Trade Questions

1. What % of GDP does trade account for presently?

Answer: around 30%; in 2000, was only 20%

2. What was India’s share in total world exports in 1951, 1991, and 2011?
Answer:
1951: 1.9%; 1991: 0.5%; 2013: 2% (imports: 2.5%; exports: 1.7%)

3. Contrast rise in India’s share in world merchandise exports between 1991

and 2013 with that of China.
Answer:
India- 1991: 0.5%; 2013: 1.7%
China- 1991: 1.8%; 2013: 12%

4. What was the main approach of Indian planners in early years towards
trade?
Answer:
 Industrialization and self-sufficiency was desired to reduce potential
dependence on other countries
 Sought to minimize import demand; exports were seen as a necessary
evil to finance the part of the import bill that was not met by external
assistance
 Import-substitution was favoured; yet, ambitious investments in heavy
industry since the second FYP led toa significant spurt in import
demand for capital goods and a rapid depletion of forex reserves;
precipitated a BoP crisis in 1957; QRs were imposed after this to
contain the crisis, and these continued more or less unabated till 2001
 Bias against exports was seen in overvalued rupee, and against imports
in a number of restrictions

5. When did India start paying more attention to exports?

Answer:
In the early 1950s, exports used to account for around 6% of the GDP.
With continued bias, this share dropped to around 4%. It was only after
the 1973 oil shock that India realized it had to step-up its exports simply
to finance the rising import bill on account of an increase in oil prices

6. What were the chief trade reforms in 1991?

Answer:
 Devaluation of the rupee
 Liberalization of import licensing
 Reduction in tariffs
 Abolition of cash subsidies for exports
 Introduction of partial convertibility of rupee on the current account,
later full convertibility (capital account convertibility is still limited)

7. What was the impact of 1996 crisis on India’s exports?

Answer:
 Adverse; these countries used to account for a sixth of India’s exports
before the crisis

8. What are some of the domestic factors that continue to hamper exports?
Answer:
 Infrastructure constraints
 High transaction costs
 SSI reservations
 Labour inflexibility
 Quality problems
 Quantitative ceilings on agri exports

9. Describe the composition of India’s commodity export basket.

Answer:
Primary products (agri, ores and minerals): 16%
Manufactured goods (engineering goods, chemicals, gems and jewellery,
textile): 64% (merchandise exports account for 85% of these)
Petroleum, crude, and products: 20%

10. Describe the region-wise share of India’s exports.

Answer:
i. Asia: 50%
ii. USA: 20%
iii. Europe: 19%
iv. Africa: 10%
v. CIS and Baltics: 1%

11. What was the impact of 1972 oil shock on India’s trade?
Answer:
In the early 1950s, exports used to account for around 6% of the GDP.
With continued bias, this share dropped to around 4%. It was only after
the 1973 oil shock that India realized it had to step-up its exports simply
to finance the rising import bill on account of an increase in oil prices.

Similarly, imports used to be around 7% of GDP circa 1960; decline to 4%

by 1972. After the shock, import needs increased due to a renewed focus
on industrial growth. 1980s were marked with a clear shift towards
reduction of quantitative restrictions on imports. In the 1980s, the view
gained ground that a more liberal policy of imports of capital goods and
technology would enable India to reap the benefits of international
division of labour

12. What is the current composition of India’s commodity import basket?

Answer:
i. Fuel: 40% (2013; in 2000, was only 33%, shows increased domestic
production)
ii. Capital goods: 12%
iii. Gold and Silver: 12%
iv. Edible oils: 2% (!!)
 v. Pulses: 0.4%
vi. Chemicals: 6%
vii. Pearls, precious stones etc.: 5%

13. What % of total imports does coal account for?

Answer: 3.5%

14. What are India’s top 3 trading partners?

Answer:
China, USA, and UAE (positions keep shifting among these three)

15. What is India’s position in trade of service globaly?

Answer:
India’s is the 6th largest exporter (3.5% share of world exports) and the 7 th
largest importer (3% share of the world’s imports)

16. What has been the impact of the 2008 shock on India’s services exports?
Answer:
During the boom years (2003-08), CAGR of services exports was 35%; in
the five years after (2008-2012), it was 8%.

