A Project Report on

Impact of WTO and TRIPS on

Indian Economy

SUBMITTED TO

DR. SHALINI MARWAHA, DR. ANIL THAKUR

PROFESSOR, DEPARTMENT OF LAWS

PANJAB UNIVERSITY, CHANDIGARH

SUBMITTED BY:

ANUBHA JINDAL

1209/18

LL.M
 ACKNOWLEDGMENT

I take the prerogative to express my heartfelt gratitude to my teacher Professor Shalini Marwaha
and Dr. Anil Thakur, Department of Laws, Panjab University, Chandigarh for her diligent
guidance all through the course of my project. It is her fruitful teaching which has given me a
comprehensive understanding of the topic. She has truly been a source of inspiration to me.

I would also like to thank my friends, who have been very helpful in providing me useful
information, wherever needed for the completion of my project. I also extend my thankfulness to
my parents for their precious moral support.

I’m grateful for all their help and valuable advice which has made the successful completion of
my project possible.

Anubha Jindal

1209/18

2
 TABLE OF CONTENTS

Acknowledgment ............................................................................................................................ 2
Table of Contents ............................................................................................................................ 3
Introduction ..................................................................................................................................... 4
Major agreements of WTO ............................................................................................................. 5
Impact of WTO on Indian Economy .............................................................................................. 7
Impact of TRIPS ........................................................................................................................... 11
Conclusion .................................................................................................................................... 23
Bibliography ................................................................................................................................. 24

3
 INTRODUCTION

World Trade Organization, as an institution was established in 1995. It replaced General

Agreement on Trade and Tariffs (GATT) which was in place since 1946. In pursuance of World
War II, western countries came out with their version of development, which is moored in
promotion of free trade and homogenization of world economy on western lines. This version
claims that development will take place only if there is seamless trade among all the countries
and there are minimal tariff and non- tariff barriers. That time along with two Bretton wood
institutions – IMF and World Bank, an International Trade Organization (ITO) was conceived.
ITO was successfully negotiated and agreed upon by almost all countries. It was supposed to
work as a specialized arm of United Nation, towards promotion of free trade. However, United
States along with many other major countries failed to get this treaty ratified in their respective
legislatures and hence it became a dead letter.

Consequently, GATT became de-facto platform for issues related to international trade. It has to
its credit some major successes in reduction of tariffs (custom duty) among the member
countries. Measures against dumping of goods like imposition of Anti-Dumping Duty in victim
countries, had also been agreed upon. It was signed in Geneva by only 23 countries and by 1986,
when Uruguay round started (which was concluded in 1995 and led to creation of WTO in
Marrakesh, Morocco), 123 countries were already its member. India has been member of GATT
since 1948; hence it was party to Uruguay Round and a founding member of WTO. China joined
WTO only in 2001 and Russia had to wait till 2012.1 While WTO came in existence in 1995,
GATT didn’t cease to exist. It continues as WTO’s umbrella treaty for trade in goods.

1
https://www.insightsonindia.com/2016/01/20/india-and-wto-detailed-analysis-of-all-related-issues-and-concepts/
accessed on 9.04.2019 at 12:15 am

4
 MAJOR AGREEMENTS OF WTO

India is a founder member of World Trade Organization and also treated as the part of
developing countries group for accessing the concessions granted by the organization. As a
result, there are several implications for India for the various agreements that are signed under
WTO discussed as follows:2

(i) Reduction of Tariff and Non-Tariff Barriers: The agreement involves an overall reduction
of peak and average tariffs on manufactured products and phasing out the quantitative
restrictions over a period. The important implication is that the firms that have competitive
advantage would be able to survive in the long run.

Agreement on subsidies and countervailing measures – SCM

In order for a financial contribution to be a subsidy, it must be made by or at the direction of a

government or any public body within the territory of a Member. Only “specific” subsidies are
subject to the SCM Agreement disciplines. There are four types of “specificity” within the
meaning of the SCM Agreement: Enterprise-specificity,Industry-specificity, Regional
specificity,Prohibited subsidies.

(ii) Trade Related Investment Measures (TRIMS): The agreement prohibits the host country
to discriminate the investment from abroad with domestic investment i.e. agreement requires
investment to be freely allowed by nations.3

(iii)Trade Related Intellectual Property Rights (TRIPS): An intellectual property right seeks
to protect and provide legal recognition to the creator of the intangible illegal use of his creation.
This agreement includes several categories of property such as Patents, Copyrights, Trademarks,
Geographical indications, Designs, Industrial circuits and Trade secrets. Since the law for these
intangibles vastly varied between countries, goods and services traded between countries which
incorporated these intangibles faced severe risk of infringement. Therefore the agreement
stipulated some basic uniformity of law among all trading partners. This required suitable
amendment in the domestic International Property Rights (IPR) laws of each country over a

2
https://www.mbarendezvous.com/general-awareness/wto-and-impact-on-india/ accessed on 9.04.2019 at 1:15 am
3
ibid

5
period of time. As a result Patents Act, Trade and Merchandise Mark Act and the Copyright
Right Act were amended in India. The main impact of this is on industries such as pharma and
bio-technology. Further, the technology transfer from abroad is expected to become costly and
difficult.

