WORLD TRADE ORGANISATION

FULFILLMENT OF MACRO ECONOMIC THEORY

COURSE
TERM 2
YEAR 2008-10
Guided by Prof. Kalika Bansa

DIBYAJOTI DEY
TRIDEEP SAHA
SAURABH SINGH
SUBHAYU SEN
JOYDEEP NANDI
PUSHPAK SAHA
SRIKUMAR
GHOSH
 INTRODUCTION
ACKNOWLEDGEMENT

It is a great opportunity for us to do our Economics Project

under the supreme guidance of Prof. Kalika Bansal. Without her
cooperation this job would have remained undone.

We express our sincere gratitude and thanks to each one

of our group members who have worked out the best of their
efforts in completion of this project. Without this strong
cohesiveness this work would not have been completed within
the stipulated time. Moreover various non group members also
provided us lots of valuable data which proved to be very
useful in the fulfillment of this project.

2
 CONTENTS

1. EXECUTIVE
SUMMARY...................................................................................
...........

2.

INTRODUCTION...........................................................................
....................

GATT..........................................................................................................................
THE URAUGUAY ROUND....................................................................................
FROM GATT TO WTO............................................................................................

3.

OBJECTIVE..................................................................................
.........................

4. IMPACT OF WTO ON
INDIA....................................................................................
AGRICULTURE....................................................................................................
PHARMACEUTICALS.........................................................................................
THE SERVICE SECTOR.......................................................................................
TEXTILES AND CLOTHING.............................................................................
INFORMATION TECHNOLOGY..........................................................................
TRIPS...................................................................................................................

5. INDIA AND THE

WTO.......................................................................................
INDIA’S ROLE IN THE WTO...............................................................................
INDIA’S WTO COMMITMENT.................................................................................

6. COMPARISON OF INDIA’S FOREIGN TRADE

BENEFITS.........................................
3
 BEFORE BECOMING THE MEMBER OF WTO........................................................
AFTER BECOMING THE MEMBER OF WTO...........................................................

7. EXIM
POLICY.......................................................................................
.............
IMPORT..............................................................................................................
EXPORT..................................................................................................................

8.

CONCLUSION...............................................................................
........................

9.

BIBLIOGRAPHY............................................................................
.........................

1 EXECUTIVE SUMMARY

The Project describes all about the World Trade

Organisation (WTO), its Introduction in the World Economy, the
Objectives laid for the Organisation, Functions that operates,
EXIM Trade Policies, and Scenarios occurred with India Before
4
the formation of WTO & the Benefits gained by India from the
organisation.
The topic discussed in this project has a long history with
India as one of the powerful member attached to it. Following
the Uruguay Round Agreement, the General Agreement on
Tariff and Trade (GATT) was converted from a provisional
agreement into a Formal Organisation known today as the
World Trade Organisation (WTO), with effect from January 1,
1995. There were 128 member countries in 1995, which has
increased to 144, with India as one of the important member.
The Secretariat of the WTO is based in Geneva, Switzerland.
According to the current status WTO now accounts for about 97
per-cent of international trade.

TRADE & INEQUALITIES

Where trade has contributed to increased inequality, its

impact has generally being minor to others factors, most
notably Technological Change.

TRADE & STRUCTURAL ADJUSTMENT

If Trade reforms are introduced, economic changes need

to be made. Import-competing firms appear to adjust by
reducing mark-offs, increasing efficiency & often by reducing
firm size.

1 – EXECUTIVE SUMMARY

TRADE & POVERTY

One of the biggest challenges facing the world community

is to how to address poverty.

5
 2INTRODUCTION
INTRODUCTION
INTRODUCTION

Simply put: “The World Trade Organization (WTO) deals with the rules of
trade between nations at a global or near-global level. But there is more to it
than that.”

2-1 GATT

In 1947, 23 countries came into an agreement in Geneva

on multilateral Trade. This agreement was termed as The
General Agreement on Tariffs and Trade (GATT) which came
into effect on 1st of Jan. 1948. These countries sought to
expand multilateral trade among them. India was one of the
founder members of GATT. Many countries signed this
agreement in 1994 which resulted no. of members of GATT to
124.