17. What % of the merchandize trade deficit do net services usually finance?
Answer: Around 40% (50% in 2013)

18. Why is India’s Balance of Trade consistently worsening since 1951?

Answer:
High imports: larges increases in imports of capital goods, petroleum and
oils, fertilizers, and gold. Modest growth of exports due to low world
demand. GoI has been trying to improve exports by measures such as
devaluation, cash assistance, income tax concessions, concessional credit,
exim scrips, convertibility of rupee on current account, EXIM bank, export
processing zones etc.

19. Outline some of the major issues in India’s merchandise trade sector.
Answer:
 Product diversification
 Export infrastructure
 Focus on useful trading blocks
 Inverted duty structure (finished goods are taxed at lower rates than
raw materials or intermediate products; this discourages domestic
value addition)
 Export promotion schemes
 Trade facilitation
 Intertwining of domestic and external sector policy

20. What are the benefits of FDI over FPI?

Answer:
FDI flows represent longer-term investments made abroad bringing
together capital, technology, and managerial know-how, market-access in
 some cases, along with entrepreneurship. They are thus seen as catalysts
for domestic development. FPIs, in contrast, tend to be short-term and
speculative in nature. They are often seen to be bringing volatility to the
financial and exchange rate markets

21. What has been India’s attitude towards FDI since independence?
Answer: Immediately post-independence, India was pro-FDI, to develop a
base for local manufacturing capability and entrepreneurship. As these
developed to some extent in the 1960s, India’s stance became more
restrictive. Restrictions were then imposed on FDI that was not
accompanied with technology transfer, and that seeked more than 40%
ownership. This continued for the next 4 decades, till the reforms of 1991.
Today, foreign ownership up to 100% is allowed in most manufacturing
sectors- in some sectors even on automatic basis- except for defense
equipment where it is limited to 26%

22. List some determinants of FDI flows.

Answer: Market size, urbanization, infrastructure, proximity to major
sources of capital, and policy factors (such as tax rates, investment
incentives, performance requirements etc.) are major determinants of FDI
flows.

Apart from market size, India doesn’t do well on most of these factors, as
can be seen by its abysmal rank of 142 in the World Bank’s Doing
Business report. However, despite these constraints, India routinely ranks
as one of the top 3 destinations across the world for FDI flows. This shows
that investors are attracted to a country’s potential and are willing to put
up with hardships rather than going to countries with easier business
conditions but poorer prospects of making profits.

TRIPS

23. What is the basic philosophy underlying WTO agreements?

Answer: The basic philosophy underlying any WTO text is neoclassical
macroeconomics, which states that anything that can be provided by the
private sector, should be. When governments operate in what is
potentially a ‘market’ their actions bring distortions. The agreements
therefore focus on removing barriers that would ‘distort’ trade in industry
or services.

24. What is TRIPS?

Answer:
 TRIPS requires member states to provide strong protection for
intellectual property rights; this is a WTO agreement that sets down
minimum standards for many forms of IP regulation as applied to
nationals of WTO countries
 Ratification of TRIPS is a compulsory requirement of World Trade
Organization membership; thus, any country seeking to obtain easy
access to the numerous international markets opened by the World
 Trade Organization must enact the strict intellectual property laws
mandated by TRIPS
 Unlike other agreements on intellectual property, TRIPS has a powerful
enforcement mechanism. States can be disciplined through the
WTO's dispute settlement mechanism
 Thus, through TRIPS, WTO makes it mandatory for its member
countries to follow basic minimum standards of IPR and bring about a
degree of harmonization in domestic laws within the field

25. Outline 5 IPRs covered under TRIPS.

Answer: IPRs covered under TRIPS include Copyrights, Trademarks,
Industrial Designs, Patents (including new varieties of plants),
Geographical Indications etc. - generally, these can just be covered
under the ambit of ‘patents for innovations’