(iv)Agreement on Agriculture (AOA): The agreement on agriculture broadly deals with

providing market access, reduction of export subsidies and government subsidies on agriculture
products by member countries. The reduction of tariffs and subsidy in export and import items
would open up competition and provide a better access to Indian products abroad.

(v) Agreement on Sanitary and psyto-sanitary measures (SPM): This agreement refers to
restricting exports of a country that do not comply with the international standards of
germs/bacteria etc. Since allowing such products inside the country, there would be spread of
disease and pest in the importing country. The implication of these agreements is that there is an
urgent need to educate the exporters regarding the changing scenario and standards at the
international arena especially in food processing, marine food and other packed food industries.

(vi) Multi-Fiber Agreement (MFA): This agreement is dismantled with effect from 1 January
2005. The result was removal of quantitative restrictions (QRs) on the textile imports in several
European countries. As a consequence a huge textile market is opened up for developing
countries like India. In order to take advantage of opening up better preparedness is required in
terms of modernization, standardization, cost efficiency, and customization to meet challenges of
foreign customers.

Besides these major agreements there are several other agreements such as agreement
on Market Access, which propagates free market access to products and reduction of tariff and
non-tariff barriers; agreement to have Safeguard Measures if there is an import surge and it is
liable to affect the domestic industries in the transition economies. These measures can include
imposing Quantitative Restrictions (QRs) for a certain period and also imposing tariffs on the
concerned products, Agreement on Counter-Veiling Duties, Anti-Dumping Duty (ADD) against
imported products if the charges of Dumping are proved against the exporting country.4

4
ibid

6
 IMPACT OF WTO ON INDIAN ECONOMY

India is one of the prominent members of WTO and is largely seen as leader of developing and
under developed world. At WTO, decisions are taken by consensus. So there is bleak possibility
that anything severely unfavorable to India’s interest can be unilaterally imposed. India stands to
gain from different issues being negotiated in the forum provided it engages with different
interest groups constructively, while safeguarding its developmental concerns.

In absence of such a body we stand to lose a platform through which we can mobilize opinion of
likeminded countries against selfish designs of west. Thanks to vast resources of developed
countries they can easily win smaller countries to their side. WTO provides a forum for such
developing countries to unite and pressurize developed countries to make trade sweeter for poor
countries. Accordingly, India remains committed to various developmental issues such as Doha
Development Agenda, Special Safeguard Mechanism, Permanent solution of issue of public
stock holding etc. 5

The World Trade organization was established to deal with all the major aspects of international
trade and it had far reaching effects not only on India’s foreign trade but also on its internal
economy.
The impact of the WTO on the Indian economy can be analysed on the basis and general
concepts.The WTO has both favourable and non-favourable impact on the Indian economy.
• FAVOURABLE IMPACT :

1) Increase in export earnings : Increase in export earnings can be viewed from growth in
merchandise exports and growth in service exports :

• Growth in merchandise exports : The establishment of the WTO has increased the exports of
developing countries because of reduction in tariff and non-tariff trade barriers.
India’s merchandise exports have increased from 32 billion us $ (1995) to 185 billion u $ (2008-
09).
• Growth in service exports : The WTO introduced the GATS (general Agreement on Trade in
Services ) that proved beneficial for countries like India. India’s service exports increased from 5

5
https://www.mbarendezvous.com/general-awareness/wto-and-impact-on-india/ accessed on 9.04.2019 at 2:15 am

7
billion us $ (1995) to 102 billion us $ (2008-09) (software services accounted) for 45% of India’s
service exports).

2) Agricultural exports: Reduction of trade barriers and domestic subsidies raise the price of
agricultural products in international market, India hopes to benefit from this in the form of
higher export earnings from agriculture

3) Textiles and Clothing: The phasing out of the MFA will largely benefit the textiles sector.
It will help the developing countries like India to increase the export of textiles and clothing.

4) Foreign Direct Investment: As per the TRIMs agreement, restrictions on foreign investment
have been withdrawn by the member nations of the WTO.
This has benefited developing countries by way of foreign direct investment, euro equities and
portfolio investment. In 2008-09, the net foreign direct investment in India was 35 billion US $.