The agreement consists of two main themes:-

1) The agreement formulated some regulations which

were to be observed by the member countries.
2) The member countries were to comply with was the
Most Favoured Nation (MFN) clause.
GATT was not an organization but was a multilateral treaty,
it had no legal status. It provided a platform to its member
nations to negotiate and enlarge their trade.

2-1.1 OBJECTIVES OF GATT

6
 The primary objective of GATT was to expand international
trade by liberalising trade to bring economic prosperity. GATT
mentions the fallowing important objectives.

1) Raising standard of living of the member countries.

2) Ensuring full employment through a steady growth of
effective demand and real income.
2 - INTRODUCTION

3) Developing optimum utilisation of resources of the world.

4) Expansion in production exchange of goods and services
on a global level.

2-1.2 PRINCIPLES

1) Follow the Most Favoured Nation (MFN) clause.

2) Carry on trade in a non discriminatory way.
3) Grant protection to domestic industries.
4) Condemn the use of quantitative restrictions or quotas.
5) Liberalise tariff and non-tariff measures through
multilateral negotiations.

2-2 THE URUGUAY ROUND

Uruguay Round (UR) is the name by which the 8th and the
latest round of Multilateral Trade Negotiations (MTNs) held
under the auspices of the GATT popularly known in Punta Del
Este in Uruguay launched in September 1986. The main issues
in this round discussed were of Agricultural Subsidies, Multi
Fibre Agreement (MFA), Trade in Services, Anti Dumping etc.
These discussions were resolved by the then Director
General of GATT, Arthur Dunkel. Who came up or Draft of the
Uruguay Round consisted of 28 agreements which spelt out the
results of Multilateral Trade Negotiations (MTN).

Some of the main agreements of the Uruguay Round were

as follows:-

1) Anti-Dumping Code: Dumping is to be condemned if it

causes or threatens material injuries to an established
domestic industry. A committee on anti-dumping

7
 practices should look into such matters related to
dumping.
2) Trade Related Investment Measures (TRIMs): Refers
to certain conditions or restrictions imposed by a
Government in respect of foreign investment in the
country. TRIM is widely employed by developing
countries.
The agreement on TRIMs provides that no contracting
party shall apply any TRIM which is inconsistent with GATT
articles. An illustrative list identifies the fallowing TRIMS as
inconsistent:-
WORLD TRADE ORGANISATION

i. Local content requirement.

ii. Trade balancing requirement
iii. Trade and foreign exchange balancing requirements.
iv.Domestic sales requirements.
1) Trade related aspects of Intellectual Property
Rights (TRIPs) - One of the most controversial outcomes
of Uruguay Round is the agreement on Trade Related
aspects of Intellectual Property Rights (TRIPs) including
Trade in counterfeit Goods. According to GATT
“Intellectual Property Rights” are the rights given to
persons over the creations of their minds. They usually
give the creator an exclusive right over the use of
individual’s creation for a certain period of time.
2) Trade in services - Bank, Insurance, Transport and
Communication, etc. are trade related services. The draft
agreement proposed that all restrictions on such services
should be waived.

Conclusion:

Following the Uruguay Round (UR) Agreement GATT was

converted from a provisional agreement into a formal
international organisation known as World Trade Organisation
(WTO). The organisation began its function from 1st Jan. 1995.
It serves as a single institutional framework directed by a
Ministerial Conference once every two years and its regular
business is overseen by a general council. The WTO secretariat
is based in Geneva, Switzerland. The membership of the WTO

8
increased from 128 in July 1995 to 144 countries by Jan. 1st
2002. The WTO members now accounts for over 97 percent of
the international trade.

2-3 FROM GATT TO WTO

After World War II over 50 countries came together to

create the International Trade Organisation (ITO) as specialise
agency of the UN to manage the business aspect of
international economic co-operation. The combined package of
trade rules and tariff concessions negotiated and agreed by 23
countries out of the 50 participating countries came to be
known as the General
2 - INTRODUCTION

Agreement on Tariffs and Trade. It came into force in 1948;

well the WTO charter was still being negotiated. WTO came
into effect from 1 January, 1995.
The GATT was provisional for almost half a century but it
succeeded in promoting and securing liberalization of world
trade. Its membership increased from 23 countries in 1947 to
123 countries in 1994. The membership of WTO increased from
128 in July, 1995 to 144 countries as of 1 January, 2002. During
its existence from 1948 to 1994 the average tariffs on
manufacture good on developed countries declined from about
40% to a mere 4%. GATT focused on tariff reduction till 1973. It
was only during Tokyo and Uruguay Rounds that non-tariff
barriers were discussed under GATT. With increasing use of
non tariff barriers and the increasing significance of service
sector in the economy the need was felt to bring non-tariff
barriers and intellectual property under the preview of
multilateral trade.

