WORLD TRADE ORGANISATION

FULFILLMENT OF MACRO ECONOM IC 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 GHOS H

NTRODUCT ON

ACI KNOWLEDGEIMENT

It is a great opportunity for us to do our Econo mics Project un der the supreme guidance of Prof. Kalika Ba nsal. Withou t her cooperation this job would have remained undone. We express our sincere gratitude and thanks to each one of our grou p membe rs who have wor ked ou t the best of their effor ts in completion of this project. Without this strong cohesiveness this work wou ld no t have been completed within the stipulated time. Moreover various non grou p membe rs also provided us lots of valuable data wh ich proved to be very useful in the fulfill ment of this project.

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...... ....... ..... ....... ..... ....... ..... ....... ..... ....... ..... ....... ..... ....... ..
INDIAS ROLE IN THE WTO...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ..... INDIAS WTO COMMITMENT..... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ....

6. COMPARISON OF INDIAS FOREIGN TRADE BENEFITS.. ... ..... ....... ..... ....... ..... .......

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

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

8. CONCLUSION... ..... ....... ..... ....... ..... ....... ..... ....... ..... ....... ..... ....... .... ........ ....... ..... .... 9. BIBLIOGRAPHY.. ... ..... ....... ..... ....... ..... ....... ..... ....... ..... ....... ..... ...... ........ ....... ..... .....

EXECUTIVE SUMMARY

Th e Project describes all about the Wor ld Trade Organisation (WTO), its Introduction in the Wor ld Economy, the Objectives laid for the Organisation, Fun ctions that operates, EXIM Trade Policies, and Scenarios occurred

with India Be fore

the formation of WTO & the Be nefits gained by India from the organisation. Th e topic discuss ed in this project has a long history with India as one of the powerful member attac hed to it. Following the Uruguay Roun d Agree ment, the General Agree ment on Tariff and Trade (GATT) was con ve rted from a provisional ag ree ment i nto 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 on e of the important member. Th e Secretariat of the WTO is based in Geneva, Switzerland. Acc ording to the curr ent stat us WTO now acc oun ts for ab out 97 pe r-ce nt of international trade.

TRADE & INEQUALITIES

Where trade has contributed to increa sed inequality, its impact has generally being minor to others fact ors, most notably Techno logical Change.

TRADE & STRU CTURAL ADJUSTMENT

If Trade refor ms are introduced, economic changes nee d to be made. Import-competing firms appe ar to adjust by reducing mark-offs, increa sing efficie ncy & often by reducing firm size.
1 EXECUTIVE SUMMARY

TRADE & POVERTY

One of the bigg est challenges facing the world com un ity m is to how to ad dress poverty.

T IN RO

TRO

D U

D UC T O

C T IO N

2
Sim ply put:

INTRODIUCTION

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 ca me into an agree ment in Geneva on multilateral Trade. This ag ree ment was termed as The General Agree ment on Tariffs and Trade (GATT) which came into effect on 1st of Jan. 1948. These countries sought to expa nd multilateral trade among them. India was on e of the foun der membe rs of GATT. Many countries signed this ag ree ment in 1994 which resulted no. of membe rs of GATT to 124. Th e agree ment consists of two main themes:Th e agree ment formulated some regulations which were to be obse rved by the member coun tries. 2) Th e member countries were to comply with was the Most Favoured Nati on (MFN) clause. GATT was no t an organization but was a multilateral treaty, it had no legal stat us. It provided a platform to its member nations to negotiate and enlarge their trade. 1)

2-1 .1

OBJECTIVES OF GATT

Th e primary objective of GATT was to expa nd international trade by libe ralisi ng trade to bring economic prosperity. GATT mentions the fallow ing important objectives. 1) Raisi ng sta nda rd of livi ng of the member countries. 2) Ensuring full employment throu gh a steady growth of effective de mand and rea l income.
2 - INTRODUCTION

3) Devel oping optimum utilisation of res ources of the world. 4) Expansion in production exc hange of goo ds and services on a global level.