5) Multi-lateral rules and discipline : It is expected that fair trade conditions will be created, due
to rules and discipline related to practices like anti-dumping, subsidies and countervailing
measure, safeguards and dispute settlements.

Such conditions will benefit India in its attempt to globalise its economy.6

• UNFAVOURABLE IMPACT :

1) TRIPs Protection of intellectual property rights has been one of the major concerns of the
WTO. As a member of the WTO, India has to comply with the TRIPs standards.
However, the agreement on TRIPs goes against the Indian patent act, 1970, in the following
ways:
• Pharmaceutical sector : Under the 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
(medicines) 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,
fortunately, most of drugs manufactured in India are off –patents and so will be less affected.

6
https://www.researchgate.net/publication/311613950_Impact_of_World_Trade_Organization_on_Foreign_Tradein
_India

8
• Agriculture: Since the agreement on TRIPs extends to agriculture as well, it will have
considerable implication’s on Indian agriculture. The MNG, with their huge financial resources,
may also take over seed production and will eventually control food production.
Since a large majority of Indian population depends on agriculture for their divelihood, these
developments will have serious consequences.

Micro-organisms : Under TRIPs Agreement, patenting has been extended to micro-organisms as

well. This will largely benefit MNCs and not developing countries like India.7

2) TRIMS : The Agreement on TRIMs also favours developed nations as there are no rules in
the agreement to formulate international rules for controlling business practices of foreign
investors.
Also, complying with the TRIMs agreement will contradict our objective of self – reliant growth
based on locally available technology and resources.

3) GATS: The Agreement on GATS will also favour the developed nations more.
Thus, the rapidly growing service sector in India will now have to compete with giant foreign
firms. Moreover, since foreign firms are allowed to remit their profits, dividends and royalties to
their parent company, it will cause foreign exchange burden for India.

4) TRADE AND NON – TARIFF Barriers : Reduction of trade and non-tariff barriers has
adversely affected the exports of various developing nations. Various Indian products have been
hit by. Non- tariff barriers. These include textiles, marine products, floriculture, pharmaceuticals,
basmati rice, carpets, leather goods etc.

5) LDC exports: Many member nations have agreed to provide duty – frce and quota – frce
market access to all products originating from least developed countries.
India will have to now bear the adverse effect of competing with cheap LDC exports
internationally. Moreover, LDC exports will also come to the Indian market and thus compete
with domestically produced goods.

India’s welfare gain is 0.68 percent (US$2.8 billion over its 2005 GDP) when the UR scenarios
are fully implemented. The country’s additional welfare gain amounts to 1.67 percent ($7.0

7
Supra 2

9
billion) when the assumed DR multilateral trade liberalization is completed. Resources in India
are allocated toward labor-intensive sectors, such as textiles; wearing apparel; leather and leather
products; and food, beverages, and tobacco. Real returns to both labor and capital increase.
Finally, India benefits even if it were to undertake unilateral trade liberalization of the order
indicated in the multilateral scenarios. The gains from the liberalization scenarios that have been
noted, of course, should be interpreted in the light of the assumptions of our modeling structure.
In particular, our computational model abstracts from the effects of macroeconomic changes and
policies. Also, we do not capture the effects of dynamic changes in efficiency and economic
growth. Furthermore, we have not analyzed the effects of possible changes in inflows of foreign
direct investment. Finally, the analysis of intersectoral employment shifts makes no allowance
for the constraining effects of India’s sectoral exit barriers and its domestic labor laws.

10
 IMPACT OF TRIPS

In a democratic country, like India, it is not easy to shift the policy against public interest. India
was in the difficult situation of protecting people’s interest on the one hand and fulfilling the
WTO’s agreement of TRIPs at the other. 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. India’s patent policy so long has been, infact, protecting the
interest of public more than that of the monopoly rights. The question is that whether the
amendment to the Indian Patents Act, 1970 has taken advantage of the provisions available under
the TRIPs agreement, and look at the exemption, exception and compulsory licensing provisions
in Pharmaceuticals. Intellectual Property rights have generated strong impact on the modern day
life. Therefore, the impact of IPR is enormous and on the modern day life. These IPRs were
promoted in an ever seen manner by the TRIPs agreement. The TRIPs agreement has mandated
its members states to implement the provisions of the agreement in order to promote and protect
IPRs. Members states are asked to provide protection to different IPRs by making necessary
adjustments in their existing laws or enacting new laws. India, being a member state to the TRIPs
agreement brought changes in its IPRs laws. The preceding fifteen years have seen many new
IPR enactments. With globalization, liberalization and privatization, the ambit of IPR has grown
multifold and its importance has amplified, having a profound impact on commercial interests. 8