2-3.1 OBJECTIVES OF WTO

The WTO has the fallowing objectives:

1) To raise the standard of living in member countries by
ensuring full employment and by expanding production
and trade in goods and services.
2) To develop an integrated, viable and durable multilateral
trading system.

9
 3) To promote sustainable development in member
countries by the optimal use of resources.
4) To help the developing countries to get a share in the
growth in the international trade.
5) To reduce tariffs and other trade barriers among member
countries and to eliminate discriminatory treatment in
international trade relations.
6) To insure linkages between trade policies, environmental
policies and sustainable development.

2-3.2 FUNCTION OF WTO

The basic functions of WTO are as follows:

1) It facilitates the implementation, administration and

operation of the trade agreements.
WORLD TRADE ORGANISATION

2) It provides the forum for further negotiations among

member countries on matters covered by the agreement
as well as the new issues falling within its mandate.
3) It is responsible for the settlement of the differences and
dispute among its member countries.
4) It is responsible for carrying out periodic reviews of the
trade policies of its member countries.
5) It assists developing countries in trade policies issues
through technical assistance and training programme.
6) It encourages co-operation within international
organisations.

2-3.3 STRUCTURE OF WTO

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 3 OBJECTIVE

1. To know about the structure, function and objective of

WTO.

2. GATT and how it changed to WTO

3. Uruguay Round and its resolution

4. How WTO had its impact of India

5. India and WTO- India’s role in WTO, India’s commitment

6. How India was benefited before and after joining WTO

7. EXIM policy

11
12
 4
IMPACTIMPACT
OF WTO ON ON
OF WTO INDIA
INDIA

4-1 AGRICULTURE

Globalization – manifesting in progressive integration of

economies and societies has assumed increasing significance
in the lives of common people all over the world. In the field of
the trade the World Trade Organization (WTO) is the principal
international institution responsible for laying down rules for
the smooth conduct of trade in goods and services among
nations in this globalized world. This is achieved by developing
a set of rules of multilateral trading system which aims to
remove, inter alia, trade barriers (tariff and non tariff) as well
as reduce and eventually remove domestic support and system
of export subsidies that distort international trade between
nations. These problems of trade distortion are most
conspicuous in agriculture sector.

Agriculture is of special significance for developing

countries particularly the extreme poor (i.e. those living on one

13
dollar or less per day). It has been estimated that “three
quarters of them about 900 million people – live and work in
rural areas, most of them as small farmers”. Table 1 shows
that where as agriculture contributes 3% to the GDP and
employs only 4% of the
4 – IMPACT OF WTO ON INDIA

population in developed countries the corresponding figures for

developing countries are 26% and 70% respectively.

Table 1: Key differences between agriculture systems in

developed and developing countries
Parameters Developed Developing
Countries Countries

(including least
developed)
Nature of Commercial/Export Subsistence
Agriculture System Oriented
Share of GDP 3% 26%
Contribution to 8.3% 27%
foreign exchange
Population 4% 27%
engaged in
agriculture

Source: Green, D and Priyadarshi, S. (2001) Proposal for

“development Box” in the WTO Agreement on
Agriculture, CAFOD and South Centre, Kaukab, R;
(2002) Presentation at Agriculture and WTO Seminar,
Ministry of Commerce, Government of Pakistan,
Islamabad, August, 2002, Action Aid “Food Rights”
The WTO Agreement on Agriculture, 2003.

