1 What is WTO and whats the need for an institutional arrangement

like WTO?
a Is an intergovernmental organization which regulates international trade.
The WTO officially commenced on 1 January 1995 under the Marrakesh
Agreement, signed by 123 nations on 15 April 1994, replacing the General
, Agreement on Tariffs and Transfer (GATT), which commenced in 1948.
Headquarter: Geneva, Switzerland
a

Key Objectives
i
ii
iii
iv
v
vi

Purpose
i
ii

To set and enforce rules for international trade,

To provide a forum for negotiating and monitoring further trade
liberalization,
To resolve trade disputes,
To increase the transparency of decision-making processes,
To cooperate with other major international economic institutions
involved in global economic management, and
To help developing countries benefit fully from the global trading
system

Protects the interests of small and weak countries against

discriminatory trade practices of large and powerful countries.
To resist lobbying efforts by domestic interest groups seeking special
favours. To bring greater certainty and predictability to international
markets and enhance economic welfare and reduce political tensions

iii

To provide a public forum where the power of consensus can

help resolve disputes

iv

To make trade rules predictable and enforceable

WTO is a bulwark against trade protectionism as its global system

lowers trade barriers through negotiation and applies the principle of
non-discrimination

vi

To encourage Free Trade thereby reduce tariff barriers, enable

comparative advantage and act as engine of growth

Main functions of WTO

i

Administering WTO trade agreements

ii

Acting as a forum for trade negotiations

iii
iv

Handling trade disputes

Monitoring national trade policies

Technical assistance and training for developing countries

vi

Cooperation with other international organizations

1 Concepts related to WTO

a Free and fair trade
Free trade, also called laissez-faire, a policy by which a government does
not discriminate against imports or interfere with exports by applying
tariffs to imports or subsidies to exports. A free-trade policy does not
necessarily imply that a country abandons all control and taxation of
imports and exports. WTO is the primary international body to help
promote free trade, by drawing up the rules of international trade.
a

Non Discrimination- MFN and National Treatment

National treatment

The WTOs most-favoured-nation

a basic principle of WTO that

prohibits discrimination between
imported and domestically
produced goods with respect to
internal taxation or other
government regulation

Under the WTO agreements, countries cannot

normally discriminate between their trading partners
grant equal market access to all other members and
that both domestic and foreign suppliers must be
treated equally. This principle is known as mostfavoured-nation (MFN) treatment

The principle is formulated in

Article 3 of the GATT 1947 and in
the TRIPS

first article of the GATT, and Article 4 TRIPS

aim of this trade rule is to prevent

internal taxes or other regulations
from being used as a substitute
for tariff protection

Some exceptions are allowed. For example, countries

can set up a free trade agreement that applies only
to goods traded within the group discriminating
against goods from outside. Or they can give
developing countries special access to their ma

National treatment only applies

once a product, service or item of
intellectual property has entered
the market

In general, MFN means that every time a country

lowers a trade barrier or opens up a market, it has to
do so for the same goods or services from all its
trading partners

Tariff lowering
Customs duties on merchandise imports are called tariffs. Tariffs give a
price advantage to locally-produced goods over similar goods which are
imported, and they raise revenues for governments. One result of
the Uruguay Round was countries commitments to cut tariffs and to
bind their customs duty rates to levels which are difficult to raise. The
current negotiations under the Doha Agenda continue efforts in that
direction in agriculture and non-agricultural market access.

Removal of quota

Quota in international trade, is the government-imposed limit on the

quantity, or in exceptional cases the value, of the goods or services that
may be exported or imported over a specified period of time.
Quota Elimination refers to an initiative to eliminate the use of quotas in
all textile and clothing trade between nations which are members of
the WTO at Uruguay round in 1994 to retire the Multi Fibre Arrangement.
The WTO Agreement on textile and clothing, is the regulation governing
textile and clothing and implements this commitment.

1 Major agreements at WTO

All these agreements were concluded during negotiations of Uruguay
round i.e. in or before 1995. In most agreements new proposals have been
brought in by different countries.
a

Agreement on subsidies and countervailing measures SCM

The WTO SCM Agreement contains a definition of the term subsidy. The definition
contains three basic elements: (i) a financial contribution (ii) by a government or any
public body within the territory of a Member (iii) which confers a benefit. All three of
these elements must be satisfied in order for a subsidy to exist.
A financial contribution to be a subsidy must be made by or at the direction of a
government or any public body within the territory of a Member. Thus, the
SCM Agreement applies not only to measures of national governments, but also to
measures of sub-national governments and of such public bodies as state-owned
companies.

Such Financial contribution must also confer benefit to the industry. In cash grants,
benefit will be straightforward to identify, but in cases where there is loan or capital
infusion from government/ Public body, it will not be that easy. Such issues are
resolved by appellate body of WTO.

Only specific subsidies are subject to the SCM Agreement disciplines. There are fou
types of specificity within the meaning of the SCM Agreement:

Enterprise-specificity. A government targets a particular company or companies fo

subsidization;
Industry-specificity. A government targets a particular sector or sectors for
subsidization.
Regional specificity. A government targets producers in specified parts of its
territory for subsidization.