26. What is meant by ‘TRIPS+’?

Answer: In addition to the baseline intellectual property standards
created by the TRIPS agreement, many nations have engaged in bilateral
agreements to adopt a higher standard of protection. Collection of
these bilateral standards is collectively known as TRIPS+, and are
increasingly becoming a common feature of many FTAs

27. What is the impact of FTAs on IPR laws, for both developing and
developed countries?
Answer:
 By entering into FTAs with the developed countries, developing
countries see some advantages in tariff reductions
 In return, developed countries seek better market access and
investment opportunities, and also seek to raise the minimum levels of
protection for IPRs as they have a comparative advantage in
technology products and services
 At the same time, developing countries find it difficult to put forward
the issues of their concern through the FTA negotiations including the
harmonisation of TRIPS and CBD, access to medicines, and protection
against the bio-piracy of their biological genetic resources, farmers'
rights and associated traditional knowledge, ability of their farmers to
continue their subsistence and livelihood related farming practices etc.
 As a consequence, FTAs create an imbalanced set of rights and
obligations in favour of developed countries by ratcheting up the
levels of IPR protection

28. List some criticisms of TRIPS.

Answer: Since TRIPS came into force it has received a growing level of
criticism from developing countries, academics, and non-governmental
organizations:
 TRIPS's wealth concentration effects (moving money from people in
developing countries to copyright and patent owners in developed
countries) and its imposition of artificial scarcity on the citizens of
 countries that would otherwise have had weaker intellectual property
laws, are common bases for such criticisms
 Proponents of strong IPR say money is needed for R&D; however, IPR
laws in places like Africa don’t really affect revenues of big firms,
whose primary profits come from developed markets, where their
products are safe from competition anyway
 TRIPS doesn’t really fall under the domain of WTO’s core mandate,
which is trade liberalization
 Trade liberalization benefits everyone, including the country
undergoing such liberalization. On the other hand, WTO’s championing
of non-trade agendas, such as TRIPS, and labour and environment laws,
are inefficiency inducing, and often benefit rich countries while hurting
poorer ones
 TRIPS leads to ever-larger patent protection timelines, and high
prices for products, especially medicines, that can be cheaply
produced if the innovation is made public quickly enough
 Studies also show that the price effect of TRIPS is not limited only to
patented products, but generally leads to higher prices of other goods
in the market as well

29. What is the Doha declaration on Public Health (2 points: 2001 and 2003)?
Answer: The declaration (2001) states that the TRIPS Agreement would
not prevent members from taking steps to protect public health and
makes clear that each member has the right to create certain exceptions
to its IPR laws to enable it to grant compulsory licenses for manufacture
of essential goods such as life-saving drugs even if the consent of the
holder of the IPR is not forthcoming.

Later, a 2003 agreement loosened the domestic market

requirement, and allowed developing countries to export to other
countries where there is a national health problem as long as drugs
exported are not part of a commercial or industrial policy

30. What are some of the challenges that the Doha declaration is facing?
Answer:
 After Doha, PhRMA, the United States and to a lesser extent other
developed nations began working to minimize the effect of the
declaration
 The official documents left a number of legal and technical problems
unresolved: e.g., the term ‘epidemics’ hasn’t been defined, which might
mean that chronic diseases such as AIDS, TB, Malaria etc. are not
covered under the exemptions

31. List 3 Indian laws that are relvant to the TRIPS agreement.
Answer: Several domestic laws such as the Patent Act, Trademarks Act,
Copyrights Act etc. have been modified from time to time to make them
TRIPS compliant
32. Discuss the evolution of the Indian Patents Act, with reference to recent
amendments enacted to make it TRIPS compliant.
Answer:

In 1970s, India moved from the colonial-era strict patent laws to more
relaxed ones, to promote indigenous manufacturing. The 1970 Patent
Act abolished product patents for food, pharmaceuticals, and chemicals,
and restricted grant of patents in these fields only to process patents. The
maximum duration of a product patent was fixed at 7 years
 The 1970 Patent Act, thus, provided an impetus to the generic drugs
industry in India; between 1970-1995, the sector grew at 15%+ p.a.
 The amendments made to the 1970 PA in 1999, 2002, and then in
2005 made it TRIPS compliant:
 2002 (2nd amendment): ‘License of right’ deleted, ‘burden of proof’
reversed, microorganisms made patentable
 2005 (3rd amendment): Product patents allowed in pharmaceuticals,
food, and chemicals, compulsory license now required for export of
patented pharmaceutical products