2-1 .2
1) 2) 3) 4) 5)

PRINCIPLES

Follow the Most Favoured Nati on (MFN) clause. Carry on trade in a non discriminatory way. Grant protection to domestic industries. Conde mn the use of quantitative restrictions or quotas. Liberalise tariff and non-tariff meas ur es through multilateral negotiations.

2-2

THE URU GUAY ROUND

Uruguay Roun d (UR) is the name by which the 8th and the latest roun d of Multilateral Trade Negotiations (MTNs) held un der the auspices of the GATT popularly known in Punta Del Este in Uruguay laun ched in Septe mber 1986. Th e main issues in this roun d discuss ed were of Agricultural Subsidies, Multi Fibre Agree ment (MFA), Trade in Services, Anti Dumpi ng etc. These discuss ions were resolved by the then Director General of GATT, Arthur Dunke l. Who ca me up or Draft of the Uruguay Round consisted of 28 ag ree ments which spelt ou t the results of Multilateral Trade Negotiations (MTN). Some of the main agree ments of the Uruguay Ro un d were as follows:1)

Anti-D umping Code: Dumping is to be conde mned if it ca uses or threate ns material injuries to an established domestic industry. A com itt ee on anti-dumping m 7

practices should look into such matte rs related to dumping. 2) Trade Related Investment Measure s (TRIMs): Refers to certain conditions or restrictions imposed by a Gove rnment in respect of foreign investment in the country. TRIM is widely employed by developing countries. The agree ment on TRIMs provides that no contracting pa rty shall app ly any TRIM which is i nconsistent with GATT articles. An illustrative list i dentifies the fall owing TRIMS as inconsistent:WORLD TRADE ORGANISATION

1)

2)

i. Local con tent requirement. ii. Trade balancing requirement iii. Trade and foreign exc hange balancing requirements. iv. Domestic sales requirements. Trade rel ated asp ects of Intellectual Pro pert y Rights (TRIPs) - One of the most controversial outcomes of Uruguay Roun d is the agree ment on Trade Related aspects of Intellectual Pr ope rty Rights (TRIPs) including Trade in coun terfeit Goods. According to GATT Intellectual Prope rty Rights are the rights given to pe rson s over the crea tions of their minds. They usually give the creat or an exclusive right over the use of individuals crea tion for a certain period of time. Trade in ser vices - Bank, Insurance, Transport and Com un ication, et c. a re trade related services. Th e draft m ag ree ment proposed that all restrictions on such services should be waived.

Conclusion: Following the Uruguay Round (UR) Agree ment GATT was con verted from a provis ion al agree ment into a formal international organisation know n as Wor ld Trade Organisation (WTO). The organisation began its function from 1st Jan. 1995. It se rves as a single institutional framework directed by a Ministerial Con ference on ce eve ry t wo yea rs and its regular business is ove rseen by a general council. Th e WTO secretariat is based in Geneva, Switzerland. Th e membership of the WTO 8

increased from 128 in July 1995 to 144 countries by Jan. 1st 2002. Th e WTO membe rs now acc oun ts for over 97 perce nt of the international trade.

2-3

FROM GATT TO WTO

After World War II over 50 countries ca me toge ther to create the International Trade Organisation (ITO) as specialise age ncy of the UN to manage the business aspect of international economic co-operation. Th e combined package of trade rules and tariff concessions negotiated and agreed by 23 countries out of the 50 participating countries ca me to be known as the General
2 - INTRODUCTION

Agree ment on Tariffs and Trade. It ca me into force in 1948; well the WTO charter was still being negotiated. WTO came into effect from 1 Janu ary, 1995. Th e GATT was provision al for almost half a centur y b ut it succeeded in promoting and securing lib eralization of world trade. Its membership increa sed from 23 coun tries in 1947 to 123 coun tries in 1994. The membership of WTO increa sed from 128 in July, 1995 to 144 coun tries as of 1 January, 2002. During its existence from 1948 to 1994 the av erage tariffs on manu facture goo d on developed countries declined from about 40% to a mere 4% GATT focused on tariff reduction till 197 3. It . was only during Tokyo and Uruguay Ro un ds that non-tariff barriers were discuss ed under GATT. With increa sing use of non t ariff barriers and the increa sing significance of service sect or in the economy the need was felt to bring non-tariff barriers and i ntellectual pro pe rty under t he preview of multilateral trade.