Prohibited subsidies. A government targets export goods or goods using domestic

inputs for subsidization. 2 types of prohibited subsidy:

Subsidies contingent upon export performance.

Subsidies contingent upon use of domestic content over imported goods.

Actionable subsidies. These are not prohibited but countries can take Countervailing
measures against these subsidies or they can be challenged in dispute resolution
body of WTO.
For a subsidy to be actionable, 3 conditions should be present

Injury to domestic industry due to subsidized imports of other country.

Serious prejudice usually arises as a result of adverse effects (e.g., export
displacement) in the market of the subsidizing Member or in a third country market.
For e.g. If India starts subsidizing its textile sector heavily, then China can claim that
this subsidy is causing serious prejudice to its textile industry.
Nullification or impairment of benefits accruing under the GATT 1994. It
means when benefit to be accrued from reduction of tariffs (under GATT) are nullified
by increase in subsidies.
Countervailing Measures against such subsidies are: imposing countervailing duties
antidumping duty.

Countervailing Duty It is imposed on imported goods to counterbalance

subsidy provided by the exporter country.
Anti-Dumping Duty At times countries resort to subsidize production or
exports so heavily that exporters are able to sell goods below domestic price or even
cost of production in foreign markets. It is aimed at wiping out target countrys
industry. Anti-Dumping Duty is aimed at counterbalancing such
subsidization. Recently, India imposed Anti- Dumping duty on imports of stainless ste
from China.

General Agreement on Trade in Services GATS

4 modes of supplying services:
1 Cross-border supply is defined to cover services flows from the
territory of one Member into the territory of another Member (e.g.
banking or architectural services transmitted via telecommunications
or mail);
2 Consumption abroad refers to situations where a service consumer
(e.g. tourist or patient) moves into another Member's territory to
obtain a service;
3 Commercial presence implies that a service supplier of one Member
establishes a territorial presence, including through ownership or
lease of premises, in another Member's territory to provide a service
(e.g. domestic subsidiaries of foreign insurance companies or hotel
chains); and
4 Presence of natural persons consists of persons of one Member
entering the territory of another Member to supply a service (e.g.
accountants, doctors or teachers). The Annex on Movement of
Natural Persons specifies, however, that Members remain free to

operate measures regarding citizenship, residence or access to the

employment market on a permanent basis.
a Trade-Related Aspects of Intellectual Property Rights (TRIPS)

The WTOs intellectual property agreement amounts to rules for trade and investment in
ideas and creativity. The rules state how copyrights, patents, trademarks, geographical
names used to identify products, industrial designs, integrated circuit layout-designs and
undisclosed information such as trade secrets intellectual property should be
protected when trade is involved
TRIPS Agreement recognizes that some licensing practices or conditions
pertaining to intellectual property rights which restrain competition may
have adverse effects on trade and may impede the transfer and
dissemination of technology.
Member countries may adopt appropriate measures to prevent or control
practices in the licensing of intellectual property rights which are abusive
and anti-competitive.
Concerns for India
US wants to do away with a liberal IPR regime which allows evergreening
of patents. Indian Patent Act as amended in 2005 allows protection of both
product and process, but it allows patent only when there is enhanced
efficacy of the substance. If a company re-invents a previously known
substance in to new form e.g. from Solid to Liquid, then protection cant
be granted. India due to its promising pharmaceutical industry exploits
these powers religiously. Since Indias course is not violative of TRIPS,
India cant be challenged in WTO.

TRIMS
It recognizes that certain investment measures can restrict and distort
trade. It states that WTO members may not apply any measure that
discriminates against foreign products or that leads to quantitative
restrictions, both of which violate basic WTO principles. A list of prohibited
TRIMS, such as local content requirements, is part of the
Agreement. Recently India was dragged to WTO by U.S. over Indias
specification of Domestic Content Requirement in relation to procurement
of Solar Energy cells and equipments.

Domestic Content Requirement in Solar Panel

Recently, India lost this case to US in WTOs dispute resolution body.
India has prescribed domestic content requirement for procurement of
Solar cells/panels for its target of installing 100 GW of solar power by

2022. Under this some (about 5%) procurement was reserved to be

bought from Indian vendors, to promote indigenous industry. US alleged
that this is against principles of Non Discrimination and National
Treatment.
India now has appealed against this decision and can get 2 year reprieve
from rolling back of scheme.
Earlier this year, WTO had ruled against the Indian ban on import of
poultry meat, eggs and live pigs from the US, stating that it was not
consistent with international norms.

a Agreement On Agriculture
It was aimed to remove trade barriers and to promote transparent market
access and integration of global markets. Agreement is highly complicated and
controversial; it is often criticized as a tool in hands of developed countries to exploit
weak countries. Negotiations are still going on for some of its aspects.
Agreement on agriculture stands on 3 pillars
i