The agriculture was included in the multilateral trading

system after the eighth (Uruguay) round of talks under GATT
on demand of developing countries who had a comparative
advantage in this sector and its benefits were being denied to
14
them. This trade round stretched from 1986-1994 and
concluded in establishment of WTO and inclusion among others
of agriculture in the discipline of WTO. This was achieved by
developing countries only after paying a heavy price in the
form concessions on many fronts especially intellectual
property rights and services.

WTO policies impact agriculture principally through the

following agreements:

1. Agreement on Agriculture (AOA)

WORLD TRADE ORGANISATION

2. Agreement on Application of Sanitary and

Phytosanitary Standards (SPS):
(Dealing with Health and disease related issues)
3. Agreement on Technical Barriers to Trade (TBT):
(Dealing with Regulations, standards, testing and
certification procedures, packaging, marking and
labeling requirements, etc)
4. Agreement on Trade Related Aspects of Intellectual
Property Rights (TRIPs):
(Dealing with Patents and copyrights, plant breeders’
rights etc).

Activists cry foul that Indian agriculture, already reeling

under severe drought and fall in cash crop prices, will die once
the import curbs are removed and free flow of food items are
allowed into India.
"There is going to be 'madness' in the agriculture sector.
Farmers will be hit hard by the WTO regime. What happens to
our vegetable oils, rice, rubber, coconuts and fruits, if similar
items can be imported cheaply from other countries," asks K
Sundaran, a social activist espousing farmers causes in South
India.
He says currently there is a massive distortion in the
international trade in agriculture. Industrialised countries have
been giving huge domestic subsidies to their agricultural sector
that there is excessive production, import restrictions and
dumping of agri-products in international markets.

15
But despite the concerns of farmers, many believe the WTO
rules will not adversely affect the Indian agriculture as it is
made out.
Developed nations have committed to the WTO that they would
reduce subsidies and tariff. So then better overseas markets
will be available for Indian agricultural products.

4-2 PHARMACEUTICALS

India has one of the most efficient pharmaceutical

industries in the world.

4 – IMPACT OF WTO ON INDIA

Pharmaceutical firms grew mainly thanks to the absence

of patent protection of medical drugs in the country. For
instance, Indian companies are now producing their own AIDS
drugs, which are available cheaply, compared to the original
products from foreign countries.
But the imposition of the new WTO rules will begin to
threaten India's achievements in the pharmaceutical field. The
Indian Patents Act, introduced in 1970, boosted Indian pharma
companies. The Act allowed them to develop and patent
alternative processes for products discovered and patented
elsewhere.
According to the Indian Drug Manufacturers' Association,
self-sufficiency in Indian pharmaceutical sector is more than 70
per cent.
"Worldwide, India is a country of very low prices for high-
quality medicines," points out the IDMA president Nishchal H
Israni.
But now the rules of the game in the pharmaceutical
industry will change as India has committed to toe the WTO
line on product patents. Product patent rules and Exclusive
Marketing Rights (EMR) under the WTO could affect a paradigm
shift in India's pharma majors.
As per the EMR provision, a product for which original
patent was granted prior to 1995, is not fit for an EMR in the
country. This has forced nine leading domestic pharma
16
companies to form the Indian Pharmaceutical Alliance that has
demanded a more transparent WTO regime for EMR grants.
How will the WTO rules affect 500,000 employees working
in roughly 20,000 pharma firms in the country?
Well, many expect a spate of mergers, acquisitions and
alliances in the domestic pharmaceutical industry in the
coming years, as the impact of WTO regulations kick in, Indian
pharma players are learning to collaborate and consolidate to
grow.
If the industry is to be believed, the Matrix-Strides merger
is only the beginning of the shakeout that the pharma sector is
set to witness over the next few years.

WORLD TRADE ORGANISATION

4-3 THE SERVICE SECTOR

As per the WTO rules, two obligations apply to all

services. They are the Most Favoured Nation (MFN) treatment
and transparency by way of publication of all laws and
regulations. Which in other words means that areas like
banking, insurance, investment banking, health, and many
other professional services that are opened up will be bound by
the WTO commitments? India will have to open up its services
sector to other WTO member countries. The result: many
overseas service providers will enter into the services sectors
in the country, thereby reducing the chances of domestic
enterprises.

17
 But experts believe India need not be frightened of the
WTO rules on services because the country at present has a
distinct competitive advantage in many areas that include
health, engineering construction, computer software and other
professional services.