Thus, under WTO pressure, when the Indian parliament passed the new
patent law in 2005, it not only brought back product patents, but also
granted all patents a term of 20 years. Moreover, the new law paved
way for the formation of the Intellectual Property Appellate Board, a
specialised judiciary to hear IP cases 

33. What has been the impact of the 2005 amendments to the Patents Act?
Answer:

This transition has been chaotic:

 Patent litigations have increased three-fold since 1995
 The courts are also grappling with how to balance the pro-innovation
and anti-competitive effects of IPR
 The Indian Patent Office and courts face significant challenges in
interpreting and applying the new Patent Act’ s provisions. In the
short-term, opponents of stronger patent protection may be able to
take advantage of ambiguities in the interpretation of various
provisions of the patent law. But this can have serious long-term
consequences, as a lack of confidence in the patent system could
adversely impact indigenous innovation to a large extent and foreign
direct investment to a small extent

Despite enforcement and judicial hurdles, the outcomes of stronger

IPRs in India have mostly been beneficial:
 The amount of R&D activity in India has increased since TRIPS.
Stronger IPR has spurred Indian companies to invest in R&D and
encouraged multinational corporations to outsource more R&D
work to India
 The average number of patent applications filed per year with the
Indian Patent Office (IPO) by Indian residents grew by about 10%
 since 1995, and by about 12% from 2005 onwards- number of
trademark applications increased from 10% growth to 17%
 It looks like under TRIPS, getting a patent issued has got tougher,
but once granted, the patent is seen as a mark of quality and is
valued higher as compared to before
 (Several commentators seem to be saying that patent applications
grew ‘dramatically’; see what line to take here)

34. What has been the impact of TRIPS on the Indian Pharma industry?
Answer:

The advent of TRIPS has done wonders for the Indian pharmaceutical
sector:

 For the first time in years, the industry was challenged, and
consequently had to make investments in Drug Discovery Programmes,
greater capacity addition in production of generic drugs, organized
efforts to manufacture patented drugs under license, and efforts to get
deals for marketing patented drugs to the Indian market
 All of this has led to greater dynamism in the industry
 While this is true, ‘big pharma’ firms from developed countries
haven’t been allowed a free run in India, due to carefully drafted
exemptions
 Pre-TRIPS, Indian firms has started exporting large amounts of drugs
to LDCs; post-TRIPS, the orientation is changing towards developed
countries

35. What is the importance of Section 3(d) of the Indian Patents Act?
Answer: One unique provision of the Indian Patent Act is embodied in
Section 3, clause (d). This provision prevents patenting of minor
improvements in chemical and pharmaceutical entities unless the
invention results in the enhancement of known efficacy of that substance.
This provision is a safeguard for public health purposes and sets a higher
threshold for granting pharmaceutical patents. In January, Gilead
Sciences (a US company) was denied a patent by the Indian Patent
Office for its drug Sofosbuvir that cures Hepatitis C, owing to
application of Section 3(d)

Section 3(d) has been extremely contentious since its introduction in

2005. The transnational pharmaceutical industry regards it as
establishing an unacceptably high barrier to patenting, as do many
foreign governments. But many observers, including the United Nations
Programme on HIV/AIDS and civil society groups, defend 3(d) and point
to India as a model for developing countries attempting to use TRIPS
flexibilities to promote public health
 In 2013, pharma giant Novartis lost a six-year legal battle after the
Indian supreme court ruled that small changes to its leukaemia drug
Glivec did not deserve a new patent
  This gives a clear distaste in India for ‘evergreening’- the practise of
big pharma firms to make small changes to drugs whose licenses are
about to expire, simply to renew their licenses. In such cases, India has
started giving out ‘compulsory licenses’
 The best thing is that India broke no TRIPS laws; it’s decision is valid
under TRIPS, but so far countries had just been too scared to try it
 Due to India’s considered stance, it’s pharmaceutical industry is still
growing at a strong 15% p.a. rate