Domestic Support It refers to subsidies such guaranteed Minimum Price or Input

subsidies which are direct and product specific. Under this, Subsidies are categorize
into 3 boxes

Green Box Subsidies which are no or least market

distorting includes income-support payments (decoupled income support),
safety net programs, payments under environmental programs, and
agricultural research and-development subsidies
e.g. MSP regimes
Blue Box Only Production limiting Subsidies under this are allowed
They cover payments based on acreage, yield, or number of livestock in a base
year.
Amber Box contains category of domestic support that is
scheduled for reduction based on a formula called the Aggregate Measure of
Support (AMS).
The AMS is the amount of money spent by governments on agricultural
production, except for those contained in the Blue Box, Green
Box and de minimis.
Note on De-Minimis provision

Under this provision developed countries are allowed to maintain trade distorting
subsidies or Amber box subsidies to level of 5% of total value of agricultural
output. For developing countries this figure was 10%.
Indias amber box subsidies are likely to cross 10% level allowed by de Minimis

provision

Market Access
The market access requires that tariffs fixed (like custom duties) by individual
countries be cut progressively to allow free trade. It also required countries to
remove non-tariff barriers and convert them to Tariff duties.

If India is able to diversify its production and add value by food processing, then thi
is a win-win deal for India. A number of commodities are exported to West and low
tariffs in west will benefit Indian suppliers.
i

Export Subsidy: These can be in form of subsidy on inputs of agriculture, making

export cheaper or can be other incentives for exports such as import duty remission
etc. These can result in dumping of highly subsidized (and cheap) products in other
country. This can damage domestic agriculture sector of other country.

But USA is dodging this provision by its Export credit guarantee program. In this, US
gov. gives subsidized credit to purchaser of US agricultural products, which are to b
paid back in long periods. This is generally done for Food Aid programs, under which
food aid is send massively to under developed countries. India also received this Aid
in 1960s. But this is only at concessional rates and credit options. But this results in
dependence on foreign grain in recipient countries and destroys their domestic
agriculture. So this is equally trade distorting subsidy, not currently under ambit of
WTOs AOA.

Subsidies and support to agriculture should be controlled and better targeted. WTO
negotiations also claim to work towards this direction, but inherent conflicting and
vested interest of few countries are too influential in WTO. Every country has
different requirements and different product mix, so flexibility is must. Ensuring foo
security is a domestic concern of a nation, international community can just advice
but cant coerce other sovereign country. Thus, India has to make its expenditure
more effective, with dynamic policy and resist any outside pressure which is
misdirected towards negative results for Indian people.

a Special Safeguard Mechanism

A Special Safeguard Mechanism (SSM) would allow developing countries to
impose additional (temporary) safeguard duties in the event of an
abnormal surge in imports or the entry of unusually cheap imports.
Special Products
At the 2005 WTO Ministerial Conference in Hong Kong, members agreed to
allow developing countries to designate an appropriate number of tariff

lines as Special Products (SPs) based on food security, livelihood

security and rural development
a Multifibre Arrangement and Agreement on Textiles and Clothing
The MFA was introduced in 1974 as a short-term measure intended to
allow developed countries to adjust to imports from the developing world.
Developing countries and countries without a welfare state have
an absolute advantage in textile production because it is labor-intensive
and they have low labor costs.
a It was decided to bring the textile trade under the jurisdiction of the World
Trade Organization. The Agreement on Textiles and Clothing provided for
the gradual dismantling of the quotas that existed under the MFA. This
process was completed on 1 January 2005. However, large tariffs remain
in place on many textile products.
b Sanitary and Phyto- Sanitary Measures
The Agreement sets out the basic rules for food safety and animal
and plant health standards
It allows countries to set their own standards. But it also says
regulations must be based on science

1 Important Ministerial Meets

i.
Sing
The Singapore issues term refers to areas of
apore
1.
trade and investment;
ministerial
2.
trade and competition policy;
meet and
3.
trade facilitation; and
Singapore
4.
transparency in government procurement,
issues
1996
These four issues are collectively are known as the Singapore issu
because first time in Singapore, they were brought up as possible
areas on which the multilateral body could initiate negotiations.

The USA and Norway pushed for bringing in labour standards in th

WTO, but developing countries were able to get the meeting to
agree that the International Labour Organisation is the competent
body to do such work.
Indias stand

On investment and competition policy, India feels that

having a multilateral agreement would be a serious impingement
the sovereign rights of countries
On competition policy, India has pointed out that there i
2.
no clarity on whether these would include export cartels. The
Organisation of Petroleum Exporting Countries (OPEC) is perhaps
best example of an export cartel that rigs prices by fixing product
ceilings.

1.

On transparency in government procurement, the Indian

position is that while the principle is entirely acceptable, there
cannot be a universal determination of what constitutes transpare
procedures.
On trade facilitation, India has argued that once again
4.
while the idea is unexceptionable, developing countries may not
have the resources by way of technology, or otherwise to bri
their procedures in line with those in the developed world over the
short to medium term.

3.

