TRENDS IN NEW ECONOMIC ORDER-GATT, WTO, GLOBALISATION

Under the guidance of

Prof. Jaya Joseph & Dr. Indrani Saha

SUBMITTED BY: -
NAME: PRERANA SINGH
CLASS: FY BLSLLB
ROLL NO.: 190545
DOS:20/12/2019

INDEX
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 TOPIC PAGE NO.

1. Introduction 3

2. GST 4-5

3. Demonetisation 5-6

4. GATT 7-10

5. WTO 11

6. Globalisation 12

7. Bibliography 13

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 INTRODUCTION

After the second World War (1939-45), efforts were made to promote economic and monetary
cooperation among different countries. The International Monetary Fund (IMF) was established along
with other institutions such as the World Bank and the Asian Development bank to promote foreign
investment and economic growth through international efforts. To develop the economies of the world,
efforts towards promotion of free international trade took place.

The United States, Soviet Union, Western European and East Asian countries in particular experienced
unusually high and sustained growth, together with full employment. Contrary to early predictions, this
high growth also included many countries that had been devastated by the war, such as Japan , West
Germany and Austria , South Korea , France , Italy  and Greece.

In 1948 GATT was established in Geneva followed by WTO in April, 1994 at a conference in Marrakesh.
It had come into effect from January 1, 1995 by replacing the GATT.

The post–World War II economic expansion, also known as the golden age of capitalism[1][2] and the post-
war economic boom or simply the long boom, was a broad period of worldwide economic
expansion beginning after World War II and ending with the 1973–1975 recession.

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 TRENDS IN NEW ECONOMIC ORDER

 GOODS AND SERVICE (GST)

“On 3rd August,2016 entire India was glued to Rajya Sabha when the Rajya Sabha successfully passed
the constitutional amendment Bill for GST (GST bill) which eventually paved the way for GST in India.
Which was implemented on 1st of July 2017.India has implemented 'Dual GST’. In 'Dual GST' regime,
all the transaction of goods and services made for a consideration would attract to two levels i.e. CGST
(central GST) and SGST (state GST).”1

Chronology on GST
1947 Report of L K Jha committee suggested moving to value added tax
(VAT)
1986 Introduction of Modified Value Added Tax (MODVAT)
1991 Chelliah Committee recommends VAT/Goods and Service Tax
(GST)
1 July 1994 Service Tax introduced in India
1999 ‘Empowerment Committee’ comprising of representatives of 29
States is formed for the purpose of introduction of state VAT.
2000 Implementation of uniform state sales tax rates (1%,4%,8%,12%)
2002 Introduction of input credit against service of same category
1 April 2003 Haryana was the first state to introduce VAT, subsequently, other
states introduced VAT (20 states in 2005, 5 states in 2006, Tamil
Nadu in 2007 and lastly, Uttar Pradesh in 2008).
1 September 2004 Central level taxes integrated by introduction of ‘CENVAT’
January 2005 White Paper, a policy document indicating basic policies of ‘state
VAT’ was released by the ‘Empowered Committee’
1 April 2005 Value Added Tax introduced in 20 States
February 2006 Finance minister comments in the budget speech that there is a large
consensus that the country must move towards a national level GST
that must be shared between the central and states. He proposes 1
April 2010 as the date for introducing GST.
1 April 2006 VAT implemented in 5 more States
1 January 2007 VAT implemented in Tamil Nadu
April 2007 Central sales tax phase out initiated (4% -2%)
May 2007 Empowered committee (EC) of state finance ministers in consultation
with Central Government, constituted a joint working group (JWG),
consisting of officers of Central and state governments to examine
various models and options for GST and give their assessment of the
same to the EC.