2-3 .1

OBJECTIVES OF WTO

Th e WTO has the fall owing objectives: 1) To raise the sta nda rd of livi ng in member coun tries 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 coun tries to get a share in the grow th in the international trade. 5) To red uce tariffs and other t rade barriers among member countries and to eliminate discriminatory treat ment in international trade relations. 6) To insure linkag es be tween trade policies, environmental policies and sustainable development.

2-3 .2

FUNCTION OF WTO

Th e basic fun ctions of WTO are as follows: 1) It facilitates the implementation, operation of the trade agree ments.
WORLD TRADE ORGANISATION

administration

and

2) It provides the foru m for further negotiations among member coun tries on matte rs cove red by the agree ment as well as the new iss ues falli ng within its mandate. 3) It is responsible for the sett lement of the differences and dispute amon g its member coun tries. 4) It is responsible for carrying out periodic reviews of the trade policies of its member coun tries. 5) It ass ists developing countries in trade p olicies iss ues throu gh techn ical assistance and training program e. m 6) It encour ages co-operation within international organisations.

2-3 .3

STRUCTURE OF WTO

10

OBJECTIVE

1. To know about the structure, function and objective of WTO. 2. 3. 4. 5. 6. 7. GATT and how it changed to WTO Uruguay Round and its resolution How WTO had its impact of India India and WTO- Indias role in WTO, Indias commitment How India was benefited before and after joining WTO EXIM policy

11

12

MPA

T OF WTO ON ND A I C

IMPACT OF WTO OI

N INI DIA

4-1

AGRICULTURE

Globali zati on manifesting in progress ive integration of economies and societies has ass umed increasing significance in the lives of comm on people all over the world. In the field of the trade the Wo rld Trade Organization (WTO) is the principal international institution responsible for layi ng down rules for the smoo th con duct 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 red uce and eventually remove domestic supp ort and system of exp ort subsidies that distort international trade betwee n nations. These problems of trade distortion are most conspicuous in agriculture sector. Agriculture is of special significance for developing countries particularly the ex treme poo r (i.e. tho se livi ng on one

dollar or less per day ). It has been estimated that three quarters of them abou t 900 milli on 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 coun tries the corresponding figures for developing coun tries are 26% and 70% respectively. Table 1: Key differe nces bet ween ag ric ulture sys tem s in develo ped and develo ping coun trie s Parameters Developed Developing Countrie s Countrie s (i ncl uding least developed) Nature of Com ercial/Export Subsistence m Agriculture System Oriented Share of GDP 3% 26% 27% 27%

Contribution to 8.3% foreign exchange Population engaged in agriculture So urce: 4%

Gree n, D and Priyadarshi, S. (2001) Proposal for development Box in the WTO Agree ment on Agriculture, CAFOD and Sou th Centre, Kauka b, R; (2002) Presentation at Agriculture and WTO Seminar, Mi nistry of Comm erce, Gove rnment of Pakistan, Islamabad, August, 2002, Action Aid Food Rights Th e WTO Agree ment on Agriculture, 2003.

Th e agriculture was included in the multilateral trading system after the eighth (Uruguay) round of talks under GATT on de mand of developing countries who had a comparative adv antage in this sect or and its benefits were being denied

to

them. This trade roun d stretc hed from 1986 -1994 and concluded in establishment of WTO and inclusion amo ng others of agriculture in the disc ipli ne of WTO. This was achieved by developing coun tries only after paying a heavy price in the for m concess ions on many fronts especially intellectual prope rty rights and services. WTO policies i mpact the following agree ments:
WORLD TRADE ORGANISATION