TRIMS

36. What are TRIMS?

Answer: Trade-Related Investment Measures; TRIMS are rules that apply
to the domestic regulations a country applies to foreign investors, often as
part of an industrial policy. These restrict preferential treatment of
domestic firms, and thereby enable international firms to operate
more easily within foreign markets

37. List some policies that are banned under TRIMS.

Answer:
Policies that have traditionally been used to both promote the interests of
domestic industries and combat restrictive business practices are now
banned; some examples are:
 Local content requirements (which require that locally produced goods
be purchased and used)
 Trade balancing rules (require that an enterprise’s purchases or use of
imported products be limited to an amount related to the volume or
value of local products that it exports)
 Domestic sales requirements and export restrictions
 Export performance requirements
 Forex and local equity share restrictions
 Manufacturing requirements (require domestic manufacturing of
certain parts)
 Technology transfer requirements
 Employment restrictions
 Fiscal incentives to promote the above-mentioned behavior are also
seen as trade distorting, and are hence banned

38. List some criticisms of TRIMS.

Answer:
 It prevents the imposition of any performance clauses on foreign
investors in respect of earning foreign exchange, foreign equity
participation, and transfer of technology
 It requires foreign companies to be treated on par with, or even better
than, local companies
 It prevents the imposition of restriction on areas of investment and it
requires the free import of raw materials, components and
intermediates
39. What has been India’s performance regarding TRIMS?
Answer: See own notes

40. Explain the India-US solar cells TRIMS issue.

GATS

41. List Articles 1-5 of GATS.

42. What are the contents of Part 3 of the GATS agreement?

43. Does GATS impinge on national sovereignty?

Answer:
While the overall goal of GATS is to remove barriers to trade, members
are free to choose:
 Which sectors are to be progressively "liberalised", i.e. marketized and
privatised
 Which mode of supply would apply to a particular sector
 To what extent liberalisation will occur over a given period of time

44. What is the W/120 list of GATS?

Answer:
Services Sector Classifications addressed in the GATS are defined in the
so-called "W/120 list", which provides a list of all sectors which can be
negotiated under the GATS

45. What does ‘ratchet effect’ mean with respect to GATS?

Answer:
Members' commitments under GATS are governed by a "ratchet effect",
meaning that commitments are one-way and are not to be wound back
once entered into. The reason for this rule is to create a stable trading
climate (however, Article XXI does allow Members to withdraw
commitments, and so far two members have exercised this option (USA
and EU))

46. What is USA’s position on GATS?

Answer:
 The US position of liberalizing services is obvious, given that services
account for over 80% of US employment, and over 65% of GDP

 The entertainment industry in the US is increasingly being come to

known as the ‘copyrights industry’; it contribute between 5-7% of the
US GDP, thereby making the US a big proponent of liberalizing AV
services
 Side note: in AV services, the debate across the globe is whether culture
should be considered a tradable commodity, or as an expression of
heritage that needs to be protected from unbridled globalization
 EU’s stance is one of protectionism; India and US favor liberalization,
 given their strong entertainment industries (think TV channels, movies
in theatres, songs on the radio)

47. What are some of the arguments against GATS for a country like India?
Answer:
 The single biggest apprehension about GATS is the opening up and
liberalization of sensitive social sectors like education, health,
water, and energy

 While national governments have the option to exclude any specific

service from liberalisation under GATS, they are also under pressure
from international business interests to refrain from excluding any
service ‘provided on a commercial basis’
 Important public utilities such as water and electricity most
commonly involve purchase by consumers and are thus
demonstrably ‘provided on a commercial basis’
 The same may be said of many health and education services which
are sought to be 'exported' by some countries as profitable
industries