4-4 TEXTILES AND CLOTHING

The WTO agreement on textiles and clothing states that

the Multi-Fibre Agreement (MFA) will eventually be eliminated.
MFA at present groups the major importer countries -- the
United States, Austria, Canada, the European Community,
Finland and Norway -- who apply restrictions by way of quota.
Exporting countries like India are a part to the MFA. The
phasing out of MFA will boost textile exports from India. It
will
4 – IMPACT OF WTO ON INDIA

also increase investment in textiles and joint ventures. But the

risk is that as India opens up its market from next month,
import of textiles and clothing will considerably increase from
countries like China, the Unites States, Taiwan and Indonesia.
This will force many textile manufacturers to modernise
their mills and improve quality.

4-5 INFORMATION TECHNOLOGY

Under the Information Technology Agreement signed

under the WTO, Indian hardware and software companies can
become major players in the value-added arena.
Availability of high-skilled of IT personnel and low cost of
labour and operation will allow India to compete in the
international market.

18
4-6

TRIPS (TRADE RELATED INTELLECTUAL PROPERTY

RIGHTS)

TRIPS Article 27.3(b), which requires all WTO countries to

provide some kind of intellectual property rights (IPR) on plant
varieties, was up for review in 1999. TRIPS are a clearly anti-
developing country treaty. Its provisions seriously threaten self
reliance in agriculture and the livelihoods of farmers. TRIPS do
not contain any elements of equity or benefit sharing. It does
not allow countries to claim a share of benefits companies
who
WORLD TRADE ORGANISATION

breed new varieties using farmers’ varieties as the base since

there is no provision requiring disclosure of the country of
origin from where base materials have been taken. The Trade
Related Aspects of Intellectual Rights (TRIPS) agreement set
minimum standards for protection of IPRs, a standard that is
closer to the level of protection provided in the developed
world.

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 5 INDIA AND THE WTO

5-1 INDIA’S ROLE IN THE WTO

India is a founding member of the GATT (1947), it actively
participated in the Uruguay Round Negotiations, and is a
founding member of the WTO. India strongly favours the
multilateral approach to trade relations and grants MFN
20
treatment to all its trading partners, including some who are
not members of WTO. Within the WTO, India is committed to
ensuring that the sectors in which the developing countries
enjoy a comparative advantage are adequately opened up to
international trade. It also has to see that the different WTO
Agreements are translated into specific enforceable
dispensations, in order that developing countries are facilitated
in their developmental efforts. India feels that the multilateral
system would itself gain if it adequately reflected these
concerns of the developing countries, so as to create the
necessary impetus to enable developing country members to
catch up with their developed country counterparts.

5-2 INDIA’S WTO COMMITMENT

Under the Uruguay Round India has bound 67% of all its
tariff lines, whereas prior to that only 6% of tariff lines were
bound. The bindings range from 0 to 300% for agricultural
products from 0 to 40% for other products. Under the Uruguay
Round manufactured products were bound at 25% on
intermediate goods and 40% on finished goods.

5-2.1 Balance of payments

Under the exceptional provision of Article XVIII: B of GATT,
India has some residual quantitative restrictions on
imports
WORLD TRADE ORGANISATION

maintained for balance-of-payments purpose. These aggregate

to 2,714 tariff lines at the eight-digit level of the Indian Trade
Classification. In May 1997, India presented to the WTO a plan
for the elimination of these restrictions in imports, including
those on consumer goods. This plan was considered at the
consultations with India of the WTO Committee on Balance-of-
Payments Restrictions in June-July 1997. At the request of the
United States, a panel was constituted on 18 November 1997
to examine the US allegation that the continued maintenance
of quantitative restrictions on imports by India is inconsistent
with India's obligations under the WTO Agreement.

21
5-2.2 AGRICULTURE

The only commitment India has undertaken under the

Agreement is to bind its agricultural tariffs. This commitment
has been fulfilled by India binding its tariffs for primary
agricultural products at 100%, processed food products at
150% and edible oils at 300%.India's prevailing agricultural
tariffs are well within the bound rates. Under the Uruguay
Round, whenever we have bound tariffs on agricultural
commodities at zero or very low-levels, renegotiation of tariff
bindings have been sought under Article XXVIII of GATT.
The Agreement on Agriculture was designed to improve
world trade, raise prices of agricultural products and ensure
higher standards of living for farmers.