agriculture

princip ally thr ough

1. Agree ment on Agriculture (AOA) 2. Agree ment on App lication of Sanitary and Phytosanitary St anda rds (SPS): (Deal ing with Hea lth and disea se related iss ues) 3. Agree ment on Techn ical Barriers to Trade (TBT): (Deal ing with Regulations, standards, testing and certification proced ur es, packa ging, marki ng and labeling requirements, etc) 4. Agree ment on Trade Related Aspects of Intellectual Prope rty Rights (TRIPs): (Deal ing with Patents and copyrights, plant bree ders rights etc). Activists cry foul that Indian agriculture, alrea dy ree ling un der seve re drought and fall in cash crop prices, will die once the import cur bs are removed and free flow of food items are a llowed into India. "There is going to be 'mad ness' in the agriculture sector. Farmers will be hit hard by the WTO regime. What happe ns to our vegetable oils, rice, rubbe r, coconu ts a nd fruits, if similar items can be imported chea ply from other coun tries," asks K Sunda ran, a social activist espousing farmers causes in South India. He says currently there is a mass ive distortion in the international trade in agriculture. Industrialised coun tries have been givi ng huge domestic subsidies to their agricultural sector that there is excess ive production, import restrictions and d umping of agri-products in international marke ts.

But despite the con ce rns of farmers, many believe the WTO rules will not adversely affect the Indian agriculture as it is made out. Developed nations have com itt ed to the WTO that they would m red uce subsidies and tariff. So then bett er ove rseas marke ts will be available for Indian agricultural products.

4-2

PHARMACEUTICALS
most efficient

India has on e of the pharmaceutical industries in the world.

4 IMPACT OF WTO ON INDIA

Pharmaceutical firms grew mainly thanks to the absence of pate nt protection of medical drugs in the c oun try. For instance, Indian companies are now producing their own AIDS drugs, which are available chea ply, compa red to the original products from foreign countries. But the imposition of the new WTO rules will begin to thr eaten India's achievements in t he 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. Acc ording to t he Indian Drug Manu facturers' Association, sel f-sufficie ncy in Indian pharmaceutical sec tor is m re than 70 o per cent. "Worldwide, India is a country of very low prices for highquality medicines," points ou t the IDMA president Nishchal H Israni. But now the rules of the ga me in the pharmaceutical industry will change as India has com itt ed to toe the WTO m line on product pate nts. Product pate nt rules and Exclusive Marke ting Rights (EMR) un der the WTO could affect a paradigm shift in India's pharma majors. As per the EMR provis ion, a product for wh ich original pate nt was granted prior to 1995, is not fit for an EMR in the country. This has for ced nine lea ding domestic pharma 16

companies to for m the Indian Pharmaceutical Alliance that has de manded a mor e transpa rent WTO regime for EMR grants. How will the WTO rules affect 50 0,000 employee s working in roughly 20,000 pharma firms in the coun try? Well, many expect a spate of merge rs, acquisitions and alliances in the domestic pharmaceutical industry in the coming ye ars, as the impact of WTO regulations kick in, Indian pharma players are l ea rning to collaborate and consolidate to grow. If the industry is to be believed, the Matrix-Strides merger is only the beginning of the shake ou t that the pharma sect or is set to witness over the next few yea rs.

WORLD TRADE ORGANISATION

4-3

THE SERVICE SECTOR

As per the WTO rules, two obligations app ly to all services. They are the Most Favoured Nati on (MFN) trea tment and transparency by way of publication of all laws and regulations. Which in other words means that areas like ba nking, insurance, investment banki ng, hea lth, and many other profess ional services that are ope ned up will be boun d by the WTO com itments? India will have to open up i ts services m sect or to other WTO member countries. The result: many ove rseas service providers will enter into the services sectors in the coun try, thereby reducing the chances of domestic enterprises.

17

But expe rts believe India need no t be frightened of the WTO rules on services be cause the country at prese nt has a distinct competitive adv antage in many areas that include hea lth, engineering construction, computer software and other profess ional services.

4-4

TEXTILES AND CLOTHING

Th e WTO agree ment on textiles and clothing states that the Multi-Fibre Agree ment (MFA) will eventually be eliminated. MFA at prese nt groups the major importer countries -the United States, Austria, Canada, the European Comm un ity, Finland and Norway -- who app ly restrictions by way of quota. Expor ting coun tries like India are a part to the MFA. The phasing ou t of MFA will boost textile ex por ts from India. It will
4 IMPACT OF WTO ON INDIA

also increa se investment in textiles and joint ve ntures. But the risk is that as India ope ns up its market from next month, import of textiles and clothing will considerably increa se from countries like China, the Unites State s, Taiwan and Indonesia. This will force many textile manu facturers to modernise their mills and improve quality.