 GATS could lead to erosion of autonomy and sovereign right of

governments to lay down policy, regulate, and legislate

 Several proponents of GATS say that concessions made under GATS by

India need not necessarily be counter-productive to India, but their
effects will depend on our diplomatic and negotiating capabilities.
They say that as long as we can make use of cross-sectoral and cross-
modal leverages, outcomes need not turn out unbalanced
 However, such arguments forget that in any such negotiations,
sections of the society with a comprehensive political voice are
likely to gain (such as the middle class, who would want easing the
restrictions on Mode 4 of GATS, which deals with movement of
labour in the services sector across national boundaries), while poor
rural population is likely to lose, in the form of privatization of
essential services (Modes 1 and 3)

 GATS does specify that members may take measures to ‘protect public
morals or public order’, but these terms aren’t concretely defined. Any
dispute arising from differing interpretations will be adjudicated not
by India’s courts, but by a WTO tribunal, which brings forth serious
questions on India’s autonomy

 Important: Thought listed and discussed separately, the Articles in

GATS have a high degree of overlap.
 For example, if Mode 4 in Article 1 is accepted by India, without
proper negotiations about Article 5 which deals with recognition of
qualifications, it will not lead to better circumstances for Indian
workforce
 If Mode 3 (Commercial presence) is liberalized before Mode 4
 (movement of natural persons), FDI flows in India will precede
international skilled migration
 The ‘sequencing’ of acceptance during negotiations of different
Articles in therefore very important

48. What is India’s position on GATS?

Answer:
India’s negotiating position on services has undergone a paradigm shift
since the Uruguay Round. From being a leading opponent of the GATS,
India has now emerged as one of the forerunners of services trade
liberalisation under the GATS.

India’s negotiating stance on services is partly attributable to the growing

importance of the services sector in its economy. With a vast pool of
educated and skilled workers in its workforce the country has a huge
interest in the export of Mode 1 and Mode 4-based services and is hence
aggressively participating in the ongoing GATS 2000 negotiations.

 The plurilateral ‘request-offer’ approach and India

India’s initial offer, submitted in January 2004, was rather conservative. It
came out with an ambitious revised offer in August 2005. In the post-
Hong Kong Ministerial period, India has received plurilateral requests in a
range of services. It is learnt that India would be expected to meet the
requests primarily in the areas of telecommunications, finance, parts of
the energy sector, distribution (retail) and courier services, including
express delivery.

India has indicated that it can meet requests substantially in sectors like
construction and related engineering services and maritime transport
services. Requests are also likely to be fulfilled partially in energy and
telecommunications.

However, as things stand now, it would be difficult for India to meet the
requests in legal services, retailing services, private education and audio-
visual services, owing to domestic sensitivities in these areas.
As far as India’s offensive interests in Modes 1 and 4 go, an assessment of
the offers placed by some of the developed countries that constitute the
key target markets for Indian service-providers, clearly reveals that there
has been very modest movement in India’s favour.

India should refrain from considering any compromise on its

interests in agriculture and non-agricultural market access (NAMA)
for pushing through its offensive interests in services. Given the
pessimistic scenario in Modes 1 and 4, there are not enough grounds for
India to make compromises related to the livelihood of millions of
vulnerable farmers or the survival of many domestic industries.

WTO
49. What is the WTO ‘transparency mechanism’?
Answer:
Since it’s coming into existence, there have been various challenges to the
legitimacy of the WTO as a viable trade-mediating organization. Concerns
have been cited about the ‘democratic deficit’ of the organization, where
developed countries are believed to have a much larger sway. Also, over
its various ministerial meetings, there has been a significant move away
from multilateralism and towards PTAs. This has become more
pronounced since the Cancun meeting, where developing countries, led
by the G4, demonstrated their negotiating capability. Since then, the US,
EU, and China are increasingly relying on bilateral and regional route to
pursue their trade interests.

Recognizing the rise of PTAs, the WTO has finally taken a step towards
rationalizing its approach towards them. A start has been made with the
setting up of the ‘transparency mechanism’, whereby member countries
are bound to disclose details of their PTAs for the WTO’s scrutiny.
However, while a step in the right direction, this mechanism for now
simply remains an information disclosure mechanism, and nothing else.