Ii. Doha
Ministerial
meet and Doha
Development
Agenda 2001

Developed countries tried to push a lopsided agreement on

Singapore Issues down the throat of developing countries, but latt
successfully resisted. The developed countries agreed to a
developmental agenda and new round of negotiations Doha
Development Round begun at 4th ministerial meet in Doha. It is sa
that this was agreed to by developed countries in expectation tha
contents of Singapore Issues will be agreed by dissidents.
Main issues of Doha Development Round
1.

Agriculture In Qatar 2001, called for the end agreemen

to commit to substantial improvements in market access; reductio
(and ultimate elimination) of all forms of export subsidies (includin
under Green and blue box); and substantial reductions in tradedistorting support.
The United States was asked by the EU and the developing
countries to make a more generous offer for reducing tradedistorting domestic support for agriculture. The United States
insisting that the EU and the developing countries agree to
make more substantial reductions in tariffs and to limit the
number of import-sensitive and special products (AOA) to
exempt from cuts. Import-sensitive products are of most
concern to developed countries like the European Union, whi
developing countries are concerned with special products
those exempt from both tariff cuts and subsidy reductions
because of development, food security, or livelihood
considerations. Brazil has emphasized reductions in tradedistorting domestic subsidies, especially by the United States
(some of which it successfully challenged in the WTO U.S.-Bra
cotton dispute), while India has insisted on a large number of
special products that would not be exposed to wider market
opening.
1.
Access to patented medicines A major topic at the Doh
ministerial regarded the WTO Agreement onTrade-Related Aspects
Intellectual Property Rights (TRIPS). The issue involves the balanc
of interests between the pharmaceutical companies in developed
countries that held patents on medicines and the public health
needs in developing countries. Before the Doha meeting, the Unit

States claimed that the current language in TRIPS was flexible

enough to address health emergencies, but other countries insiste
on new language.
On 30 August 2003, WTO members reached agreement on th
TRIPS and medicines issue. Voting in the General Council,
member governments approved a decision that offered an
interim waiver under the TRIPS Agreement allowing a membe
country to export pharmaceutical products made under
compulsory licenses to least-developed and certain other
members. It also allows members to not to allow evergreenin
of Patents.
1.
Special and differential treatment (SDT) SDT as a
principle has been there since 1970s in multilateral negotiations
under GATT. In Doha round, members agreed that Developing and
Least developed countries will continue to be eligible for a favorab
treatment. However, of late developed countries are dragging the
feet here too. They now claim that big developing countries like
India, China, Brazil and South Africa are unreasonable in their
demand and only least developed countries are rightful claimant o
differential treatment. Here it is inconceivable that poor countries
like India are to be treated at par with western developed world.
the December 2005 Hong Kong ministerial, members agreed to fiv
S&D provisions for least developed countries(LDCs), including the
duty-free and quota-free access.
2.
Implementation issue: Developing countries claim that
they have had problems with the implementation of the agreemen
reached in the earlier Uruguay Round because of limited capacity
lack of technical assistance. They also claim that they have not
realized certain benefits that they expected from the Round, such
increased access for their textiles and apparel in developed-count
markets. They seek a clarification of language relating to their
interests in existing agreements.
3.
There was also an agreement on prevention of
appropriation of Traditional Knowledge of developing world by
Corporations in west
Cancun

Ministerial Meet
Abandonment
of Singapore
issues 2003

At Fifth WTO Ministerial Conference, the main task was t

take stock of progress in negotiations and other work under the Do
Development Agenda but position remained entrenched as they
were.
The only positive development was the creation and
survival of the new developing country negotiating group, the G-20

Geneva Talks
2004

Singapore issues were dropped from Doha Agenda.

Further, it was agree to proceed in areas of agriculture,
Non- Agricultural market access, Services and Trade facilitation.

Potsdam , 2007

In June 2007, negotiations within the Doha round broke down at a

conference in Potsdam, as a major impasse occurred between the
USA, the EU, India and Brazil. The main disagreement was over
opening up agricultural and industrial markets in various countries
and how to cut rich nation farm subsidies.
Bali Ministerial
Meet and Bali
Package Trade
Facilitation and
Peace Clause
2013

Nairobi

Ministerial Meet
2015

In Bali Trade facilitation was agreed to by all nations and

for adjustments/adaptations to limits under Agreement on
Agriculture; a Peace clause was agreed at. Peace clause gave
countries 4 year times to adjust to the limit and avoid sanctions.
Date for ratification of Bali agreement was 31 July, 2014
on which India declined to ratify unless a permanent solution is
reached. After this, in November, India US reached understanding
in which time limit of 4 years was removed and in return Trade
Facilitation was agreed to by India.
At Bali, Developed countries were able to woo under
developed countries on basis of a Special Package for them direc
toward Social and physical infrastructure. India as a result was
isolated in all this, only South Africa extended some support to
Indias stand.
Trade Facilitation requires member countries to invest in
Infrastructure that facilitates Imports and exports, simplify custom
procedures and remove other non-tariff barriers.
It should be noted that development of Infrastructure is
already a priority for government and it is much desirable in
agriculture too, as India is net exporter of agri products. But issue
was of 4 years of peace clause, which now stands removed.
Trade facilitation deal was marketed by developed
countries as a progressive and much needed deal for good of all ty
of countries. It is being said that it will boost up Global GDP by $ 1
Trillion and will add millions of new job. This argument has a little o
no empirical backing and it is feared that western supplier will inva
domestic markets of developing and underdeveloped countries.
Trade facilitation along with special package is like saying that
gains of developed countries will be so big, that losses of underdeveloped countries will be lucratively compensated by them.