4-5

INFORMAT ION TECHNOLOGY

Under the Information Technology Agree ment signed under the WTO, Indian hardware and software companies can bec ome major players in the value-add ed arena. Availability of high-skilled of IT personn el and low cost of labour and operation will allow India to compete in the international marke t.

18

4-6

TRIPS (TRADE RELATED INTELLECTUAL PROPERTY RIGHTS)

TRIPS Article 27.3(b), which requires all WTO coun tries to provide some ki nd of intellectual prope rty rights (IPR) on plant varieties, was up for review in 1999. TRIPS are a clea rly antideveloping coun try treat y. Its provisions seriously threaten self reliance in agriculture and the liveli ho ods of farmers. TRIPS do no t contain any elements of equity or benefit sharing. It does not allow coun tries to claim a share of benefits companies who
WORLD TRADE ORGANISATION

breed new varieties using farmers varieties as the base since there is no provis ion requiring disclosure of the coun try of origin from where base materials have been take n. The Trade Related Aspects of Intellectual Rights (TRIPS) ag ree ment set minimum sta ndards for protection of IPRs, a standard that is closer to the level of protection provided in the developed world.

19

5
5-1

INDIA AND THE WTO

INDIAS ROLE IN THE WTO

India is a founding member of the GATT (194 7), it actively participated in the Uruguay Roun d Negotiations, and is a foun ding member of the WTO. India strongly fav ours the multilateral ap pro ach to trade relations and grants MFN 20

treat ment to all its trading partners, includi ng some who are no t membe rs of WTO. Within the WTO, India is com itt ed to m ensuring that the sect ors in which the developing coun tries enjoy a comparative adva ntage a re adequately ope ned up to international trade. It also has to see that the different WTO Agree ments are translated into specific enforcea ble dispensations, in order that developing coun tries are facilitated in their developmental effor ts. India fee ls that the multilateral system wou ld itself gain if it adequately reflected these con cerns of the developing coun tries, so as to create the necessa ry impetus to enable developing coun try membe rs to catch up with their developed coun try coun terparts.

5-2

INDIAS WTO COMMITMENT

Under the Uruguay Round India has bound 67% of all its tariff lines, wh ereas prior to that only 6% of tariff lines were bound. Th e bindings range from 0 to 300% for agricultural products from 0 to 40% for other products. Under the Uruguay Roun d manu factured products were bou nd at 25% on intermediate goods and 40% on finished goods.

5-2 .1

Balance of payments

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

maintained for balance-of-payments pur pose. These aggregate to 2,714 tariff li nes at the eight-digit level of the Indian Trade Classi fication. In May 1997, India prese nted to the WTO a plan for the elimination of these restrictions in imports, including tho se on c onsumer goo ds. This plan was considered at the consultations with India of the WTO Comm itt ee on Ba lance-of- Pay ments Restrictions in June-July 199 7. At the request of the United State s, a panel was constituted on 18 Nove mber 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 Agree ment.

21

5-2 .2

AGRICULTURE

Th e only com itment India has unde rtaken un der m the Agree ment is to bind its agricultural tariffs. This comm itment has been fulfilled by India binding its tariffs for primary agricultural products at 100% , processed foo d products at 150% and edible oils at 300% .India's prevailing agricultural tariffs are well within the bound rate s. Under the Uruguay Roun d, whenev er we have boun d tariffs on agricultural comm odities at zero or ve ry low-level s, renegotiation of tariff bindings have been sought un der Article XXVIII of GATT. Th e Agree ment 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 Agree ment on Textile and Cl othing (ATC) to integrate this sec tor into GATT 1994 in stage s, the Indian Government moved cotton and wool yarn, polyester staple fibre and 20 other industrial fabrics on to the list of free ly importable goods in 1995. India is concerned ab out the fact that repeated anti-dumping investigation by certain trading partners on the sa me product lines, without givi ng full effect to the special dispensation provisions of Article 15 of the Anti-dumping Agree ment has resulted in trade harass ment for its exp orters of textiles.
5 INDIA AND WTO

