access to enable ministry
officials to keep abreast of events in the WTO through online access to the WTOs immense
database of official documents and other material. Efforts are also being made to help countries
that do not have permanent representatives in Geneva.
DEVELOPMENT AND TRADE
Over Three quarters of WTO members are developing or least developed countries. All WTO
agreements contain special provision for them, including longer time periods to implements
agreements and commitments, measures to increase their trading. Opportunities and support to

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IMPACT FACTOR: 4.16
Website: www.indusedu.org (ISSN 2249-9482, Volume 4, Issue 4, April 2014)

help them build the infrastructures for WTO works handle dispute and implement technical
standards.Before that in 1997, a high level meeting on trade initiatives and technical assistance
for least developed countries resulted in an integrated framework involving intergovernmental
agencies to help least developed countries increase their ability to trade and some additional
preferential market access agreement. A WTO committee on trade and development, assisted by
a subcommittee on least developed countries looks at developing countries special needs.
STRUCTURE
The WTO has 153 members, accounting for almost 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, the General Agreement on Tariff and Trade
(GATT).
The WTOs top level decision-making body is the Ministerial Conferencewhich meets at least
once every two years. Below this is the General Council(normally ambassadors and heads of
delegation in Geneva.At the next level, the Goods Council, Services Council and Intellectual
Property(TRIPS)

Councilreport

to

the

General

Council.

Numerous

specialized

committees,working group and working partiesdeal with the individual agreements and other
areas such as the environment, development, membership applications and regional trade
agreements.
SECRETARIAT
The WTO Secretariat, based in Geneva, has around 625 sta and is headed by a director-general
.it does not have branch office outside Geneva. Since decisions are taken by the Members
themselves, the Secretariat does not have the decision-making role those other international
bureaucracies are given. The Secretariats main duties are to supply technical support for the
various councils and committees and the ministerial conferences, to provide technical assistance
for developing countries, to analyze world trade, and to explain WTO airs to the public and
media. The Secretariat also provides some forms of legal assistance in the dispute settlement
process and advises governments wishing to become members of the WTO. The annual budget is
roughly 189 million Swiss francs.
WTO AND INDIA:

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India is one of the founder members of world trade organization. India has most of its foreign
trade with the member countries of WTO.
On 5 March 2014, India notified the WTOs Committee on Safeguards that it initiated on 28
February 2014 a safeguard investigation on bare elastomeric filament yarn.
In the notification, India indicated as follows:
All interested parties may make their views known within a period of 30 days from the date of
the notice issued by the Director General (Safeguards) i.e. 28 February 2014 to:
Any other party to the investigation who wishes to be considered as an interested party may
submit its request so as to reach the Director General (Safeguards) on the aforementioned
address within 15 days from the date of the aforesaid date of notice of the Director General
(Safeguards).
IMPACT OF WTO ON INDIAN ECONOMY
The impact of WTO on Indias economy is staged as follows:I.

Positive Impact I Benefits I Advantages I Gains from WTO:The Positive impact of WTO on India's economy can be viewed from the following
points:1)

Increase In Export Earnings:Estimates made by World Bank, Organization for Economic Co-operation and

Development (OECD) and the GATT Secretariat, shows that the income effects of the
implementation of Uruguay Round package will be an increase in traded merchandise goods. It
is expected that Indias share in world exports would improve.
2)

Agricultural Exports:Reduction of trade barriers and domestic subsidies in agriculture is likely to raise

international prices of agricultural products. India hopes to benefit from this in form of higher
export earnings from agriculture. This seems to be possible because all major agriculture
development programmes in India will be exempted from the provisions of WTO Agreement.
3)

Export of Textiles and Clothing:With the phasing out of MFA (Multi - Fibber Arrangement), exports of textiles and

clothing will increase and this will be beneficial for India. The developed countries demanded a

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IMPACT FACTOR: 4.16
Website: www.indusedu.org (ISSN 2249-9482, Volume 4, Issue 4, April 2014)

15 year period of phasing out of MFA, the developing countries, including India, insisted that it
be done in 10 years. The Uruguay Round accepted the demand of the latter. But the phasing out
Schedule favours the developed countries because a major portion of quota regime is going to be
removed only in the tenth year, i.e. 2005. The removal of quotas will benefit not only India but
also every other country'.
4)

Multilateral Rules and Disciplines:The Uruguay Round Agreement has strengthened multilateral rules and disciplines. The

most important of these relate to anti - dumping, subsidies and countervailing measures,
safeguards and disputes settlement. This is likely to ensure greater security and predictability of
the international trading system and thus create a more favorable environment for India in the
New World Economic Order.
5)

Growth to Services Exports:Under GATS agreement, member nations have liberalized service sector. India would

benefit from this agreement. For Ex: - Indias services exports have increased from about 5
billion US $ in 1995 to 96 billion US $ in 2009-10. Software services accounted for about 45%
of service exports.
6)

Foreign Investment:India has withdrawn a number of measures against foreign investment, as the

commitments made to WTO. As a result of this, foreign investment and FDI has increased over
the years. A number of initiatives have been taken to attract FDI in India between 2000 and
2002. In 2009-10, the net FDI in India was US $ 18.8 billion.
II.