1
ICSI,2019, Business Economics, retrieved from http//: www.icsi.edu

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November 2007 Joint working group (JWG) presented its report on the GST to the
EC. The EC accepted the report on GST submitted by the JWG.
1 January 2008 VAT implemented in Uttar Pradesh
April 2008 Empowered committee finalises the overall strategy for GST
introduction in India.
November 2009 ‘First discussion paper’ on GST released by EC.
December 2009 Task force submits its report on GST to 13th finance commission
January 2010 Department of Revenue releases its comments on 'First Discussion
Paper' on GST.
February 2011 IT strategy (by Mr. Nandan Nilekani) for GST released)
March 2011 115th Constitutions Amendment Bill (CAB) introduced in parliament.
However, this 115th CAB was lapsed (in May 2014) with change of
Government at central.
1 April 2011 Point of Taxation Rules, 2011 introduced
1 July 2012 Negative List of Service Regime introduced- Place of Provision of
Service Rules, 2012 introduced
July 2014 Union finance minister states in the budget speech 2014 that "I do
hope we are able to find a solution in the course of this year and
approve the legislative scheme which enables the introduction of
GST".
19 December 2014 The 122nd constitutional Amendment Bill was introduced in Lok
Sabha.
6 May 2015 The 122nd constitutional amendment Bill passed in Lok Sabha.
6 May 2015 122nd constitutional amendment Bill introduced in Rajya Sabha.
122nd constitutional amendment Bill was referred to select
committee of Rajya Sabha.
22 July 2015 Rajya Sabha select committee tabled its report.
October 2015 Government placed in the public domain four reports on key business
process i.e. registration, payment, refund and returns in GST regime.
14th June 2016 Draft GST law made available.
3 August 2016 Rajya Sabha cleared the Constitutional Amendment Bill.
8 August 2016 Lok Sabha cleared the Constitutional Amendment Bill.
September/October 2016 -More than half of the State Assemblies need to ratified the
Constitutional Amendment Bill.
-Presidential Assent received – GST Council formed.
November 2016 Formation of GST Council and recommendation on GST Law by
GST Council.
January 2017 -GST Council consensus for GST to be rolled out from 1st July 2017
instead of 1st April 2017.
-Notification of GST rules.
February/March 2017 -Draft laws approved by GST Council.
-Cabinet approves for GST supplementary Bill.
-Lok Sabha passes the four Bills.
April 2017 -Rajya Sabha passes the four Bills.
-President gives assent to four GST Bills.
1 July 2017 Implementation of GST.

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  DEMONETISATION

“Demonetisation is the act of stripping currency unit of its status as legal tender. The old unit of currency
must be retired and replaced with the new currency unit.

On 8 November 2006, prime minister Narendra Modi announced the "demonetisation" of ₹500 and
₹1000 notes with effect from the next day. Through the days after 8th November, the government has
made a set of claims with regard to the objectives and outcome of the demonetisation scheme.

The first claim is that demonetisation would plug terror financing. The second claim is that
demonetisation would help unearth "black Money". The third claim is that the unearth black money
would expand the fiscal space of the government. When the unaccounted cash is not returned to the
banking system, the reserve Bank of India (RBI) can use the savings to pay the government a dividend.
The fourth claim is that demonetisation would help reduce interest rate in the banking system. The fifth
claim is that demonetisation would help formalise India's informal economy, reduce the extent of
transactions in cash and help create a "less-cash economy." A number of incentives have been offered to
induce people to use digital transactions.

Demonetisation as a cleaning exercise may produce several good things in economy. The immeasurable
benefits of having more transparency and reduced volume of Black money activities can be expected as
long-term benefits.”2

2
ICSI,2019, Business Economics, retrieved from http//: www.icsi.edu

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  GENERAL AGREEMENT ON TARRIF ANDTRADE(GATT)

“The General Agreement on Tariffs and Trade (GATT) was established in 1948 in Geneva to pursue the
objective of trade in order to encourage growth and development of all the member countries. The
principal purpose of GATT was to ensure competition in commodity trade through the removal or
reduction of trade barriers. The first seven rounds of negotiation conducted under GATT were aimed at
stimulating international trade through reduction in tariff barriers and also by reduction in non-tariff
restrictions on imports imposed by member countries. GATT did provide a useful forum for discussion
and negotiation on international trade issues.”3

“Since 1947, the GATT has been the major focal point for industrial country governments seeking to
lower trade barriers. Although the GATT was initially largely limited to a tariff agreement, over time, as
average tariff level fell, it increasingly came to concentrate on non-tariff trade policies and domestic
policies having an impact on trade. Its success was reflected in a steady expansion in the number of
contracting parties. By the end of Uruguay round (1994), 128 countries had joined the GATT.”4

The implication of GATT, 1994 agreement in various areas are:

1. “Reduction in basic duty and export subsidies: -

i) On tariff’s, India has promised to reduce the basic duty by 30%. It is to be affected over a
period of 6 years and is to cover raw materials, intermediate and capital goods. This does not
include agriculture products, petroleum products, fertilizers and some non-ferrous metals like
zinc and copper. 
ii) The GATT agreement stipulates the anti-dumping proceedings would be terminated is the
volume of dumped imports from a particular country is less than 1% of the domestic market.”5