5-2 .4

INTELLECTUAL PROPERTY

India is availing itself of the transition periods due to her un der Article 65 of the TRIPS Agree ment to meet her obligations under the seven areas covered by the Agree ment. India's achievements in this field have been in the pass ing of TRIPS plus legislation in the field of Copyright La w. The 1994 amendments to t he Act of 1957 provides protection to all origi nal literary, dramatic, musical and artistic works, cinematographic films and soun d recordings. The most recent changes bring sect or s such as satellite broadcasting, computer

22

software and protection.

digital

technology

un der

Indian

copyright

5-2 .5

TRADES RELATED INVESTMENT MEASURES

Substantial modifications have already bee n to investment regime, increasing the nu mber of se ctor whe re foreign investment can take place and also increasing the foreign equity limit on thes e investments. India has already notified the trade- related investment measu res maintained by it in terms of Articles 2 and 5 of the TRIMs Agree ment and the illustrative lis t anne xed to the TRIMs Agree ment. 5-2 .6 ANTI-DUMPING made the foreign

Anti-dumping and coun tervailing d uties a re imposed under the Customs Tariff Act 1975 and the Rules made there under. Th e Act and Rules are on the lines of the respective GATT Agree ment on anti-dumping and countervailing d uties. Th e time limits and the proced ur es prescribed under the Indian laws/GATT Agree ment is strictly followed by the designated authority. With the increasing nu mber of case s, the Gove rnment of India proposes to set up a Directorate General of Anti-dumping and Allied Duties for expeditious disposal of anti-dumping and coun tervailing duty cases.

WORLD TRADE ORGANISATION

5-2 .7

SERVICE SECTOR

Th e services sect or ac coun ts for ab out 40% of India's GDP, 25% of employment and 30% of exp ort ea rnings. Recognizing the importance of the services sect or in achieving higher economic growth, t he gove rnment is givi ng added emphasis to i mproving services such as telecomm un ications, shipping, road s, por ts a nd air transp ort. The foreign direct investment regime has been liberalized

to attract

foreign 23

investment in the services sector.India actively participated in the Uruguay Rou nd services negotiations and made comm itments in 33 activities as compa red to an ave rage of 23 for developing coun tries. India also participated in the spill- over negotiations. In basic telecom un ication services, m India has un dertaken com itments in the areas of voice m telephone service for local and long-distance (within the service area ), cellular mobile services and other services such as circuit switched data transmiss ion sour ce s, facsimile services, private lea sed circuit services as per details given in the schedule of com itments. m While developed coun tries have surplus capital to invest, most of the developing coun tries have surplus of ski lled, semiskilled and un skilled workers. We have a large pool of wellquali fied profess ionals capable of providi ng services abroad. As developed countries have a comparative adv antage in exporting capital intensive services, simila rly developing countries have a comparative adv antage in exporting labour intensive services involvi ng move ment of persons. In Article IV of GATS, there is a clear obligation to increa se the participation of developing coun tries in trade in services. Th e Agree ment also recognizes the basic asy m et ry in the level of development of the services sect or m in developed and d eveloping coun tries and a com itment m that the developed countries will take con crete meas ur es aimed at strengthening the domestic service sect or of developing coun tries and providi ng effective market access in sect ors and modes of supp ly of exp ort interest to developing countries.

5 INDIA AND WTO

5-2 .8

INFORMATION TECHNOLOGY

India participated in the negotiations on the Agree ment from the ea rly st ages and after examination of the implications of the proposed agree ment and extensive discuss ions with trading partners joined as a participant on 1 April 1997. India is comm itt ed to phasing out the import t ariffs on the products cove red by the ITA as scheduled. 24

5-2 .9

REGIONAL TRADE AGREEMENTS

India at tac hes significance to her participation in regional ag ree ments within the framework of multilateral rules. India has been instrumental in sett ing up the Sou th Asian Ass ociation for Regi onal Cooperation (SAARC), whose major achievement in 1995 was the conclusion of the negotiations on trade preferences within the framewor k of the SAARC Preferential Tradi ng Arrangement (SAPTA). SAPTA became operational on 7 Dece mber 1995 and includes preferential tariff concess ions on 226 items and product gro ups. A second roun d of SAPTA trade negotiations was laun ched in Janu ary 1996 to broaden tariff concess ions. India granted concess ions on 902 tariff lines, effective 1 March 1997.