5-2.3 TEXTILES

As per the obligations under the Agreement on Textile

and Clothing (ATC) to integrate this sector into GATT 1994 in
stages, the Indian Government moved cotton and wool yarn,
polyester staple fibre and 20 other industrial fabrics on to the
list of freely importable goods in 1995. India is concerned
about the fact that repeated anti-dumping investigation by
certain trading partners on the same product lines, without
giving full effect to the special dispensation provisions of
Article 15 of the Anti-dumping Agreement has resulted in trade
harassment for its exporters of textiles.

5 – INDIA AND WTO

5-2.4 INTELLECTUAL PROPERTY

India is availing itself of the transition periods due to her

under Article 65 of the TRIPS Agreement to meet her
obligations under the seven areas covered by the Agreement.
India's achievements in this field have been in the passing
of TRIPS plus legislation in the field of Copyright Law. The 1994
amendments to the Act of 1957 provides protection to all
original literary, dramatic, musical and artistic works,
cinematographic films and sound recordings. The most recent
changes bring sectors such as satellite broadcasting, computer

22
software and digital technology under Indian copyright
protection.

5-2.5 TRADES RELATED INVESTMENT MEASURES

Substantial modifications have already been made

to the foreign investment regime, increasing the
number of sector where foreign investment can take
place and also increasing the foreign equity limit on
these investments. India has already notified the trade-
related investment measures maintained by it in terms
of Articles 2 and 5 of the TRIMs Agreement and the
illustrative list annexed to the TRIMs Agreement.

5-2.6 ANTI-DUMPING

Anti-dumping and countervailing duties are imposed

under the Customs Tariff Act 1975 and the Rules made there
under. The Act and Rules are on the lines of the respective
GATT Agreement on anti-dumping and countervailing duties.
The time limits and the procedures prescribed under the Indian
laws/GATT Agreement is strictly followed by the designated
authority. With the increasing number of cases, the
Government of India proposes to set up a Directorate General
of Anti-dumping and Allied Duties for expeditious disposal of
anti-dumping and countervailing duty cases.

WORLD TRADE ORGANISATION

5-2.7 SERVICE SECTOR

The services sector accounts for about 40% of India's

GDP, 25% of employment and 30% of export earnings.
Recognizing the importance of the services sector in achieving
higher economic growth, the government is giving added
emphasis to improving services such as telecommunications,
shipping, roads, ports and air transport. The foreign direct
investment regime has been liberalized to attract foreign

23
investment in the services sector.India actively participated in
the Uruguay Round services negotiations and made
commitments in 33 activities as compared to an average of 23
for developing countries. India also participated in the spill-
over negotiations. In basic telecommunication services, India
has undertaken commitments in the areas of voice telephone
service for local and long-distance (within the service area),
cellular mobile services and other services such as circuit
switched data transmission sources, facsimile services, private
leased circuit services as per details given in the schedule of
commitments.
While developed countries have surplus capital to invest,
most of the developing countries have surplus of skilled, semi-
skilled and unskilled workers. We have a large pool of well-
qualified professionals capable of providing services abroad. As
developed countries have a comparative advantage in
exporting capital intensive services, similarly developing
countries have a comparative advantage in exporting labour
intensive services involving movement of persons.
In Article IV of GATS, there is a clear obligation to increase
the participation of developing countries in trade in services.
The Agreement also recognizes the basic asymmetry in the
level of development of the services sector in developed and
developing countries and a commitment that the developed
countries will take concrete measures aimed at strengthening
the domestic service sector of developing countries and
providing effective market access in sectors and modes of
supply of export interest to developing countries.