3
Datt Gaurav & Mahajan Ashwani, Indian Economy, (India: S Chand and Company Limited,2018) p.844
4
Arora Surbhi, Economics for Law Students, (Allahabad: Central Law Publications,2019) p.449
5
Myneni Dr. S.R., Indian Economics, (Faridabad: Allahabad Law Agency,2017) p.528
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 2. “Effects of trade related intellectual property rights on the Indian economy: -

Some critics are of the view that Trade-Related Intellectual Property Rights (TRIPs) as embroidered in
the GATT agreement had disastrous effect on Indian economy, more especially in two vital areas i.e.,
pharmaceuticals and agriculture. Both these areas affect the well-being of the people.
TRIPs require understanding about the scope of the new patent regime. Under TRIPs, patents shall be
available for any invention whether product or process in all fields of industrial technologies.
A very dangerous provision has been introduced in patent protection and this relates to changing the
philosophy of the patent regime whereby products, imported or locally produced, will be covered under
patent protection without any discrimination. This implies that the patent regime not only tries to establish
manufacturing Monopoly but it also intends to establish import monopoly. In this situation, the patent–
holders would resort to imports only and the national government would not be able to exercise any price
control on the imported products. This provision will help the patent holder to defy all price control
measures.”6

3. “Trade Related Investment Measures (TRIMs) and India: -

TRIMs ensure that government shall not discriminate against foreign capital. It compels member
countries to give national treatment to foreign capital. Under this agreement, India can continue to deploy
measures such as import balancing requirements on the grounds of balance of payment difficulties. There
no implicit or explicit reference to obligation regarding entry on qualities of foreign direct investment.
The GATT rules are not restricting the freedom of developing countries to frame and implement
economic policy as per their requirement.

Once a decision is taken to allow foreign investment in a certain area, form the country loses much of its
freedom to restrict its harmful effect on our local industry and economy. India would no longer have the
power to prevent multinational from merely extracting resources from India and dumping imported goods
in the domestic market by requiring them to use locally produced goods as production inputs or limiting
imports of an enterprise to an amount related to its export. India will be prohibited from protecting its
national interest despite the fact that foreign investment has historically increase imports and reduced
exports. The fear is that foreign companies would take Over control of most of the Indian market and
deprive Indian companies of a fair opportunity to engage in trade.”7

4. “General Agreement on Trade in Service (GATS) and India: -

6
Datt Gaurav & Mahajan Ashwani, Indian Economy, (India: S Chand and Company Limited,2018) p.p. 845-846
7
Myneni Dr. S.R., Indian Economics, (Faridabad: Allahabad Law Agency,2017) p.530
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GATS require transparent decision making with respect to the trade and services. GATS allow countries
to, enter into regional integration agreements liberalizing services as long as they have substantial
sectorial coverage and eliminate substantially all discrimination between the parties.
There is no general obligation imposed on the need to provide access to Foreign Service enterprises or for
granting them national treatment. These have been made subject to negotiation on a request and offer
basis. The service agreement is not tied to progress in the market access. The most feared inter linkage
between services and goods is absent.
The service agreement (GATS) opens a wedge in our favour because, it places the cross-border
movement of natural persons for supply services on the same footing of moment of ‘commercial
presence' of service provided in the form of branche subsidiaries of joint ventures.”8

5. “General Agreement on Textiles and clothing of GATT 1994 and India

GATT agreement has made certain proposals to liberalise the trade of textiles and clothing. These
proposals are very important for developing countries since textile exports constitute the single most
important item of their export. Ironically, developed countries who claim to be greatest champions of free
trade have imposed most comprehensive quota restrictions under the multi-fibre agreement (MFA) . The
Act proposes to phase out MFA quotas over a 10-year period (1993 to 2003) and to fully liberalise the
textile sector at the end of the 10-year period.”9

6. Agreement of Agriculture and India

“The criticism on agreement on agriculture is focused on the giving up of subsidies and public
distribution system (PDS). But in agriculture we are under no obligation to reduce any of the subsidies
given to our farmers. The reason is simple. The total aggregate value of our 'Non-product specific
subsidies',namely, the subsidies on fertilizers, water, electricity, seeds, pesticide and cost of credit
available to all crops and 'product specific subsidies' is negative. We are free to provide subsidies to
reduce the costs of marketing as well as internal and international transport and freight for export of
agricultural products because developing countries are exempt from the grant of such subsidies.