Recently, Nairobi meet was a huge disappointment for t

developing and under developed world. Here, U.S. trade
Representative called Doha Development Agenda a dead, outdate
and undesirable course. West is desperately trying to set aside
development aspect of negotiations, to which it had agreed in Doh
Its focus is now on Trade Facilitation Agreement of Bali
meet. They are trying to introduce new issues (including some
Singapore issues) such as Government Procurement, E-commerce,
Investment, Competition policy. To this India and other developing
countries took strong objection.

A large majority of developing countries led by India,

China, South Africa, Indonesia, Ecuador, and Venezuela prepared t
ground to ensure that the Doha Round of negotiations are not clos
by the two trans-Atlantic trade elephants.
They also proposed for a permanent solution for public
stockholding programmes for food security and a special safeguar
mechanism (SSM) to protect millions of resource-poor and lowincome farmers from the import surges from industrialized countri
Again, the two proposals were actively opposed by the U
which led a sustained campaign to ensure that there was neither a
outcome on continuing DDA negotiations nor a deal on SSM and
public stockholdings for food security.
Highlights of Nairobi outcomes:

Commitment to completely eliminate subsidies for farm

exports

Developed members have committed to remove export

subsidies immediately, except for a few agriculture products, and
developing countries will do so by 2018.
Developing members will keep the flexibility to cover
marketing and transport costs for agriculture exports until the end
2023, and the poorest and food-importing countries would enjoy
additional time to cut export subsidies.
The decision on Public Stockholding for Food Security
Purposes commits members to engage in finding a permanent
solution to this issue. Under the Bali Ministerial Decision of 2013,
developing countries are allowed to continue food stockpile
programmes, which are otherwise in risk of breaching the WTOs
domestic subsidy cap, until a permanent solution is found by the
11th Ministerial Conference in 2017.
Decision on a Special Safeguard Mechanism (SSM) for
Developing Countries recognizes that developing members will ha
the right to temporarily increase tariffs in face of import surges by
using an SSM. Members will continue to negotiate the mechanism
dedicated sessions of the Agriculture Committee.
One of the decisions of particular interests of least
developing Countries is Preferential Rules of Origin. It entails that
Made in LDC products will get unrestricted access to markets of
non-LDCs.
There was affirmation that Regional Trade Agreements
(RTAs) remain complementary to, not a substitute for, the
multilateral trading system (WTO).

Peace Clause - The term peace clause has been a cause of disquiet ever since India
dug in its heels on the issue of domestic food security in the World Trade Organisation
(WTO) negotiations, leading to a deadlock. Should the WTO have a say in Indias policy o

buying foodgrain at a fixed price from farmers and supplying it below cost to the poor?
India thinks not, but developed nations disagree.

After the developing and emerging nations clashed on the issue at Bali in 2013, they
cobbled together a temporary peace clause. The peace clause said that no country
would be legally barred from food security programmes even if the subsidy breached the
limits specified in the WTO agreement on agriculture. This peace clause was expected t
be in force for four years until 2017, by which time the protagonists hoped to find a
permanent solution to the problem.
Indias worry is that if the clause expires before a permanent solution is in place, food
security programmes and policies to protect farmers, such as Minimum Support Prices,
would come under siege.

The limited window offered by the Western powers for the peace clause was seen by Ind
as insufficient assurance. The clause also requires full disclosure of MSPs and annual
procurement for food security programmes, which the Government fears would leave
India open to questioning by other countries on domestic matters.

Discuss the salient features of the WTOs Trade facilitation agreement.

Concluded at the WTOs 2013 Bali Ministerial Conference, the TFA contains provisions for
expediting the movement, release and clearance of goods, including goods in transit. It
also sets out measures for effective cooperation between customs and other appropriate
authorities on trade facilitation and customs compliance issues. It further contains
provisions for technical assistance and capacity building in this area.

The TFA will enter into force once two-thirds of the WTO membership has formally
accepted the Agreement. India is the 76th WTO member to accept the TFA in April, 2016
The TFA broke new ground for developing and least-developed countries in the way it wi
be implemented. For the first time in WTO history, the requirement to implement the
Agreement was directly linked to the capacity of the country to do so. In addition, the
Agreement states that assistance and support should be provided to help them achieve
that capacity.