5 – INDIA AND WTO

5-2.8 INFORMATION TECHNOLOGY

India participated in the negotiations on the Agreement

from the early stages and after examination of the implications
of the proposed agreement and extensive discussions with
trading partners joined as a participant on 1 April 1997. India is
committed to phasing out the import tariffs on the products
covered by the ITA as scheduled.
24
5-2.9 REGIONAL TRADE AGREEMENTS

India attaches significance to her participation in regional

agreements within the framework of multilateral rules. India
has been instrumental in setting up the South Asian
Association for Regional Cooperation (SAARC), whose major
achievement in 1995 was the conclusion of the negotiations on
trade preferences within the framework of the SAARC
Preferential Trading Arrangement (SAPTA). SAPTA became
operational on 7 December 1995 and includes preferential
tariff concessions on 226 items and product groups. A second
round of SAPTA trade negotiations was launched in January
1996 to broaden tariff concessions. India granted concessions
on 902 tariff lines, effective 1 March 1997.

25
 6 COMPARISON OF INDIA’S
FOREIGN TRADE BENEFITS

6-1 BEFORE BECOMING THE MEMBER OF WTO

It’s agreed that India was one of the founder member of
WTO; it faced problems in Foreign Trade grounds. The
problems that India faced before the formation of WTO were
the following:

(1)Absence of Anti – dumping

(2)No Subsidy Facilities
(3)Absence of TRIMs & TRIPs
(4) Lac of Market Scenario & Strategies

6-2 AFTER BECOMING THE MEMBER OF WTO

(1)Anti-Dumping - Dumping is condemned if it causes or
threatens material injury to an established industry. A
product is considered as dumped when its export price
becomes less as compared to the normal price in the
exporting country plus a reasonable amount for
administrative, selling and any other costs and for profits.
Anti dumping measures can be employed only if
dumped imports are shown to cause serious damage to
the domestic industry in the import industry. The
measures are not allowed if the margin of dumping is de
minimise.
(2)Subsidies - The draft agreement defined certain specific
subsidies which would be subjects to various disciplines.
Certain other types of subsidies would fall under”
prohibited ” category.

26
 (3)Technical barriers to trade - Technical regulation and
standards along with testing and certification procedures
should not create unnecessary obstacles to trade.

6 – COMPARISON OF INDIA’S FOREIGN TRADE BENEFITS

(4)Right of market-The main issue is to reduce tariff and

other trade restriction in case of commodities like
agricultural goods, textiles etc.
(5)TRIMs (Trade related investment measures) - Widely
employed by developing countries. Refers to certain
conditions imposed by government in respect of foreign
investment. The agreement of TRIM provides the following
inconsistent TRIMs.
a) Local content requirement
b) Trade balancing requirement
c) Trade and foreign exchange balancing requirement.
d) Domestic sales requirements.
(6) TRIPs (Trade Related Aspects of Intellectual Property
Rights-It is defined as “information with commercial value”.
Intellectual Property Rights have been characterised as a
composite of “ideas, inventions and creative expression”.

27
 7 EXIM POLICY

7–1 IMPORT

7-1.1 Indian Import Policy

Import is the antonym of export. In the terms of economics,

import is any commodity brought into one country from
another country in a legal way. The economic needs of the
country, effective use of foreign currency are the basic factors
which influence India's import policy. There are mainly 3 basic
objectives of the import policy of India:
• To make the goods easily available.
• To simplify importing license.
• To promote efficient import substitution.

7-1.2 Current Scenario of Imports in India

There are few goods which cannot be imported namely
tallow fat, animal rennet, wild animals, unprocessed ivory etc.
Most of the restrictions are on the ground of security, health,
environment protection etc. Imports are allowed free of duty
for export production. Input output norms have been specified
for more than 4200 items. The norms tell about the amount of
duty free import of inputs allowed for specified products. There
are no restrictions on imports of capital goods. Import of
second hand capital goods whose minimum residual life is of
five years is permitted. Export Promotion Capital Goods (EPCG)
scheme provides exporters to import capital goods at a
concessionary custom rates. In the past 30 years Indian
imports have risen quite dramatically. At present imports
accounts for 17% of the GDP. Capital goods have been

28
continued to be imported and in the last three years, their
share has fallen from 25% to 22%.
7 – EXIM POLICY

7-1.3 Major Indian Imports

There are facilities available for the service industries to
enjoy the facility of zero import duty under EPCG scheme.
Some of the major imports of India are edible oil, newsprint,
petroleum and crude products, crude rubber, fabrics, electronic
goods etc.