No provision in the agreement inhabits or impairs our ability to follow our own policies to ensure our
food security and self-Reliance in agricultural sector.”10

8
Myneni Dr. S.R., Indian Economics, (Faridabad: Allahabad Law Agency,2017) p.530
9
Datt Gaurav & Mahajan Ashwani, Indian Economy, (India: S Chand and Company Limited,2018) p.850
10
Myneni Dr. S.R., Indian Economics, (Faridabad: Allahabad Law Agency,2017) p.532
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 7. Social Clause in GATT and India

“The social clause in an international trade agreement which renders it feasible to link imports with
conformity of labour standards. This arrangement could provide for restriction or prohibition of imports
of products from countries, industries or enterprises where there is no compliance with stipulated labour
standards. It could also provide for preferential imports of products from where there is compliance with
stipulated standards.
It was stated that the social Claus is motivated by humanitarian concern, so that the developing countries
adopt proper standards of living for the workers and pay their labour better wages. But the developing
countries have taken strong opposition against the inclusion of social clause in GATT.”11

 WORLD TRADE ORGANISATION (WTO)

“The setting up of WTO was agreed by 125 countries in April, 1994 at a conference in Marrakesh. It had
come into effect from January 1, 1995 by replacing the GATT. The WTO provides the forum for

11
Idid p.352
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negotiation among its members concerning their multilateral trade relations in matters dealt with under
the agreements.

There is a ministerial conference composed of representatives of all the members which meets at least
once in every two years to carry out the functions of WTO and take actions necessary to this effect. It has
the authority to take decisions on all matters under any of the multilateral trade agreements (MTA)  is so
requested by the members. There are other organs that has General Council, the Dispute Settlement Body,
Trade Policy Review Body, Council for Trade in Goods and other Subsidiary Bodies. There is a
secretariat of the WTO headed by Director-General. The first Director-General was renato Ruggiero.

The first ministerial conference of WTO was held at Singapore on December 9-13, 1996. The trade
minister from 127 country is finally approved the ministerial declaration. In Singapore meet, 6 problems
were discussed. Four were what were called the new issues and two were old issues. The four new issues
were core labour standards, investment, competition policies and government procurement. The old issues
were textiles and agriculture.

The second ministerial conference of WTO was held at Geneva on May 18-20, 1998. The declaration of
the second ministerial conference of WTO contained no new decisions of the WTO. 132 member
countries participated in the conference. The meeting also concluded with a side agreement on duty-free
trade in electronic commerce (e-commerce). Since 1998 was the 50th anniversary of the founding of
WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), there was also a day
long commemoration of the event with speeches by 14 prime ministers and presidents. The agreement on
e-commerce was beneficial to India since India sells digitalized products over the internet.”12

 GLOBALISATION

“Although globalisation is generally understood to mean integration of the economy of the country with
the world economy, it is a complex phenomenon. It is an outcome of set of various policies that are aimed

12
Myneni Dr. S.R., Indian Economics (Faridabad: Allahabad Law Agency,2017), p.p.533-534
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at transforming the world towards greater interdependence and integration. It involves creation of
networks and activities transcending economic, social and geographical boundaries. Globalisation
attempts to establish links in such a way that the happenings in India can be influenced by events
happening miles away. It is turning the world into one whole or creating a bound borderless world.

Outsourcing: This is one of the important outcomes of globalisation process. In outsourcing a company
hires regular service from external sources, mostly from other countries, which was previously provided
internally or from within the country (like legal advice, computer service, advertisement, security- each
provided by respective departments of the company).as a form of economic activity outsourcing has
intensified in recent times. because of the growth of fast modes of communication, particularly the growth
of information technology (IT). Many of the services such as voice-based business processes (popularly
known as BPO or call centres), record keeping, accountancy, banking services, music recording, film
editing, book transcription, clinical advice or even teaching are being outsourced by companies in
developed countries to India. With the help of modern telecommunication links including the internet, the
text, voice and visual data in respect of these services is digitised and transmitted in real time over
continents and national boundaries. Most multinational corporations, and even small companies are
outsourcing their services to India where they can be availed at a cheaper cost with reasonable degree of
skill and accuracy. The low wage rates and availability of skilled manpower in India have made it a
destination for global outsourcing in the post-reform period.”13

BIBLIOGRAPHY

1. Arora Surbhi,2019, Economics for Law Students, Allahabad, Central Law Publications
2. Datt Gaurav & Mahajan Ashwani,2018, Indian Economy, India, S Chand and Company Limited
13
NCERT, Indian Economic Development (New Delhi: Prakash Veer Singh,2014), p.p.45-46
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3. Myneni Dr. S.R.,2017 Indian Economics, Faridabad, Allahabad Law Agency
4. NCERT, 2014, Indian Economic Development New Delhi, Pakash Veer Singh
5. ICSI,2019, Business Economics, retrieved from http//: www.icsi.edu

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