IMPACT ON EXISTING LEGAL FRAMEWORK

IPR have generated strong impact on the modern day life. These IPRs were members’ states to
implement the provisions of the agreement in order to promote and protect the IPRs. Members’
states have been asked to provide protection to different IPRs by making necessary adjustments
in their existing laws or by enacting new laws. In order to fulfill such obligations, member’s
states have amended their laws or have brought up new legislations. India being a member state
to the TRIPs agreement brought changes in its IP Laws in fulfillment of its obligations under the
agreement. The TRIPs agreement brought changes in the existing framework on the IPRs, which
had impact on the entire world. The TRIPs agreement uniforms and rationalizes all the existing

8
http://euroasiapub.org/wp-content/uploads/2016/09/4-117.pdf accessed on 8.04.2019 at 12:35 pm

11
international agreements on different areas of IPRs. It provides for the blue print for the
protection of all the different forms of IPRs.

IMPACT ON COPYRIGHT LAW

The Copyright Act, 1957 has been amended to include computer program as literary work as
required by Article 10 of the TRIPs Agreement.

IMPACT ON TRADE MARK LAW

The Trade and Merchandise marks Act was passed in the year 1958.Since then it has been
amended several times. Moreover in view of developments in trading and commercial practices,
need for simplification and harmonization of trade mark management system, it was necessary to
bring out a comprehensive legislation on the subject. Accordingly the Trade marks Act 1999 was
passed.The Trade and Merchandise Marks Act, 1958 has been replaced with the Trade Marks
Act, 1999 which includes protection of well-known marks, certification marks and collective
marks. It now provides for registration of trade mark for services as well. This is in compliance
with Article 16 of the TRIPs Agreement.9

IMPACT ON INDIAN PATENT LAW

Changes into the Indian patent laws have been necessitated by India’s accession to the world
Trade Organisation, as one of the founder members, in January 1995. The Agreement helps India
to introduce the changes at three different stages. To satisfy the first set of obligations, the Patent
(Amendment) Act, 1999 was enacted after India lost the dispute with USA in WTO. In
pursuance of the TRIPs agreement negotiated during the Uruguay Round, the Patent Act ,1970
was first amended in March 1999 to introduce the transitional mailbox facility from 1 January
1995 to receive and hold product patent applications in the field of pharmaceutical, agriculture
and chemicals until 1 January 2005.The second amendment to the act was made in June 2002 to
meet obligations under the TRIPs agreement relating to modifications in the provisions
concerning among other issues, term of patent protection, rights of patentee and Compulsory
licensing. This included changes in patentable inventions, grant of new rights, extension of the

9
https://www.researchgate.net/publication/228147635_Globalization_and_WTO_Impact_on_India's_Economic_Gro
wth_and_Export

12
term of protection, provision for reversal of burden of proof in case of process patent
infringement and conditions for compulsory licenses. The third amendment required to meet
obligations under TRIPs agreement introduce product patent protection in all fields of
technology. The Patent (Amendment) Act, 2005 make the Indian patent Act fully compatible.
Other recent legislations include the Geographical Indications of Goods (Registration and
Protection) Act, 1999, The Designs Act20, 2000 and The Protection of Plant Varieties and
Farmers' Rights Act, 2001. 10

IMPACT ON FOOD SECTOR

The food sector in the country will also have to face new challenges in the new patent regime.
Different processes and products will become patentable. Therefore, there is need to document
all the traditional processes as well as products with a view to reduce the number of
controversies over claims for patent rights. One of the serious implications of the treaty is that
when the industrial countries could strengthen their control over global agriculture by keeping
their food security intact, developing countries are called upon to dismantle their food security
system.

INDIAN CONSUMERS

Fears have been raised in several quarters, including consumers and industry on the possible
impact on them, particularly the pharmaceuticals. Consumer fear the product patent may lead to
price hike, making medicines unaffordable to the poor. However, government has clarified that
the law is prospective and covers an insignificant percentage of medicines. With the introduction
of product patents, the inventor will try to maximize his profits and therefore price of drug higher
than if there were no patents. Correspondingly, the consumption of the drug will be lower. This
represents an indirect welfare loss to Indian consumers because of higher prices associated with
introducing product patents. In addition to this are the direct costs of administrating the patent
system and enforcing patentee rights through the courts in case there are infringing disputes.
Thus patented products would be sold at monopolistic prices devoid of any competition resulting
in still high price for the consumers.11

10
https://www.academia.edu/6323752/The_World_Trade_Organization_and_Its_Impact_on_Indian_Businesses
11
Supra4