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6
COMPARISON OF INDIAS FOREIGN TRADE BENEFITS

6-1

BEFORE BECOMING THE MEMBER OF WTO

Its agreed that India was one of the founder member of WTO; it faced problems in Foreign Trade groun ds. The problems that India faced be fore the formation of WTO were the following: (1)Absence of Anti dumping (2)No Subsidy Facilities (3)Absence of TRIMs & TRIPs (4) Lac of Marke t Scenario & Strategies

6-2

AFTER BECOMING THE MEMBER OF WTO

(1)Anti-Dumping - Dumping is con de mned if it ca uses or thr eatens material injur y to an established industry. A product is considered as dumped w en its exp ort price h bec omes l ess as compa red to the normal price in the e xporting country plus a rea sonable am un t for o administrative, selli ng and any other costs and for profits. Anti dumping meas ur es can be employed only if dumped imports are show n to ca use serious damage to the domestic i ndustry in the import i ndustry. The meas ur es are not allowed if the margin of dumping is de minimise. (2)Subsidies - Th e draft agree ment defined certain specific subsidies wh ich would be subjects to various disciplines. Certain other types of subsidies would fall under prohibited category.

26

(3)Techn ical barriers to t rade - Techn ical regulation and sta ndards along with testing and certification procedures should not create unn ecess ary obstacles to trade.
6 COMPARISON OF INDIAS FOREIGN TRADE BENEFITS

(4)Right of marke t-The main iss ue is to reduce tariff and other trade restriction in c ase of com odities m like agricultural goo ds, textiles etc. (5)TRIMs (Trade related investment meas ur es) - Widely employed by developing coun tries. Refers to certain conditions imposed by gove rnment in respect of foreign investment. The agree ment of TRIM provides the following inconsistent TRIMs. a) Local con tent requirement b) Trade balancing requirement c) Trade and foreign exc hange balancing requirement. d) Domestic sales requirements. (6) TRIPs (Trade Related Aspects of Intellectual Property Rights-It is defined as information with com ercial m value. Intellectual Prope rty Rights have been characterised as a composite of idea s, inventions and crea tive express ion.

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71 7-1 .1 IMPORT

EXIM POLICY

Indian Import Policy

Import is the anton ym of exp ort. In the terms of economics, import is any com odity brought into on e country m from another country in a legal way. Th e economic needs of the country, effective use of foreign curr ency are the basic factors which influence India's import policy. There are mainly 3 basic objectives of the i mport policy of India: To make the goods ea sily available. To simpli fy importing license. To promote efficient import substitution.

7-1.2

Curren t Scenario of Imports in India

There are few goods which canno t be imported namely tall ow fat, animal renn et, wild animals, un processed ivory etc. Most of the restrictions are on the grou nd of security, hea lth, environment protection et c. Imports are allowed free of duty for exp ort production. Input output norms have been specified for mor e than 4200 items. The norms tell abou t the amoun t of duty free import of inputs allowed for specified product s. Th ere are no restrictions on imports of capital goods. Import of sec on d hand capital goods who se minimum residual life is of five yea rs is permitt ed. Export Promotion Capital Goods (EPCG) sc heme provides exp orters to import capital goods at a concess ionary cust om rates. In the past 30 yea rs Indian imports have risen q uite dramatically. At pres ent imports acc ounts for 17% of the GDP. Capital goo ds have bee n

continu ed to be imported and in the last thr ee years, their share has fallen from 25% to 22 %.
7 EXIM POLICY

7-1 .3

Ma jor 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 product s, c ru de rubbe r, fabrics, electronic goods etc.

7-1 .4

Problems due to Large Import of Products

Th e rece nt trend of imports is of some con ce rn. 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 i ndustries need to be developed. It also creates press ur e on the ec onomy as the mon ey ultimately has to be be arded by the people.

WORLD TRADE ORGANISATION

7-2

EXPORT

Exp or t mea ns the transferring of any goo d from one country to another coun try in a legal way for the purpose of trade. Exp ort goods are provided to the foreign consumers by the domestic producers.