7-1.4 Problems due to Large Import of Products

The recent trend of imports is of some concern. The
regular imports of oil reflect upon the fact that India is not able
to produce the quantity of oil required in India. Moreover the
increase in the imports of products also highlights the fact that
the Indian domestic industries need to be developed. It also
creates pressure on the economy as the money ultimately has
to be bearded by the people.

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WORLD TRADE ORGANISATION

7-2 EXPORT

Export means the transferring of any good from one

country to another country in a legal way for the purpose of
trade. Export goods are provided to the foreign consumers by
the domestic producers.

7-2.1 Indian Exports: A History

The history of Indian exports id very old. During

prehistoric times India exported spices to the other parts of the
world. India was also famous for its textiles which were a chief
item for export in the 16th century. Textiles and cotton were
exported to the Arab countries from Gujarat. During the Mughal
era India exported various precious stones such as ivory,
pearls, tortoise stones etc. But during the British era, Indian
exports declined as the East India Company foreign trade of
India.

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7- 2.2

Indian Exports: Current Scenario

Every year India earns billion of dollars by exporting

various goods and items. The Indian government has outlined
certain export policies. The export policies tell about the
products to be exported and the countries to whom exports are
to be done. The government of India works with the Federation
of Indian Export Organization, the leading export promotion
organization of India. Exports are the major focus of India's
trade policy and most of
7 – EXIM POLICY

the items can be freely exported from India. A few items are
subject to export control to prevent their shortage. The profits
from exports are exempted from income tax. Indian exports
contribute nearly 12.4% in the GDP.

7-2.3 Leading Export Items of India

In the past ten years, exports have grown at a rate of

nearly 22%. Some commodities have enjoyed faster export
growth than others. Some of India's main export items are
cotton, textiles, jute goods, tea, coffee, cocoa products, rice,
wheat, pickles, mango pulp, juices, jams, preserved vegetables
etc. India exports its goods to some of leading countries of the
world such as UK, Belgium, USA, China, Russia etc.

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7-2.4 Restriction on the Exports of Items

However there are some restrictions on the export of

goods. Under sub section (d) of section 111 and sub section (d)
of section 113, any good exported or attempted to be
exported, contrary to any prohibition imposed by or under the
customs act or any other law is liable for confiscation.
WORLD TRADE ORGANISATION

7-2.5 Problems of the Indian Export Sector

But there are few problems which need to be solved

before India makes a mark for itself in the export sector. The
Indian goods have to be of superior quality. The packaging and
branding such be such that countries are interested to export
from India. At the same time India must look for potential
market to sell their goods. The government should frame
policies which gives boost to the exports.

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33
 8 CONCLUSION

The developed countries want that the underdeveloped

countries observe some restrictions relating to labour
employment and ecological balance. Their argument is that the
underdeveloped countries use child labours or their social
security measures are very poor. Further, these countries do
not take measures to control pollution or to maintain ecological
balance. As a result, cost of production in such countries is low.
So, the developed countries should be allowed to impose tariffs
or imports from underdeveloped countries until the developing
countries improve the condition of labour and do not employ
child labour. Thus, the developed countries tried to impose
many restrictions on the production process of the
underdeveloped countries. Thus, if the developing countries try
to protect their interest as a group, they may stand to gain
from the WTO system.
If we consider both sides of a coin then we can conclude
that if the developed countries liberalise their import of
agricultural goods, India’s export of agricultural goods will
increase. India has a comparative cost advantage in the
production of agricultural commodities. Hence India’s of such
commodity is expected to increase.
On the other side according to the agreement of Trade
Related Investment Measure’s (TRIMs), there should not be any
discrimination between foreign and domestic investments. As a
result, it will very difficult to control the restrictive activities of
the following investors. This agreement will also favour the
investors of the developed countries.

34
 9 BIBLIOGRAPHY

(1) Business Economics & Business Environment – Jaydeb

Sarkhel.

(2) International Business - Francis Cherunilam

(3) International Marketing – Rakesh Mohan Joshi

(4) www.wikipedia.org

(5) www.exprasspharma.com

(6) www.wto.org

(7) Annual Report 2007

(8) Department of Commerce, Government of India

(9) Trade Policy Reviews 2002

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