13
IMPACT ON INNOVATIONS

Many countries of the world, including India, The implementation of TRIPs worldwide
represents a step in the opposite direction have achieved self-sufficiency in knowledge intensive
sectors by allowing for a loosely defined intellectual property rights (IPR) regime and its impact
on the production and innovative capacity of developing countries in knowledge intensive
sectors is not at all clear. Taking India as representative of a technologically advanced
developing country, and the biotech based segment of the pharmaceutical industry as an example
of an emerging knowledge intensive sector, we examine the possible impact of TRIPs on the
incentives and ability to innovate.12

The conclusion is that TRIPs is not likely to have a significant impact on incentives for
innovation creation in the biotech segment. The strengthening of the IPR regime world wide as
part of the TRIPs agreement might adversely affect the technological activity in the developing
countries by choking the spill overs of knowledge fro industrialized countries to developing
countries. The provision of product patent on many industrial products might affect adversely the
process of innovative activities in the developing countries enterprises. It is true that the
development of many products is beyond the capability of most developing countries in view of
huge resources involved. The TRIPs agreement was born to protect the interests of the industry,
trade and services. Whereas the higher standard of protection is relatively advantageous for the
developed economies which are ahead of the developing countries in terms ofinnovations and
research and development among developing countries it is less advantageous for those where
the domestic industry is not very strong to invest in R and D to pursue new product development
or process development skills. The increase in the period of the patent protection and a stricter
enforcement of patenting rules and regulations would increase the cost of technology acquisition
for Indian industry. Impact of TRIPs on Indian Pharmaceutical Sector The most adverse impact
of the TRIPs Agreement is going to be on the health sector of the developing countries. The role
of patent in maintaining monopoly and restrictive practices in Pharmaceutical industries was
identified by the UN Agency like UNCTAD in the 70’s itself. It was this realisation which
prompted the developed and developing countries to deny or limit Pharmaceutical patents till
recently. India is a glaring example in this regard. After denying product patent under the 1970

12
ibid

14
Act, the Indian domestic Pharmaceutical industry became an export surplus industry. The 40000
crore domestic industry fears that increased competition, import surges and MNCs would lead to
a non level playing field. So far, the pharmaceutical industry was covered only by process patent,
which allowed them to reverse engineer drugs and market them at very low prices. Now with a
product patent in place this will no longer be possible. The post Patent Regime opens up vast
opportunities for Indian pharmaceutical firms. India will emerge as a leading country in the
world pharmaceutical market. Presently, many Indian companies have begun international
operations as well as acquisitions which will make a significant contribution to their turn over.
Export will be the major thrust of the industry, in the post Product Patent regime.

IMPLICATIONS FOR DRUGS PRICES

A strong Patent system under TRIPs will establish a sort of monopoly. Drugs prices in India are
very low when compared to A product patent of 20 years in medicines under the TRIPs
Agreement will give rise to patent monopoly. In condition of monopoly, a high price can be
charged, as these prices have no considerations with the buying capacity of the consumers in
developing countries like India, the countries where product patent is recognized. The fear that
prices of medicines will spiral is unfounded.97% of all drugs manufactured in India are off
patent, and so will remain unaffected. these cover all the life savings drugs, as well as medicines
of daily use for common ailments. In the patented drug also, in most cases there always
alternatives available . 13

IMPACT ON AVAILABILITY OF PHARMACEUTICAL PRODUCTS

In addition to high prices, the lack of availability of essential drugs will be affected. The TRIPs
Agreement does not require a patentee lo manufacture an invention in India. Under TRIPs,
patents be shall available and patents rights enjoyable without discrimination as to the place of
invention, the field of technology and whether products are imported or locally produced. Before
enactment of the Patents Act, 1970, the Colonial patents and Designs Act, 1911 permitted
foreign countries to block India’s access to the latest antibiotics and to critical therapeutic
discoveries. Between 1947-1957, 90% of drugs and pharmaceutical patents in India were held by
foreign citizen and les then 1% were commercially exploited in India. The three amendments to

13
https://www.mbarendezvous.com/general-awareness/wto-and-impact-on-india/ accessed on 8.04.2019 at 12:05 am

15
the Indian Patents Act were made alongside intense debates which emphasized that with the
rights of the patent holders strengthened under TRIPs, there is an urgent need to balance this
situation with more effective instruments so as to ensure that the public interest issues, as for
example, access to medicines at affordable prices are also addressed. 14