7-2 .1

Indian Ex ports: A History

Th e history of Indian expor ts id ve ry old. During p rehistoric times India exp orted spices to the other parts of the world. India was also famou s for its textiles which were a chief item for exp ort in the 16th centur y. Textiles and cotton were exp orted to the Arab coun tries from Gujarat. Dur ing the Mughal era India exp orted various precious st on es such as ivory, pea rls, tortoise ston es etc. But during the British era, Indian exp orts declined as the East India Company foreign trade of India. 30

7-

2.2

Indian Ex ports: Current Scenario

Eve ry year India earns billi on of dollars by exporting various goo ds and items. The Indian gove rn ment has outlined certain ex por t policies. The expor t policies tell ab out the products to be exp orted and the coun tries to who m exp orts are to be done. The government of India wor ks with the Federation of Indian Export Organization, the lea ding exp ort p romotion organization of India. Exp orts are the major focus of India's trade policy and most of
7 EXIM POLICY

the items can be free ly ex por ted from India. A few items are subject to exp ort control to preve nt their shortage. Th e profits from ex por ts a re exe mpted from income tax. Indian exports contribute nea rly 12.4% in the GDP.

7-2 .3

Leading Export Items of India

In the past ten yea rs, ex por ts have grow n at a rate of nea rly 22%. S ome com odities have enjoyed faster m export grow th than others. Some of India's main ex por t items are cotton , textiles, jute goo ds, tea, coffee, cocoa products, rice, w eat, pickles, mango pulp, juices, jams, h prese rved vegetables etc. India exp orts its goo ds to some of lea ding coun tries of the world such as UK, Belg ium, USA, China, Russ ia etc.

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7-2 .4

Restriction on the Exports of Items

How ev er there are some restrictions on the exp ort of goods. Under sub section (d) of section 111 and sub section (d) of section 11 3, any goo d exp orted or atte mpted to be exp orted, con trary to any proh ibiti on imposed by or un der the cust oms act or any other law is liable for confiscation.
WORLD TRADE ORGANISATION

7-2 .5

Problems of the Indian Ex port Sector

to be solved

But there are few problems which need

be for e India makes a mark for itself in the ex por t sec tor . The Indian goo ds have to be of superior quality. The packaging and branding such be such that countries are interested to export from India. At the sa me time India must look for potential market to sell their goods. The gove rnment should frame policies which gives boo st to the exports.

32

33

CONCLUSION

Th e developed countries want that the underdeveloped countries obse rve some restrictions relating to labour employment and ecological balance. Their argument is t hat the un derdeveloped coun tries use c hild labours or their social security meas ur es are very poor. Further, these coun tries do no t take meas ures to control pollution or to maintain ecological balance. As a result, cost of production in such countries is low. So, the developed coun tries should be allowed to impose tariffs or imports from un derdeveloped countries un til the developing countries improve the condition of labour and do not employ c hild labour. Thu s, t he developed coun tries tried to impose many restrictions on the production process of the un derdeveloped countries. Thu s, if the developing countries try to protect their interest as a grou p, they may sta nd to gain from the WTO system. If we consider both sides of a coin then we can conclude that if the developed countries l iberalise their import of agricultural goods, Indias expor t of agricultural goods will increase. India has a comparative cost adva ntage in the production of agricultural com odities. Hence Indias of m such com odity is expected to increase. m On the other side according to the ag ree ment of Trade Related Investment Mea sures (TRIMs), there should not be any discrimination be tween foreign and domestic investments. As a result, it will ve ry difficult to control the restrictive activities of the following investors. This agree ment will also favou r the investors of the developed countries.

34

9
(1)

BIBLIOGRAPHY

Business Econo mics & Business Environment Jaydeb Sarkhel. International Business - Francis Cherun ilam International Marke ting Rakesh Mohan Joshi www.wikipedia.org www.exprasspharm a.com www.wto.org Annual Repor t 2007 Depa rtment of Comm erce, Gove rnment of India Trade Policy Revie ws 2002

(2) (3) (4) (5) (6) (7) (8) (9)

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