WTO has also failed to factor in the fact the trade liberalization does not
happen in isolation, and has wider socio-economic repercussions, with
impact on questions of equity and justice.

50. What is the ‘Ministerial Conference’ of WTO?

Answer:
The highest decision making body of the WTO is the Ministerial
Conference, which usually meets every 2 years. It brings together all WTO
members (countries and unions).

51. What are the ‘Singapore Issues’?

Answer:
‘Singapore Issues’, which emerged during the Singapore Ministerial in
1996, refer to disagreements about 4 working groups set up during this
meeting. These issues were:
 Transparency in government procurement 
 Trade facilitation (customs issues) 
 Trade and investment, and 
 Trade and competition

These issues were opposed by most developing countries, and

disagreements prevented a resolution despite repeated attempts to
revisit them, notably during the 2003 Ministerial Conference
in Cancú n, Mexico, whereby no progress was made. Since then, some
progress has been achieved in the area of trade facilitation (‘July
Package’ under the Doha round)

52. What is the Doha Development Round?

Answer:
 Launched in 2001, this is the current trade-negotiation round of. Doha
round talks are overseen by the Trade Negotiations Committee (TNC).

The intent of the round, according to its proponents, was to make trade
rules fairer for developing countries. However, by 2008, critics were
charging that the round would expand a system of trade rules that were
bad for development and interfered excessively with countries' domestic
policy space.

Since 2008, talks have stalled over a divide between developing and
developed nations on major issues, such as agriculture,
industrial tariffs and non-tariff barriers, services, and trade remedies.
There is also considerable contention against and between the EU and the
USA over their maintenance of agricultural subsidies—seen to operate
effectively as trade barriers.

The negotiations are being held in five working groups. Some important
topics under negotiation are: market access, development issues, WTO
rules, and trade facilitation.

As of 2014, the future of the Doha round remains uncertain, and one of
the major sticking point is agricultural subsidies, that India
steadfastly refuses to back down on.

53. What are the 5 working groups under the Doha agreement?
Answer:
Market access, development issues, WTO rules, and trade facilitation.

54. What was the importance of the Cancun 2003 Ministerial?

Answer?
Cancun was aimed at forging agreements on the Doha round. The G20
developing nations (led by India, China, Brazil, ASEAN led by
the Philippines) resisted demands for agreements on the ‘Singapore
issues’, and called for an end to agricultural subsidies (most important
contention) within the EU and the US.

The talks broke down without progress, and the collapse of the talks was
seen to be a major victory for the developing countries, who were now
seen to have the confidence and cohesion to reject a deal that they viewed
as unfavorable. This was reflected in the new G20 trade block, led by the
G4 (India, China, Brazil, South Africa)

55. What was the ‘July Package’?

Answer:
 After the spectacular failure of the Cancun ministerial, In Geneva in
2004, EU accepted the elimination of agricultural subsidies by a ‘date
certain’
 Singapore issues were moved off the Doha agenda
  Developing countries accepted trade facilitation (custom duties etc.) as
a subject to be negotiated
 After intense negotiations, members reached what has come to be
known as the ‘Framework Agreement’ or the ‘July Package’, which
covers agriculture, non-agricultural market access, services, and trade
facilitation

56. What was the importance of the Hong Kong 2005 ministerial?
Answer:
This was considered vital if the four-year-old Doha Development Round
negotiations were to move forward sufficiently. Key achievements:
 Countries agreed to phase out all their agricultural export
subsidies by the end of 2013, and terminate any cotton export
subsidies by the end of 2006
 Further concessions to developing countries included an agreement to
introduce duty-free, tariff-free access for goods from the Least
Developed Countries, following the ‘Everything but Arms’ initiative of
the European Union 
 That is, industrialized countries agreed, in principle, to open up
their markets for developing countries
 Other major issues were left for further negotiation to be completed by
the end of 2010

57. Explain the ‘Bali Package’ and India’s stance.

Answer:

Addresses a small portion of the Doha programme, principally,

bureaucratic ‘red-tape’, by means of the ‘Trade Facilitation Agreement’

Because of the controversial nature of reforming laws on intellectual

property, trade in services and subsidizing crops for Food Security, the
talks focused on trade facilitation, which means lowering cross-border
tariffs and other regulations that impede international trade.