Negative Impact / Problems I Disadvantages Of WTO on Indian Economy

1)

TRIPs:The Agreement on TRIPs at Uruguay Round weighs heavily in favours of Multinational

Corporations and developed countries as they hold a very large number of patents. Agreement on
TRIPs will work against India in several ways and will lead to monopoly of patent holding
MNCs. As a member of WTO, India has to comply with standards of TRIPs.
The negative impact of agreement on TRIPs on Indian economy can be stated as follows
a)

Pharmaceutical Sector:-

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Under the Patents Act, 1970, only process patents were granted to chemicals, drugs and
medicines. This means an Indian pharmaceutical company only needed to develop and patent a
process to produce and sell that drug. This proved beneficial to Indian pharmaceutical companies
as they were in a position to sell quality medicines at low prices both in domestic as well as in
international markets. However, under the agreement on TRIPs, product patents needs to be
granted. This will benefit the MNCs and it is feared that they will increase the prices of
medicines heavily, keeping them out of reach of poor. Again many Indian pharmaceutical
companies may be closed down or taken over by large MNCs.
b)

Agriculture:The Agreement on TRIPs extends to agriculture through the patenting of plant varieties.
This may have serious implications for Indian agriculture. Patenting of plant varieties may
transfer all gains in the hands of MNCs who will be in a position to develop almost all new
varieties with the help of their huge financial resources and expertise.

c)

Microorganisms:The Agreement on TRIPs also extends to Microorganisms as well. Research in micro organisms is closely linked with the development of agriculture, pharmaceuticals and industrial
biotechnology. Patenting of micro - organisms will again benefit large MNCs as they already
have patents in several areas and will acquire more at a much faster rate.

2)

TRIMs:Agreement on TRIMs provide for treatment of foreign investment on par with domestic

investment. This Agreement too weights in favours of developed countries. There are no
provisions in Agreement to formulate international rules for controlling restrictive business
practices of foreign investors. In case of developing countries like India, complying with
Agreement on TRIMs would mean giving up any plan or strategy of self - reliant growth based
on locally available technology and resources.
3)

GATS:One of the main features of Uruguay Round was the inclusion of trade in services in

negotiations. This too will go in favours of developed countries. Under GATS agreements, the

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member nations have to open up services sector for foreign companies. The developing countries
including India have opened up services sector in respect of banking, insurance, communication,
telecom, transport etc. to foreign firms. The domestic firms of developing countries may find it
difficult to compete with giant foreign firms due to lack of resources & professional skills.
4)

Non - Tariff Barriers:Several countries have put up trade barriers and non - tariff barriers following the

formation of WTO. This has affected the exports from developing countries. The Union
Commerce Ministry has identified 13 different non - tariff barriers put up by 16 countries against
India. For ex. MFA (Multi - fibber arrangements) put by USA and European Union is a major
barrier for Indian textile exports.
5)

Agreement on Agriculture (AOA)

The AOA is biased in favours of developed countries. The issue of food security to

developing countries is not addressed adequately in AOA. The existence of global surpluses of
food grains does not imply that the poor countries can afford to buy. The dependence on
necessary item like foodgrains would adversely affect the Balance of Payment position.
6)

Inequality within the Structure of WTO

There is inequality within the structure of WTO because the agreements and amendments

are in favours of developed countries. The member countries have to accept all WTO agreements
irrespective of their level of economic development.

CONCLUSSION
The tension between rising demand for naturalresources due to population and income growth on
the one hand, and their scarcity and exhaustibility on the other, is a challenge facing modern
society. This tension seems likely to increase, especially as the global economy recovers from
recession and the circle of development and industrialization continues to widen. Fears of
inadequate access to supplies in resource scarce countries and of inappropriate exploitation in
resource-rich regions could lead to trade conflict or worse. Adequately defined rules for
international cooperation, built on a shared perception of gain, will contribute to the avoidance of
such an outcome. In sum, the analysis in this report argues strongly for cooperation. The
importance of natural resources to virtually every aspect of human activity, and the particular

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International Journal of Research in Engineering & Social Sciences

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Website: www.indusedu.org (ISSN 2249-9482, Volume 4, Issue 4, April 2014)

characteristics of these products, make it vital that governments work together to find common
ground and appropriate trade-offs. Such cooperation should aim to ensure sound resource
management, equity and mutual gain. The trade aspects of cooperation have been a particular
focus of the report, and the case has been made for seeking accommodation through effective
multilateral trade rules. Well-designed rules on trade are not only about securing the standard
gains from trade; they are also a key component of cooperation in domains such as
environmental protection and domestic policies to manage scarce resources.

REFERENCES:
1. Members and Observers at WTO official website
2. Functions of the WTO, IISD
3. Understanding the WTO: What We Stand For_ Fact File
4. "WTO Secretariat budget for 2011". WTO official site. Retrieved 25 August 2008
5. Timeline: World Trade Organization at BBC News, 15 February 2012
6. Languages, Documentation and Information Management Division at WTO official sites

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