IMPACT ON RESEARCH AND DEVELOPMENT

The development of new drugs is an extremely expensive exercise since the entire cost of
developing a new drug and bringing it into the market has to be borne by the firm developing it.
It is estimated that it takes twelve years and about 200 to 300 million dollars for a US firm to
develop a new drug and introduce it into the market. India companies neither have adequate
funds nor infrastructure to conduct basic research. The majority of patent filing are from
residents of industrialized countries and there is strong relationship between the volume of patent
filings and level of GDP and investment in research and development. China ,Japan and U.S.A.
are the top three ranked countries in terms of GDP and R& D.In 2007,aboubt 59.2% of world
patent filing are filed in these three countries. Indian Pharmaceutical sector has moved into post-
product patent regime, putting end to the long era of launching and manufacturing re-engineered
generic drugs in India. The transitional period to reintroduce product patent regime has elapsed
but the transitional period for transformation of domestic Pharmaceutical industry to face the
challenges in post-product patent regime is still underway, it fails to protect the public from the
aggressive monopolies that patents confer on the right holders. Thus the implication of the TRIPs
Agreement for the Indian Pharmaceutical industry is going to be enormous. Monopoly MNCs
claiming high prices on the pretext of recouping their huge outlay in R&D and long clinical trials
cannot be effectively countered. 15

There is no doubt that India is considered as one of the largest pharmaceutical industry in the
world. Nearly 90% of the domestic demand for pharmaceutical in India is generally satisfied
through indigenous protection. At the same time, imports are limited to very few drugs, precisely
life saving drugs. One of the important consequences had been seen in the rise of the prices of
drugs. Of course there is applicable only to those medicines which have been invented only after
the new product laws came into operation i.e. since 2005. So, it is expected that it would affect

14
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5488177/
15
https://openknowledge.worldbank.org/bitstream/handle/10986/15082/9780821354100.pdf?sequence=4

16
only a small proportion of the drugs available in India. The TRIPs convention is not going to
improve the incentives for investment in the finding of treatment for new diseases. Therefore, the
impact of TRIPs will be restricted to an elimination of the production of patented products. It
will not have a deleterious or a positive impact on their levels of inventive activity. Even more
importantly, TRIPs is not likely to create any incentive to increase technological knowledge or
create innovations other than that provided by the national system of innovation. TRIPs is not
likely to increase incentives for multinational Pharmaceutical firms to invest in, or to collaborate
with research and production unities based in developing countries. By putting a universal
minimum standard, India which till now was supporting the developing countries by offering the
cheapest generic version of the medicines under its process patent regime would not be in
position to export these medicines after adopting ‘product patent regime’ under the TRIPs. It is
among the few Pharmaceutical industries from the developing countries, posing the capacity to
meet out such unforeseen challenge by taking recourse of flexibilities offering under the TRIPS
and hence ensuring an access to the medicine to the poor peoples. A country having agreed to be
a party to the TRIPs and to WTO regime is bound to legislate in harmony with the international
agreements phasing out the pre-existing IP legislations. These new laws not only call for the
change in the existing IP laws but also in many cases take up the need for setting up new and
modernized institutions. Many Intellectual Property laws are at times just rushed through without
giving due weightage to the long-term implications of the new provisions.43.To utilize the WTO
benefits, India has complied with the TRIPs, agreement, otherwise India has to face the problem.
Significant impact has been felt in India since the establishment of the WTO. In the wake of the
things, several aspects both beneficial and adverse are discussed here. Efforts have been made to
find out what exactly has happened in India as a whole and especially to the most important
sector, namely, the pharmaceutical sector. The WTO regime has created excellent opportunities
for the developing countries to increase their exports. However, the developing countries have to
improve the quality of products upon their international standards set up by the WTO
organizations. 16

What is Indo – US’s WTO problem?

16
http://www.oiirj.org/oiirj/nov-dec2013/55.pdf

17
Since end of cold war both countries have witnessed a spectacular improvement in bilateral
relations in almost all spheres. However, at WTO platform two countries remain arch rival and
leaders of opposite camps. U.S. has severe disliking for India’s position in atleast two spheres –
Agriculture and Intellectual Property.

Agriculture

Agreement on Agriculture which was hatched in Uruguay round negotiations is heavily tilted in
favor of developed world. For balancing this India as part of Group of developing and least
developed nations (G-33) proposed amendment to AOA in 2008. Current quest of G-33, toward
achieving permanent solution is follow up story of this proposal only. As of now, Peace Clause
agreed to in 2013, allows us perpetually to continue our food stocking program at administered
prices, without being dragged into WTO for violation of AOA.17

Intellectual Property

Further, as part of Doha Development Agenda, developing countries managed to tweak

‘Agreement on Trade related aspects of Intellectual Property’ (TRIPS) in favor of developing
countries by allowing compulsory licensing in certain circumstances. First compulsory license
was granted by Indian Patent Office to NATCO for ‘nexavar’ drug produced originally by
German firm Bayer AG.