Implementation of the WTO Trade Facilitation Agreement (TFA) has the potential to
increase global merchandise exports by up to $1 trillion per annum, according to the
WTOs flagship World Trade Report released on 26 October 2015. Significantly, the Repo
also found that developing countries will benefit significantly from the TFA, capturing
more than half of the available gains.

1 Impact or other regional trade pacts like TPP on WTO?

TPP on WTO

Association of South East Asian Countries (ASEAN), European Union, North

American Union etc. are some associations that provide more liberal and seamless
access of members markets to fellow member countries.
This runs counter to objectives of WTO establishing a global rule based
system of trading with minimal barriers.
However, for so many different countries at different stages of socioeconomic development, it is impossible to agree to a common trading regime.
Consequently, countries lobby with group of likeminded countries and aim at arriving
a mutually symbiotic agreement which ensures a win-win deal for all participants.
Entering into a free trade agreement or formation of custom union may
violate Most favourable Nation principle of WTO. Hence, most such agreements are
entered into keeping in mind exceptions allowed by MFN principle. Agreements while
giving preferential treatment to few members must not create new trade barriers for
non members.
Recently, 12 nations led by United States concluded a Trans Pacific
Partnership Treaty (TPP). Treaty includes both developed and developing nations (like
Vietnam, Peru, and Chile).
It provides stringent provisions for Labour Standards, Environment Standard
and Intellectual Property. It gives power to private corporations, to sue member
countries for violation of terms of treaty. USs biggest trade partner China is not party
to treaty. Negotiations led by US are underway for a similar treaty with European
countries, dubbed as Trans-Atlantic partnership.
On the other hand India and China are participating in and leading
negotiations of Regional Comprehensive Economic partnership (RCEP) Agreement
which will reflect interests of developing countries in its final draft.
It is said that when such strong regional agreement (TPP and RCEP) will
emerge reflecting different positions taken by different countries, negotiations will sta
among these two groups and over time they will be subsumed under WTO.
It is feared that US is likely to use its dollar muscle to lure developing and
least developed countries to join these not so fair treaties.

1 National interest clause that India lost to

1 Impact of WTO
a Cases of Complaints against India

India Certain Measures Relating to Solar Cells and Solar Modules (Complainant: United
States)

India Anti-Dumping Duties on USB Flash Drives from the Separate Customs Territory of
Taiwan, Penghu, Kinmen and Matsu(Complainant: Chinese Taipei)
India Measures Concerning the Importation of Certain Agricultural
Products(Complainant: United States)
India Certain Taxes and Other Measures on Imported Wines and Spirits(Complainant:
European Communities)

Cases of Complaints by India

United States Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Product
from India (Complainant: India)
Turkey Safeguard measures on imports of cotton yarn (other than sewing thread)
(Complainant: India)
European Union and a Member State Seizure of Generic Drugs in Transit(Complainant:
India)
Hence, WTO is a body which provides opportunity to aggrieved country to bring unfair
trade practices to notice of Dispute Settlement body and to bring an end to such unfair
practice. This dimension of WTO makes it a desirable and neutral body as it seeks to
create a just global trading system.
a

Impact on Indian economy

WTO provides Negotiating options and strategies, market access, trade

facilitation and government procurement, TRIPS and GATS, and growth, poverty and
inequality.
The single-undertaking clause allow cross-sectoral bargaining, India needs t
learn the art of negotiation.
WTO is India's best hope for protecting its trading rights. India must consid
the direct benefits that flow from the demands put forward, define its negotiating
positions positively rather than negatively.
The TRIPS agreement affects the structure and functioning of the
pharmaceutical industry, which has serious implications for health care.
Dispute Resolution Mechanism of WTO is highly efficient. Chronological list
cases in WTO can be accessed here. Countries drag their trading partner to this body
when action of one country is perceived to be unfair and violative of any WTO
agreement, by other country.

The policies framed by the WTO have had the following impact on the Indian economy
Positive impact:

1. Boost in trade - India gained market access in several countries by virtue of bein
a member of the WTO as it obviated the need to enter into bilateral trade agreements
with them.

Indias merchandise exports have increased from 32 billion USD in 1995 to 310 billio
USD in 2014-15.
Indias service exports have increased from 5 billion USD in 1995 to 783 billion USD
2014-15.
2. Agricultural exports Curbing of trade barriers and domestic subsidies have

elevated the cost of agricultural products in the international markets, thus benefiting
the farmers.

3. Textile and clothing The dissolution of Multi-Fiber Arrangements (MFA) has

largely benefited the textiles sector as the quotas limiting its trade are now eradicated

4. Access to advanced technology Advanced technology in various sectors is no

available to India at a much lower cost than earlier.
5. Efficient dispute redressal mechanism The WTOs dispute settlement
procedures have helped sort trade related disputes swiftly.

6. Increase in Foreign Direct Investment (FDI) In accordance with the

agreement on TRIMs (Trade Related Investment Measures) which lays down the rules
that restrict the preference of domestic firms and thus allow foreign firms to operate
more easily in international markets, have compelled the member nations to withdraw
the restrictions on foreign investment. This has resulted in the harmonisation of the
dominance of local and foreign companies.