The main aim was lowering of tariff barriers, and it promised to be the
first agreement reached through the WTO that is approved by all its
members.

The only binding target is reforming customs bureaucracies and

formalities to facilitate trade. The accord includes provisions for lowering
import tariffs and agricultural subsidies, with the intention of making it
easier for developing countries to trade with the developed world in
global markets. Developed countries would abolish hard import
quotas on agricultural products from the developing world and
instead would only be allowed to charge tariffs on amount of
agricultural imports exceeding specific limits. However, all other
agreements apart from TF-related are given on a best-faith basis, where
no developed country has undertaken legal promises to reduce
agricultural subsidies.
 The trade facilitation measures agreed in Bali could cut the cost of
shipping goods around the world by more than 10%, by one estimate,
raise global output by over $400 billion a year (another estimate says $1
trillion), with benefits flowing disproportionately to poorer countries

From EPW etc.: The real story, and why India has vetoed the TF agreement
in August 2014 (after it was approved in December 2013 by the UPA
government)

 Agreement on TF (meaning, requirements, provisions and exemptions

for developing countries and LDCs)
 Possible impact on third world and India (market access issues,
hollowing out of domestic manufacturing, more imports, increasing
trade imbalance)
 India’s sticking point: (‘green box’ provisions, AoAs and ERPs, US/ EU
farm subsidies, India’s farm subsidies etc.)

58. Why is the dispute settlement mechanism at WTO effective?

Answer:
The Dispute Settlement Body consists of all WTO members, and has the
sole authority to establish panels of experts to consider the case. It also
has the power to authorize retaliation in case of non-compliance of its
rulings.

Either side can appeal the panel’s ruling, and appeals have to be based on
points of law; they cannot re-examine existing evidence or examine new
issues.

The Uruguay Round agreement also made it impossible for the country
losing a case to block the adoption of the ruling. Rulings are automatically
adopted unless there is a consensus to reject a ruling — any country
wanting to block a ruling has to persuade all other WTO members
(including its adversary in the case) to share its view
59. Explaing the 3 WTO boxes.
Answer:
 ‘Green box’ roughly translate into a green ‘go’ signal, and amber could
be considered a cautionary light, there is no red box. Instead, the
WTO has invented a ‘blue box’ which is used for what the organization
considers production-limiting programs
 To further complicate matters, you could consider yourself ticketed for
running a red light if the amber box subsidies exceed pre-set reduction
commitment levels. In addition, there are exemptions for many of the
boxes, including those designed to help make developing countries
more trade competitive

Green box
 Policies not restricted by the trade agreement because they are not
considered trade distorting
 These green box subsidies must be government-funded — not by
charging consumers higher prices, and they must not involve price
support. They tend to be programs that are not directed at particular
products, and they may include direct income supports for farmers that
are decoupled from current production levels and/or prices

Amber box
 Agriculture's amber box is used for all domestic support measures
considered to distort production and trade
 As a result, the trade agreement calls for 30 WTO members, including
the United States, to commit to reducing their trade-distorting
domestic supports that fall into the amber box
 U.S. agricultural subsidies listed as changing production and/or
changing the flow of trade include commodity-specific market price
supports, direct payments and input subsidies

Blue box
 Any support payments that are not subject to the amber box reduction
agreement because they are direct payments under a production
limiting program
 The blue box is an exemption from the general rule that all subsidies
linked to production must be reduced or kept within defined minimal
levels. It covers payments directly linked to acreage or animal
numbers, but under schemes which also limit production by
imposing production quotas or requiring farmers to set aside part
of their land
 Opponents of the blue box want it eliminated because the payments are
only partly decoupled from production, or they want an agreement in
place to reduce the use of these subsidies. Others say the blue box is an
important tool for supporting and reforming agriculture, and for
achieving certain ‘non-trade' objectives, and argue that it should not be
restricted as it distorts trade less than other types of support