Since then US pharma industry has been apprehensive of frequent evocation of this principle in
developing world. US not only want this concept to be done away with, it also wants 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 can’t be granted. India due to its promising pharmaceutical
industry exploits these powers religiously. Since India’s course is not violative of TRIPS,
question of India being challenged in WTO doesn’t arise.18

Domestic Content Requirement in Solar Panel

17
ibid
18
Supra 5

18
Recently, India lost this case to US in WTO’s 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.

Visa problem

Recently, U.S. has double the fees for certain categories of H1B and L1 visas to $4,000 and
$4,500 respectively. H1B and L1 visas are temporary work visas for skilled professionals. India
is the largest user of H1B visas (67.4 per cent of the total 161,369 H1B visas issued in FY14
went to Indians) and is also among the largest users of L1 visas (Indians received 28.2 per cent
of the 71,513 L1 visas issued in FY14). India is likely to pursue bilateral discussions over the
issue, but as last resort it may head to WTO if nothing comes out.19

Why India stayed out of Information Technology Agreement-II in Nairobi?

As many as 53 WTO members agreed in Nairobi to a seven-year time frame to scrap all tariffs
on 201 IT products that account for an annual trade of $1.3 trillion. Such a pact is touted to drive
down prices of items ranging from video cameras to semi-conductors. However, India had been
opposing such an agreement on fears that the deal would benefit only those countries (notably
the US, China, Japan and Korea) that have a robust manufacturing base in these products, and
not India. This Information Technology Agreement is being called ITA-II. Original ITA was
signed in 1996. New ITA aims at expanding lists of items covered and total elimination of
custom tariffs in 7 year framework. Since 1996 many new items have creeped in electronics
industry which remains outside the ambit of ITA. Current dismal state of Indian electronic
industry is often attributed to ITA of 1996. This compelled India to keep certain electronic items

19
https://openknowledge.worldbank.org/bitstream/handle/10986/15082/9780821354100.pdf?sequence=4

19
tariff free which gave us infamous ‘inverted duty structure’. Here, domestic products are charged
to higher excise duty than custom duty on imports. This put Indian manufacturers at serious
disadvantage in comparison to foreign vendors.

It is expected that by 2020 India will consume electronic items worth $ 400 billion. As per
current situation, out of this it is likely to import atleast goods worth $300 billion. Electronic
hardware manufacturing is one of the main components of ‘Make in India’ and ‘Digital India’
program. Hence India stayed away from ITA-II.

How India’s stand differs when it comes to services?

From India’s point of view, services present a different picture from agriculture and industrial
tariffs. As an emerging global power in IT and business services, the country is, in fact, a
demander in the WTO talks on services as it seeks more liberal commitments on the part of its
trading partners for cross-border supply of services, including the movement of ‘natural persons’
(human beings) to developed countries, or what is termed as Mode 4 for the supply of services.
With respect to Mode 2, which requires consumption of services abroad, India has an offensive
interest.

In sharp contrast, the interest of the EU and the US is more in Mode 3 of supply, which requires
the establishment of a commercial presence in developing countries. Accordingly, requests for
more liberal policies on foreign direct investment in sectors like insurance have been received.
These developed countries are lukewarm to demands for a more liberal regime for the movement
of natural persons.20

Unlike many developing countries, India has taken offensive positions in this area as it has
export interests in information technology (Mode 1). The country also seeks greater access to the
EU and the US in terms of the movement of natural persons, or what is termed as Mode 4 in
cross-border supply of services. Lack of movement in Mode 4 due to opposition by the US and
the EU may affect India’s ability to offer much in other modes of services.

India would also like to see issues like economic needs test, portability of health insurance and
other such barriers in services removed. As far as delivery of services through commercial

20
ibid

20
presence (Mode 3) is concerned, there is an increasing trend of Indian companies acquiring
assets and opening businesses in foreign markets in sectors such as pharmaceuticals, IT, non-
conventional energy, etc. This is further evidenced by the increase in Outward Foreign Direct
Investment. India may, therefore, have some interest in seeking liberalisation in Mode 3,
although it may need to strike a balance with domestic sensitivities in financial services. Mutual
recognition of degrees, allowing portability of medical insurance, reducing barriers to movement
of professionals, etc, are some of the areas of interest to India.

An important issue relating to the delivery of services and liberalisation is domestic regulatory
reforms. Appropriate domestic regulations are necessary to prevent market failure as well as to
address issues like quality control, accreditation and equivalence, effective registration and
certification systems, revenue sharing, etc, for protecting and informing consumers. In addition,
regulatory frameworks can also advance transparency. Any market access commitments that
India might make during the ongoing negotiations must be preceded by an effective regulatory
framework. The hiatus in the negotiations could be utilized for putting into place appropriate
regulatory regimes in different service sectors.