The WTO agreement has strengthened multilateral rules and disciplines particularly
related to anti-dumping, subsidies, countervailing measures, safeguards and disputes
settlement. This has ensured greater security and predictability of international tradin
system which create more favourable environment for India in the new world econom
order.
Negative impact:
Despite the benefits of WTO to India, many experts argue that India would be in a
disadvantageous position by virtue of being a member of WTO. Their arguments
include:
1. Trade Related Intellectual Property Rights (TRIPs): Protection of intellectual
property rights (patents, copyrights, trademarks etc.) has been made stringent. It is
argued that the TRIPs agreement goes against the Indian Patents Act, 1970. Only
process patents can be granted in food, chemicals and medicines under the Indian
Patents Act. TRIPs agreement provides for granting product patents also. Under TRIPs
patents can be granted to methods of agriculture and horticulture, bio-technological
process including living organism like plants and animals. The duration of patents
under TRIPs is 20 years.

Introduction of product patents in India will lead to hike in drug prices by the MNCs
who have the product patent. This will hit the poor people who will not have the gener
option available to them.

The extension of intellectual property rights to agriculture has negative connotation

for India. Presently, plant breeding and seed production are largely in the public
domain. Indian scientists have undertaken plant breeding and multiplication is in the
hands of National and State Seed Corporations. The government, through this
machinery, provides seeds to Indian farmers at very low prices. Indian scientists, in th
future will find it extremely difficult to breed new varieties and Indian research
institutions will be unable to compete financially with MNCs and will be denied access
to patented genetic material. MNCs will get the control over our genetic resources and

as such the control over food production would be jeopardised.

Patenting has also been extended to a large area of micro-organisms.

2. Application of TRIMs agreement undermines any plan or strategy of self-relian

growth based on local technology and resources.

Services: Service sector like insurance, banking, telecommunications, transportation

are backward in India compared to that of developed countries. Therefore, inclusion o
trade in services is detrimental to the interest of India, at least in the short run.

a WTO & Indian agriculture

Developed countries replaced the ongoing Doha Round with a developmen

agenda with a new Round incorporating new issues of interest to the rich world.

The new issues include environment, labour, e-commerce, global value

chains, investment, competition policy and transparency in government procurement.

India has rejected rich nations attempts to expand the ambit of the talks b
introducing new issues without completely fulfilling the Rounds development
dimension.

New Delhi has already sought the reduction of huge / trade distorting
agribusiness subsidies in developed countries, an effective Special Safeguard
Mechanism as well as a permanent solution to the issue of public food stockholding in
developing countries for the purpose of food security.

Many small farmers in the developing world have been facing unfair
competition from highly subsidised products exported by farmers from developed
countries, which leads to the artificial depression in world food prices and agricultural
dumping in developing countries. This causes unemployment and poverty in sectors
like farming sector, local industries, impacts ways of productions and attendant ways
life, and triggers population migration.

If the Doha Development Agenda is replaced with a new Round, will open th
door to legitimising bilateral investment treaties, as well as multilateral agreements
such as Trans-Pacific Partnership

Not only will it introduce toxic Investor-State Disputes Settlement (ISDS)

mechanisms that undermine the policy space of countries, but also, it will seek to
impose mandatory regulations a process of harmonising standards from labour
rights to environmental protection.

a India and pharmaceutical sector

Under Indian Patent Act, 1970, only process patents are granted to
chemicals, drugs and medicines. Thus, a company can legally
manufacture once it had the product patent. So Indian pharmaceutical

companies could sell good quality products at low prices. However under
TRIPs agreement, product patents will also be granted that will raise the
prices of medicines, thus keeping them out of reach of the poor people.
But most of the drugs manufactured in India are off-patents and so will be
less affected.

The Pharmaceutical Industry witnessed a change after the formation of World Trade
Organization (WTO) in 1995 when India, being a signatory member of WTO, adopted
TradeRelated Aspects of Intellectual Property Rights (TRIPS) Agreement.
Being a signatory member of WTO, India had signed onto TRIPS. Under TRIPS, all
countries have to provide for protection of product patents from January 1, 1995.
However, developing countries like India, which did not have a regime of product
patents, could avail a transition period of ten years - until January 1, 2005.
Domestically and internationally India resisted conforming to TRIPS and refused to
comply with its provisions earlier. The simple reason was that to conform to TRIPS,
India would have to revise one of the main aspects of its patent policy that only
process and not product patents would be granted to pharmaceuticals and
agrochemicals.

The Indian pharmaceutical industry, which had little technological capabilities to

manufacture modern drugs locally in the 1950s, has emerged technologically as the
most dynamic manufacturing segment in the Indian economy in the 1990s.

Only after the emergence of TRIPS on the horizon, Indian pharmaceutical industry
woke up to the challenges of new intellectual property regime. The Indian
pharmaceutical industry became part of the knowledge industry consequent to
TRIPS. India has had a unique position among the countries in the developing world
for it has a strong generic pharmaceutical industry, which has been able to provide
medicines at prices that were among the lowest in the world.

A successful patent policy of any developing country is one that strikes a clear
balance between protecting the rights of innovators & services at affordable prices
to the population. In a democratic country, like India, it is not easy to shift the policy
against public interest. After the TRIPS, India was in the difficult situation of
protecting peoples interest on the one hand and fulfilling the WTOs agreement of
TRIPs on the other hand.

TRIPS implementation in India and other manufacturing countries will effectively

cut the lifeline of affordable drugs unless safeguard measures are implemented to
prevent this. One danger in compulsory licensing is that it will discourage further th
commercial R & D necessary to new drugs to fight global epidemics.

TRIPS allows countries to overcome patent barriers by issuing compulsory license

or licenses for government use, which allow the production or importation of generi
medicines without the consent of the patent holder. These policy tools are common
used by developed countries, mostly in cases of anti-competitive practices.

The Indian Patent Act 1970 is compliant with TRIPS agreement and hence it doesn
violate the same. Art.31 of TRIPS agreement provides number of conditions for

issuing compulsory licences:

Person applying for licence has to have tried to negotiate voluntary licence with
the patent holders on reasonable commercial terms, failure of which can have
compulsory licence issued; and
The right holder has to be paid remuneration in the circumstances of each case
taking into account the economic value of authorization
Compulsory licensing cannot be given exclusively to licencees and it should be
subject to legal review in the country
India can grant such licences under certain conditions, such as public health
emergencies, to ensure access to affordable medicines. It granted the first such
licence in 2012, allowing local firm Natco Ltd to sell a copy of German drugmaker
Bayer'scancer medicine Nexavar at a tenth of the price.

India only began issuing patents for drugs in 2005 in order to comply with the
WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS
Agreement). The TRIPS Agreement explicitly allows compulsory licensing as long as
procedures and conditions set out in Article 31 of TRIPS are fulfilled.

a Comment on Indias stand on food security at the WTO.

The Doha round (2001) of WTO talks focused on the problems of developing
countries, aiming to provide them a level playing field in the global trading system
that critics say is tilted in favour of the rich nations, specially the US and EU.

The bloc of rich nations, critics say, has successfully stonewalled efforts to reform
their trade-distorting farm subsidies that have derailed export competitiveness in
agriculture. At the same time, they have pushed through issues of importance to
their interests, such as the Trade Facilitation Agreement that will further open up
markets to their goods and services.

This agreement was pushed through in Bali, where the ministerial conference was
held in December 2013, even as Indias food stockpiling policy was held up.

Indias strong stand on food security at the World Trade Organization (WTO)
threatened to derail the first multilateral trade agreement reached in the last two
decades. Developed countries have complained that India is going back on its
promise made at Bali where it was agreed that the Trade Facilitation Agreement will
be made a WTO rule by 31 July, while a permanent solution to the food security issu
will be found only by 2017.

India has maintained that different timelines for various elements of the Bali
package is against the WTO rules of a single undertaking where everything need to

be implemented simultaneously.

India demands WTO should finalise an agreement allowing India and many other
developing countries more freedom to subsidise and stockpile more food grains tha
it is allowed by WTO rules.

India wants there should be a permanent solution to its food security policies. WT
norms limit subsidies to 10% of the total value of agriculture production based on
1986-88 prices. India and some other developing countries argue that the base yea
is outdated.

India has argued a large and poverty-stricken populace requires a safety net of
buffer stocks in foodgrain. Those opposed say it goes against the intrinsic principle
non-interference with the market. For most of the developing countries including
India, public stockholding for food security is a livelihood issue, a matter which
should not be even debated at WTO. Developed countries lose nothing if they allow
higher public stockholding by developing countries after putting in place a
mechanism with reasonable limits to ensure developing countries do not dump thei
excess cereals at rock bottom prices in the international market.

Food security is the foundation upon which the United Nations Millennium
Development Goals to eradicate extreme poverty and hunger stand. Forcing
developing countries and Least Developed Countries to agree to anything which ma
compromise their right to food security will not only compromise basic human
dignity but also go against the UN declaration to which all countries are a signatory.

The government support to farmers in developed countries are way ahead of wha
developing countries can even afford to provide. For example, while India provides
about $12 billion farm subsidy to its 500 million farmers, the US provides around
$120 billion to its 2 million farmers. The figures could be contested, but not the
trends.

From Indias point of view, the Nairobi declaration at the end of the Tenth
Ministerial Conference was disappointing on multiple fronts. From its relative preeminence among emerging market economies with the principled position on
sticking to the Doha agenda, India has returned with very few, if any, of its demand
met. There is no concrete agreement on a special safeguards mechanism to protect
farmers in the developing countries against sudden import surges, and no short
deadline for a permanent solution on public stockholding for food security purposes
And the lack of an unambiguous reaffirmation of the Doha Development Agenda
means new issues of interest to developed countries, including competition policy,
government procurement and investment are now open for negotiations.