Some experts are of the view that under the Uruguay Round commitments, developed countries
already have a liberal trade regime in Mode 1 (which covers Business Processing Outsourcing or
BPOs) with regard to some of the service sectors of interest to India. Further research needs to
done to assess the extent of autonomous liberalisation undertaken by developed countries, which
can be locked in during the negotiations, and consequent gains that can accrue to India. Further,
even in the absence of additional liberalisation, India’s service exports would continue to grow in
view of its cost advantage and demography. India could also explore the possibility of finalizing
mutual recognition agreements with the main importers of services, so that differences in
national regulatory systems do not act as barriers to its exports.21

Should India provide market access in Higher Education?

As we have read in General Agreement on Trade in Services, Mode 3 classification covers

services provided by a foreign commercial establishment through physical presence in relevant
country. Accordingly, western countries are pushing hard to get unrestricted access to Indian

21
ibid

21
education sector under this mode and again India is defensive. India has already made some
offers on this front to WTO in run up to Nairobi Meet. Topics are still under negotiation and
discussion.

Coverage of higher education in GATS will encourage treatment of education as a tradeable

commodity. It is possible that any agreement will curb power of Indian government to provide
subsidy and support to the sector. Further, it is likely to affect reservation policy of India.
Further, foreign university will consume scarce educational human resource available in India,
leaving less competitive domestic and public institution starved of good teachers. It is also feared
that this will speed up process brain drain from India as foreign universities are likely to design
courses under ambit of their parent institution.

On other hand, India is in desperate need to create more and better quality educational
institutions. Gross enrolment in higher education is just 12% while government aims to increase
it to 30%. For all this, it is imperative that more investment is attracted in the sector. Overtime
due to competition, students will get better educational alternatives and at cheaper costs.
However, for this to happen, government has to draw certain redlines while negotiating on the
issues of support to public institutions, scholarship to weaker sections and on its reservation
policy.

22
 CONCLUSION

The Indian economy has experienced a major transformation as a result of the changing
multilateral trade discipline within WTO framework. It is expected that the sectors such as
textiles, clothing, leather and leather products, and food, beverages, and tobacco etc would
experience growth in output and exports. However, there is a serious and urgent need to re-look
the strategies followed by individual firms in the changing context of increasing competition and
opened markets.22

India has to continue its effort to prevent issues of developmental importance to be sidelined.
Until this is done WTO cannot impinge upon sovereignty of India. India has already marked red
line in sectors such as agriculture by making it clear than there is no scope of compromise on its
positions. West has relentlessly tried to project India as rigid and uncompromising negotiator.
However, these attributes are better suited to U.S. and other developed countries. They have been
backtracking on various commitments under Doha Development Round and desperately trying to
bring in new issues including Singapore issues. These issues are prejudicial to interests of
majority of countries and vast majority of population. Consequently, majority of countries stand
with India after failure of every meet.

India needs to upscale its diplomatic capability. In recent Nairobi meet, it was seen that while
developed countries spoke in unison, there was no such unity in developing countries. Brazil, a
prominent member of WTO, has already broken away from G-20/33 group and has aligned itself
close to position held by developed countries; thanks to its globally competitive agricultural
sector. India made a serious effort last year at India- Africa summit to arrive at common agenda
for WTO and was largely successful. However, there needs to be larger combined effort in
bringing on the common platform of developing nations in all continents. U.S. has been already
doing it for several years and that’s partly why it remains most assertive and subtle power in any
negotiation.

22
https://sol.du.ac.in/mod/book/view.php?id=1735&chapterid=1704

23
 BIBLIOGRAPHY

1. https://sol.du.ac.in/mod/book/view.php?id=1735&chapterid=1704
2. https://openknowledge.worldbank.org/bitstream/handle/10986/15082/9780821354100.pd
f?sequence=4
3. http://www.oiirj.org/oiirj/nov-dec2013/55.pdf
4. http://euroasiapub.org/wp-content/uploads/2016/09/4-117.pdf
5. https://www.researchgate.net/publication/228147635_Globalization_and_WTO_Impact_
on_India's_Economic_Growth_and_Export
6. https://www.researchgate.net/publication/311613950_Impact_of_World_Trade_Organiza
tion_on_Foreign_Tradein _India
7. https://www.mbarendezvous.com/general-awareness/wto-and-impact-on-india/
8. https://www.insightsonindia.com/2016/01/20/india-and-wto-detailed-analysis-of-all-
related-issues-and-concepts/
9. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5488177/

24